H1 - Doing business, but not quite in USA

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DVH

New Member
I work for a software giant under H1B. My labor certification is on it's way..taking forever..as anticipated.

Meantime, I have started a company in my home country. This companyHandles various gift deliveries in my home country and it is 100% Internet based.

I have set up the web server, credit card merchant accounts etc in the USA. I do not do any "Work" for this company. All I have done is setting up the ground work (ie. servers, bank accounts..etc) and everything else is handled by my partners in my home country.

Is this "Legal" under H1B visa?

I sincerely thank all the advisors of this forum. The information here is priceless.
 
Did you receive any payments from this company?

If you have not, then most probably you are fine. But if you did, then you have to declare that income.

Let us also look at the legal issues (of course, just from a logical stand-point, NOT as a legal professional, so there could be missing parameters)

1. Under H1 you are not supposed to work for any other company in US other than your sponsor (may work at their clients, but still only for your sponsor). Now since this company has no operating presence in US, probably the H1 restrictions might not apply (at least logically I dont see any angle where it might come in)

2. But if you received payments from this company, whether in US currency or foreign, you are supposed to declare them as income and pay taxes on it. If your country has an agreement with US not to be subjected to double taxation then you might get a relief but otherwise it is like an additional business income.

3. From a corporate angle, if this company's work is in competition with your H1 sponsor's business, and if your H1 sponsor has not agreed to your setting up the infrastructure for this company, then they have every right to sue you or withdraw your H1.

4. Now another thing comes to my mind. If this company has no legal operations in US, so then how did you set up the website and credit card payment features. If you have provided a contact address in US (most probably your home address?) and if you agree to involve in any transactions between the web hosting company or the online credit card payment procesing company and this foreign company of yours, then the whole thing could be interpreted as an illegal operation and that could cause you trouble.

So, Check with a competent attorney with international business experience.
 
gcwaiting007,

Thank you for your valuable feed back.

The credit card processors is aware of the nature of my business
and many banks offer such accounts to businesses running off shore. In fact there are many international banks that would let you open credit card merchant accounts without any precence in the bank's primary country; depending on the volume of your sales.

What I am committed to 'watch out!' is that I do not do any "Work" for this company of mine.

Yes. I do keep records of the money I get from this business and
put it under miscellaneous income on my taxes.

DVH
 
DVH,

Regarding my point #4:

I am not sure if I made my point clear. If you receive payments from customers on behalf of this foreign company, or if you make payments to the credit card processing company, again on behalf of this company, then there is a danger of this being interpreted as 'work' done for that company in US. In fact, even sending marketing mails or letters or any type of correspondence on behalf of this company can be construed as 'Work'.

So beware of such issues.

As far as my knowledge goes, you can invest money in a foreign firm and receive dividends or interest on your investment. That has to be declared, of course. Or you can take a sabbatical, and work for that company outside US and earn money for that work. Thats fine with IRs. But if you involve in transactions in US, like sending money or receiving money on behalf of the foreign company like your post suggests then that could raise eyebrows.

Forums like this have limited view to the issues. And most of the times, NON-Legal people like me tend to 'comment' (I daresay they are advises) on issues based on their logical thinking and based on either their own experience or what they hear and read from elsewhere and extra/intra-polate(sic?) to the current situations. While these give broad ideas and general directions, it is always good to take professional opinion on such international issues.

We are already in 3rd qtr of the year and pretty soon you will be facing IRS people (where the average officer's IQ is not anything to write home about). IF proper precautions are not taken, their interpretations of rules can be very hurting.
 
gcwaiting007,

Yes I declare the money I get from this company on my taxes. I would appreciate your advise on the following questions I have now.

1. Does the IRS worry about the Visa status of an individual when they do their audits. Since I am declaring every cent I get from this company I feel that I won't have a problem with the IRS.

2. Can you point me to a lawyer or a knowledgeable person who I could seek professional advise from about my operation.

Thanks.
 
Originally posted by DVH

1. Does the IRS worry about the Visa status of an individual when they do their audits. Since I am declaring every cent I get from this company I feel that I won't have a problem with the IRS.
Click to expand...
No. IRS probably does not worry about your Visa status, but depending on the way you declare this income, INS could raise questions. So for example, lets take the following scenarios.

Scenario I: (Lets assume the steps below are feasible)
1. You setup the web site, server, etc. for this co.
1.1 You either invest money in this co. or you package the work you did as a product (the architecture, the software, etc.) and sell it to this co.
2. You direct the online payments that the customers to this site pay, to an Escrow account in a bank in your country which will be accessed by this foreign co. of yours.
3. The charges for the ISP, Online credit card processor, merchant account maintenance fee, etc. are all paid by the company directly (without you, the H1 holder of another co., paying or receiving anything)
4. This foreign company then makes you a payment as, say, dividend on your investment or as the price for your package.
5. With this scenario, you file your returns to IRS and declare the dividend as additional income.
6. As part of your GC processing (or even randomly) INS issues an RFE, lets say for this scenario's purpose, and asks you to submit W2s and Tax returns.

You can easily explain that the additional income was just an investment income or the proceeds from a sale

Scenario II:
1. You set up the web site, server, etc. for this co.
2. You access the merchant account to take the money that your customers pay
3. You issue payments to all the involved parties, like the ISP, Credit card etc.
3.1 You provide your address and phone to be the point of contact
4. Whatever profits you make after reimbursing your local and international expenses, you declare as your additional income.
5. Now you file your returns in this scenario.
6. Now if you get an RFE or INS comes to know of this, what will you say?

To me, Scenario II is illegal. You have worked in this country for a foreign company, and got some monetary gains for the work you did, without authorization and hence violated the law.

So, planning for your tax filing has lot more importance, isn't it?


2. Can you point me to a lawyer or a knowledgeable person who I could seek professional advise from about my operation.
Click to expand...
I believe you need to consult a CPA as well as a law firm that deals in International Business as well as Immigration. For CPA, it is best to talk to several local guys/gals and decide. For legal, Findlaw.com is one site that comes to mind. Rajeev Khanna's office is another.

I hope this clarification helps
 
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