Home-Based Businesses: Inadvertent Unauthorized Employment

From time to time, articles are written to guide MurthyDotCom readers in avoiding inadvertently running afoul of immigration laws. One common problem involves individuals present in the United States in lawful, nonimmigrant status who wish to earn extra money. These foreign nationals are often enticed by the prospect of home-based businesses, sometimes involving multi-level marketing. Others use their knowledge of social media and technology to earn extra income. As there is no direct employer-employee relationship, it is often mistakenly believed that this does not constitute unauthorized employment. This presumption is incorrect and can lead to a series of immigration problems.

Unauthorized Employment Includes Home-Based Businesses

One needn’t be employed by an existing business in order for an activity to be considered unauthorized employment. When an individual establishes a business, even on a part-time basis from home, s/he generally is considered to be working in the United States. If s/he is present in a status that does not allow employment, or that only permits employment with a specific sponsoring employer, such an individual is likely engaging in unauthorized self-employment.

No Clear Definition of Employment

It can be difficult to define the precise line between an acceptable money-generating activity and “employment.” For example, people often sell old, unwanted belongings. Selling items that one acquires routinely in life generally is not considered unauthorized employment. Consignment and pawn stores also provide options for turning unwanted possessions into cash. A line is crossed, however, when one starts to acquire such items for the purpose of reselling them.

Common Home-Based Sales Activities Generally are Employment

Direct, person-to-person sales, including serving as a representative of a multi-level marketing company such as Amway, Avon, or Herbalife, may be considered unauthorized employment. Even if one’s compensation from the multi-level marketing company is in the way of free vacations, products, or bonuses this may be considered a type of income from unauthorized employment.

WebSite “Views” or Creating Apps to Sell is Improper

This same analysis can be applied to various income-generating technology areas. We have received a variety of questions related to technology, specifically pertaining to payments based on “views” of social media ads or web traffic. Other questions surround the creation of apps. There is a difference between creating apps and web content as a hobby, and doing it to generate income. While it can be difficult to define the limits, when those limits are crossed, immigration problems can arise due to unauthorized employment. So, it is best to be cautious in this area.

Incorporation of Business Not Required for Violation of Law

It is not necessary to have formed a corporation, LLC, or partnership when speaking in terms of having one’s own business or being self-employed. Even if no legal business entity is formed, there can be self-employment without proper legal authorization, resulting in immigration complications.

Even Unpaid “Work” Prohibited in Many Situations

Even if a foreign national is not receiving any form of compensation for the services provided, the activity still may be considered unauthorized employment. Active involvement in the creation of a company, for instance, may be considered work, and therefore be prohibited without proper authorization. Volunteering for a company simply to gain experience could be deemed unauthorized employment as well, especially if duties are performed for which one would normally be paid. So, while volunteering to build a website for a company may provide valuable experience for one’s resume, it also may be grounds to find that the individual has committed a status violation.

Problems Can Start at U.S. Consulate or with USCIS

The problems in situations such as those described above usually arise at the U.S. consulates in connection with visa applications or with I-485 applications to adjust status to permanent residence from within the United States. In these instances, it is sometimes necessary to provide income tax returns. It is also necessary in both contexts to provide employment history, under penalty of perjury. If this information leads the government official to believe the applicant has engaged in unauthorized employment, there is a risk that the immigration benefit being requested will be denied.

Failure to Declare Income or File Returns is Not a Solution

While problems generally are detected by way of the tax filings, this DOES NOT mean that a violation is avoided as long as no paycheck received. Failure to declare money or the payment of taxes on any income in order to avoid detection is not a solution. Deliberate failure to pay taxes on money earned is a criminal violation that can trigger even more serious immigration consequences.

CBP Investigation at POE Can Reveal Violation of Law

Another situation where problems may arise is at ports of entry (POEs), such as international airports, where individuals seek admission to the United States. Foreign nationals requesting permission to enter the U.S. may be questioned by U.S. Customs and Border Protection (CBP) officers regarding prior stays in this country. The CBP is also authorized to search people’s belongings, including electronic devices. The contents of laptops, cell phones, and iPads often provide a great deal of information about the day-to-day activities of the user.

If the CBP determines, for example, that an H1B or H-4 visa holder previously worked in the United States without authorization (such as through direct sales, social media, or technology development), that person may be denied admission to the U.S. and, in that event, the visa will be cancelled. There have even been reports of the CBP making fraud findings against individuals who were paid for direct sales while previously in H1B or H-4 status. This type of finding at the POE results in expedited removal from the United States, which carries with it serious penalties barring readmission to the U.S. on multiple grounds.

Passive Investments Allowed

The above information on unauthorized employment should not be confused with making passive investments. It is permissible to make financial investments that, hopefully, will generate financial gain, provided that the investments are entirely passive in nature. For example, it is possible to invest in a private company, as long as the foreign national’s only role is as a passive investor. It also generally is permissible to invest in various methods of saving, such as the stock market or bonds, where one’s role in obtaining financial gain is purely passive and not the result of working (other than planning and research). Engaging in extensive use of these types of investment vehicles, however, such as day trading, potentially could be deemed unauthorized employment.

Conclusion: Discontinue Activity and Consult with an Attorney

Immigration laws are complex. Violations, even if made innocently, often result in harsh consequences for individuals and their families. There are conflicting interpretations regarding what is or is not considered unauthorized employment. Thus, it generally is best to be cautious and conservative with respect to this particular issue. If an individual has engaged in any of the activities described above, it would be best to cease the activity and seek the advice of an experienced immigration attorney without delay. There may be a solution that will return the individual to lawful status, but the longer one waits to address the matter, the more difficult it is likely to be to find a good solution. The attorneys at the Murthy Law Firm are available to provide guidance to those who have questions about working lawfully in the United States.

Originally posted 29.Jul.2005, this NewsBrief has been updated for MurthyDotCom readers. While some aspects of immigration have changed in significant ways in the years since MurthyDotCom began publishing articles in 1994, there is much that is still the same. From time to time, we at the Murthy Law Firm refer our clients to articles, like this one, which remains relevant.


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Disclaimer: The information provided here is of a general nature and may not apply to any specific or particular circumstance. It is not to be construed as legal advice nor presumed indefinitely up to date.