Protecting my interests as an H1B holder in an LLC co-formed with a US citizen

[dev_chem2003]

Hi,

First of all I want to thank all of you, especially Admin, for donating your time and work to help others.

I am an H1B visa holder and work with a software firm.

Recently I had a business idea and I approached a friend who is a U.S. citizen to form a company together. We are planning to form LLC firm as I can't form S corporation. We are expecting the company to start making money soon. As of now my friend is a Citizen and also employed in a software firm. He can probably claim his share of profits as earnings.

1) Can I claim the profit in other way such as dividents etc.?Will it cause any issue to my status in future while paying tax for issued 1099- DIV?

2) How do I protect my interest in the company - since this friend legally has the control of the company how do I make sure that this guy doesn't do something at my expense? Can we form a sideagreement that will outline how he will run the company - can the sideagreement force him to consult with me before he makes certain decisions? Can the sideagreement simply say something along the lines "that he won't do anything at the detriment of my interest in the company"? Can the sideagreement say that once I get the green card I will automatically become an executive in the company?

3) Can I legally work for this company? I read somewhere online that "You can start to undertake volunteer work on behalf of the venture or company at any time". So I am contributing voluntarily to this entreprise. Can i have any legal problems becacuse of that, in getting my green card? How would the government knowt that I contribute to the company?

Thanks in Advance.

Regards!

 

[Concerned4us]

As an H1B visa holder you may NOT work in any capacity for any organization (or yourself) other than your H1B sponsor. You are now in violation of the regulations governing the H1B program if you are or have done any - even unpaid - work for this company. You may only be an investor. Illegal work of any kind and at any time can certainly be a problem in future immigration processing. STOP IT IMMEDIATELY. You could certainly be denied a GC because of your failure to follow US laws,

You should have consulted an attorney and a CPA BEFORE beginning this venture. Do so now.

 

[littleadv]

1) Can I claim the profit in other way such as dividents etc.?Will it cause any issue to my status in future while paying tax for issued 1099- DIV?

You're allowed to be a passive investor, and be a partner in a company. Your earnings will be reported on form 1065 Schedule K-1, not 1099-DIV.

2) How do I protect my interest in the company - since this friend legally has the control of the company how do I make sure that this guy doesn't do something at my expense?

Why does your friend have the control over the company? If you're forming an LLP with your friend - you're a partner, part of the company belongs to you.

Can we form a sideagreement that will outline how he will run the company - can the sideagreement force him to consult with me before he makes certain decisions?

You must have an agreement on who owns what portion, and who has what responsibility. But, your citizen partner cannot consult with you, you're not allowed to take any part in running the business. By doing so - you're breakig the law. You are only a passive investor. Your partner has to run the company on his own. If you don't trust him on this - don't go into the partnership.

Can the sideagreement simply say something along the lines "that he won't do anything at the detriment of my interest in the company"? Can the sideagreement say that once I get the green card I will automatically become an executive in the company?

You should consult with a lawyer on that. Before signing anything.

3) Can I legally work for this company?

NO.

I read somewhere online that "You can start to undertake volunteer work on behalf of the venture or company at any time".
So I am contributing voluntarily to this entreprise. Can i have any legal problems becacuse of that, in getting my green card? How would the government knowt that I contribute to the company?

You're not allowed to do any work for anyone other than your H1B sponsor, whether paid or not. By doing so you're breaking the law.