Can an H1B Visa Holder Start an LLC to Invest in Real Estate?
“Waiting for perfect is never as smart as making progress” – Seth Godin
Can an H1B Visa Holder Start an LLC to Invest in Real Estate? This article is directed towards physicians and other immigrant workers who are on an H1B visa sponsored by an American company, and are planning to invest in real estate via their own LLC or business entity.
Real Life Question: Can an H1B Visa Holder Start an LLC to Invest in Real Estate?
- I am an Indian citizen working for an American company in the USA that sponsored my H1B visa. Can I open my own LLC (business entity structure) to buy an investment real estate property in the USA, using my LLC (Can I incorporate an LLC and can that LLC buy a real estate investment property)?
- In the initial stages of my investment career, this question kept me up during the night, for many months. I never got a straight black & white answer from my legal counsel. The more number of attorneys you speak to, the more variation you will hear on how they answer the question.
- That’s because the USCIS uses slightly vague language to describe the regulations, and how you interpret the law completely depends on the person and/or attorney interpreting it and the risk tolerance of that person. This will leave you in a lot of uncertainty.
- I came to the following conclusions after much research on this topic. This is not legal advice. Please reach out to your attorney for legal advice.
Owning LLC to Run a Business vs. Owning LLC to Buy Real Estate
- Can an H1B visa holder start an LLC to invest in real estate? When we evaluate the USCIS stance on H1B holders owning an LLC, we need to understand two different scenarios:
- H1B holder working for an American company, opens his/her LLC and wants to work for their LLC, and get another H1B sponsored by his own LLC. This is complicated, and we are not discussing this scenario in this blog post. Refer to “this” article for more details. Now, lets go to the second scenario.
- H1B holder working for an American company, wants to invest in real estate. For the sake of adding asset protection, he/she opens an LLC, and buys properties under this LLC. In this blog post, we discuss only about this second scenario.
The Bottomline: Can an H1B Visa Holder Start an LLC to Invest in Real Estate?
- Physicians on H1B visa can open their own LLC to buy investment real estate properties with that LLC.
- The person should only be the owner for the LLC company, he/she cannot work for the company.
- The owners of the LLC must be passively involved in the company.
- If you want to own rental properties under an LLC, you can do it. But if you want to manage (e.g. reconstruction, renovation, manage renters, and etc.) the property, you must hire a property manager to do it. You should not manage it directly. You cannot be the CEO of your LLC.
- If you manage it by yourself, you will be violating USCIS regulations. You must limit yourself to being a passive investor or passive shareholder. You can oversee your business as a passive shareholder or investor, you are not supposed to participate directly in the operations.
- You can own a business (LLC), have ownership rights, receive cash flow, receive dividends, and capital gains.
What is the Basic Understanding of the USCIS Regulation?
- If you are on an H1B visa sponsored by an American company, you can work only for that company. You cannot work for any other company–either paid work or free work.
- If you do, you will be taking up a job that could have otherwise been given to an American worker, and your work will be considered “unauthorized employment.”
- Hence, if you work for a second company (your own LLC in this case) either for salary and/or benefits or for free, you are taking away a potential opportunity from an American worker.
- Hence, USCIS regulations say that you can own your own company (LLC) while you are on an H-1B visa sponsored by an American company, but you cannot work for your own LLC.
Take these Precautions
- If you are employed with an American employer that sponsored your H1B, you have to stay with your employer even after you open your company (LLC). You cannot resign to you current job. If you do, your stay in USA will become illegal.
- While on an H1B, if you open your own LLC to buy or invest in a bunch of Single Family Homes (SFH) or a multifamily home–you need to hire a property manager to manage the properties. You cannot manage the property yourself.
- While on an H1B, if you open your own LLC to invest into a commercial property syndication investment, this will be considered as a passive investment. The real estate sponsors of the syndication investment are managing the property, you are not the manager. Hence, it does not violate the USCIS regulations.
- If you are on an H1B, and want to invest in real estate via your LLC, hire an attorney and seek legal advice.
If you have an appetite for more information – refer to these USCIS publications regarding this topic – USCIS-1; USCIS-2; USCIS-3.
Did you form an LLC to invest in real estate? What advice did you get so far? Share your experiences by writing to us.
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