Can a H1B register a Business?

I have been asked the same question at least by 300 people by now and I keep telling the same stuff every time. I thought it would be a better way to blog and ask people to refer.

Here we go...

1. Can a H1B Register a Firm or Business?

Absolutely Yes! H1B by definition is on a work permit visa for an employer. He should only be working for his employer for earning his direct wage. He cannot get wages from any other source as is restricted by his status. Nonetheless, the status never has a restriction on investing in any business (other than Liquor, Tobbaco, firearms which need minor adjustments).

There is no law which says that a H1B cannot register a business. It is as simple as you invest in a stock and can get capital gains on your investments.

This gain is not your wage rather is the Return on your investment which is taxable. You can even get a dividend from your investment for which you will need to pay dividend tax. These taxes differ between 15% - 20% depending on the current Govt. policy.

Legally, you are entitled to receive any capital gain from any kind of business. So you can register a business and be a 100% share holder. A H1B be can only register a C-Corp type business as, the Sole proprietorship type will report your income as a wage.

2. Ways of retrieving money from your business?

There a numerous ways but you should never pay yourself directly which might effect your legal status. You can declare dividends and pay taxes and there are some other ways, (by the time you have reached this point you will be able to figure the rest of the ways).

3. Can H1B work for his business?

You can work and provide any kind of voluntary services to your firm but you should never be compensated for the work financially by the firm. The only way you are entitled to receive financial benefits is your dividends.

4. Why is Green card required for my business?

Truly speaking it is not required to have Green card for your business unless the type of your business needs someone to take responsibility to answer questions or show that someone is operating the firm (or even if your business is obligated to run some payroll - insider secret).

Suggestion: Do what you love to do. Choose a business which creates value and in which you never feel guilty!

ref: http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

Payroll Tax basics for dummies

Basic Tax Structure:

FICA: Social Security	6.2%	6.2%
FICA: Medicare	1.45%	1.45%
Federal Income Tax (Corporate/Personal)	35% - 39%	17.4%
State Income Tax	0% - 9.5%	0% - 9.5%
Federal Unemployment (FUTA)	0.8%	NA
State Unemployment Insurance (SUI)	2.8%	NA

State Income Taxes differ as per the State. Check your state taxes at the below link:
http://www.taxadmin.org/fta/rate/ind_inc.html

For Contractors working for a different Employer: (Typically a C-corp firm)
If your client pays $50/hr and your employer cuts 20% of the billing.

Your Hourly payroll rate: $40/hr

Your Taxes: $10.02

Employer Taxes: $5.90

The Corporate tax of your employer is based on the
$10 – Expsenses (say $6) = $4 Net Income.
The employer pays taxes on $4 (35%) = $1.40

Employer’s Net profit after Tax: $4.10/hr (approx)

Employee’s Net profit after Tax: $29.98/hr

There might be some benefits like Health Insurance and 401K which employee might provide to you which gets reflected on your paystub. An employer will be entitled to tax exemption if he contributes 50% to these benefits.

You can find your Health Insurance quote at : http://www.ehealthinsurance.com/

Probably it would be <= $1/hr depending on your age and current health status.

The FUTA is applicable for the first $7000 for salary employer pays an employee.

	Employer	Employee
FICA: Social Security	$2.48	$2.48
FICA: Medicare	$0.58	$0.58
Federal Income Tax (Corporate/Personal)	$1.40	$6.96
State Income Tax (Texas)	$0.00	$0.00
Federal Unemployment (FUTA)	$0.32	$0.00
State Unemployment Insurance (SUI)	$1.12	$0.00
Total	$5.90	$10.02

Ref: http://www.wikipedia.com/

Human Capital

What ever venture you do, who ever you are, where ever it is, the MOST Important catalyst for your business in HUMAN CAPITAL.

Def: http://en.wikipedia.org/wiki/Human_capital

One is never perfect in everything; rather a group can be built for everything which is required for perfection.

Look into yourself and gauge what you are good @ and what you are not for the business. If you wanted to make a successful venture you need to find the right resources to compensate the skills you are missing.

The best investment in any firm is the human capital. A firm can raise and invest everything but cannot build intelligence by itself. It is an outcome of humans when invested in a firm can provide infinite (ά) results. I tried to define the Infinity replacing the people with “Zero”.

The core principle of the world's greatest enterprise is investing in Human Capital. It is the people who build the firm and drive it beyond the imagination.

Google's highest investments are on their employees.

Richard Branson's best shot always was he had to find a the right person for the job which gives him enough bandwidth to take up the next one..

"Relay Venturing" is what I call Branson’s way of entrepreneurship which I will post in my further blogs.