Establishing an Employer-Employee Relationship as a Founder
For some international startup founders, establishing a Board of Directors is necessary to secure a U.S. work visa. But who exactly does this affect? And how do you go about setting up a Board?
Written in partnership with business attorney Leslee Cohen at AllRise Legal Counsel.
When reviewing visa applications, U.S. Citizenship and Immigration Services (USCIS) wants to see a differentiation between the employing U.S. company and the individual they plan to hire.
In other words, USCIS is looking for an employer-employee relationship.
It is relatively simple to demonstrate this type of relationship when an existing company seeks to hire someone new.
What happens when the employee is also the company's founder? That’s when establishing an employer-employee relationship can get tricky.
The good news is that there are two ways to handle this situation for U.S. immigration purposes:
- Own less than 50% of the U.S. company's shares
When a founder owns less than 50% of the company's shares, it shows that they do not have the majority of power in the company. This establishes an employer-employee relationship.
- Establish a Board of Directors with the power to either hire, pay, fire, supervise, or otherwise control your work
If the founder owns more than 50% of the company's shares, they can instead show an employer-employee relationship by setting up a Board of Directors.
The Board of Directors will need to have the power to “hire, pay, fire, supervise, or otherwise control your work,” based on USCIS’s guidance.
So, how do you go about forming a Board of Directors?
In order to form a Board of Directors, the company’s shareholders or incorporator should draft a written consent in accordance with the laws of the state in which the company is formed. The written consent should name the directors who comprise the members of the Board as well as the length of their term of service.
If the company is formed as a limited liability company rather than a corporation, the term of art is a “Board of Managers” rather than a “Board of Directors”. A limited liability company can be “manager-managed” or “member managed” and if you are relying on this employer/employee relationship, you want to be sure that the entity’s articles/certificate of formation on file with the applicable state reflect that it is a manager-managed entity. The Board of Managers is then appointed by means of the company’s limited liability company operating agreement, or an amendment thereto that is authorized by the members if such an agreement is already in existence.
It is important to ensure that the founder/employee is not the sole member of the Board and, if a member of the Board at all, that there are at least two other directors with the majority vote.
You should also confirm that the company’s bylaws properly reflect the number of directors the company is authorized to elect and that the Board acts by majority or supermajority consent in all matters such that the founder/employee is subject to the supervision of the Board rather than being able to control its actions. All of the terms that are typically in the bylaws of a corporation are found in the operating agreement instead with respect to a limited liability company and should be checked for the proper number of managers and action by the majority or supermajority as well.
If I'm a founder, do I have to own less than 50% of my company's shares or set up a Board to get a U.S. visa approved?
Not necessarily. If you are on a tight timeline and willing to take the risk, you can apply for your visa before establishing an employer-employee relationship.
This may result in a Request for Additional Evidence (RFE) that will ultimately slow down the process of getting your visa approved. However, USCIS may approve your visa and not question the employer-employee relationship.
If you are considering this route, you should consult with an immigration attorney about your unique case.
Establishing a Board of Directors doesn't have to be a roadblock in your U.S. immigration journey. We hope that you feel prepared to set up a Board and then get back to growing your company!