Chapter 5 - Ownership and Control
The petitioner for an intracompany transferee must be a qualifying organization seeking to transfer a foreign employee to the United States temporarily from one of its operations outside the United States. Accordingly, to be eligible for L-1 nonimmigrant classification, there must be a qualifying relationship between the foreign and U.S. entities. In the United States, business entities usually take the form of a sole proprietorship, partnership, corporation, or limited liability company (LLC). State law generally governs the formation, operation, and dissolution of such business entities. Since each state has its own rules for business entities, officers should refer to the relevant state authority’s website if there is a specific question about a business entity.
An organization cannot transfer someone to work in the United States as an L-1 nonimmigrant, unless the organization has a qualifying U.S. entity to employ the L-1 beneficiary. The source of the beneficiary’s salary and benefits while in the United States (for example, whether the beneficiary will be paid by the United States or foreign affiliate of the petitioning company) is generally not controlling in determining eligibility for L status.
Evidence of Ownership and Control, Generally
Depending on the nature of the petitioner, USCIS may require different types of evidence to demonstrate ownership and control for purposes of establishing the qualifying L-1 relationship. USCIS considers ownership of more than 50 percent of an organization as evidence of control. Control based on ownership of more than 50 percent is called de jure control. However, it is possible for an owner of 50 percent or less of a company to exercise de facto control over the organization.
Large, established organizations may submit a statement by the entity’s president, corporate attorney, corporate secretary, or other authorized official describing the ownership and control of each qualifying organization, accompanied by other evidence such as a copy of its most recent annual report, U.S. Securities and Exchange Commission filings, or other documentation that lists the parent and its subsidiaries.
In addition to a statement of an authorized official regarding ownership and control of each qualifying organization, organizations should submit other evidence of ownership and control, which may include but is not limited to: records of stock ownership, partnership agreements, operating or LLC agreements, member certificates, audited financial statements, profit and loss statements or other accountant’s reports, tax returns, or articles of incorporation, by-laws, and minutes of board meetings.
Not-for-profit Entities – Ownership and Control and Doing Business
Not-for-profit or nonprofit entities are eligible to use the L classification if all requirements are met. These entities sometimes have difficulty demonstrating ownership and control, because their ownership and organizational structure does not perfectly align with the for-profit entities that are more commonly seen in the L context. Often a non-profit will indicate that they have a branch relationship in which they demonstrate that the employing entity is the same organization operating in another location. However, there may be some regional or country-specific requirement that the entity register as a separate entity.
In these cases, or any other claims of a qualifying relationship, ownership and control must be established. In the case of a nonprofit, there may be no traditional evidence of ownership such as equity certificates. Accordingly, to establish the existence of a qualifying relationship involving a nonprofit organization, a petitioner must demonstrate that the relevant person, group, or entity owns or manages sufficient assets to directly or indirectly control both the U.S. and foreign entities involved. Factors considered may include a person, entity, or group’s obligation to fund capital needs of the nonprofit, any rights to receive distribution of assets on liquidation, or any rights to direct how the assets of the nonprofit may be used, purchased, or sold. Control of a nonprofit entity means the direct or indirect legal right and authority to direct the establishment, management, and operation of the nonprofit organization. In determining what constitutes ‘control’ with respect to nonprofit organizations, USCIS takes into consideration the structure of the organization’s management and governance including the authority of the organization’s senior officers, board members and trustees.
Generally, to demonstrate a qualifying relationship, non-profit petitioners may submit, as applicable, Internal Revenue Service (IRS) filings, state filings, annual reports, and audited financial statements to demonstrate the relevant relationship between entities. As applicable, petitioners may also submit proof of a qualifying relationship by the submission of articles of incorporation or similar organizational documents, bylaws or similar operating documents, meeting minutes, or other appropriate documentation. These examples are illustrative and not exhaustive.
In addition, demonstrating that a non-profit entity is doing business may look different in comparison to a for-profit entity. USCIS considers an entity may also qualify if it is providing such goods or services in a regular, systematic, and continuous way to others within its organization, if the record demonstrates how that activity generates revenue or otherwise facilitates the organization’s purpose. USCIS recognizes that many non-profit organizations do not generate revenue by providing goods or services. In these cases, doing business refers to performing the activities that serve to advance the underlying goals and purpose of the organization.
Opening New Office in United States
If the beneficiary is coming to the United States to open a new office, USCIS requires proof of ownership and control, in addition to financial viability. The petitioners’ statement of ownership and control should therefore be accompanied by appropriate evidence such as evidence of capitalization of the company or evidence of financial resources committed by the foreign company, operating or LLC agreements, partnership agreements, articles of incorporation, by-laws, and minutes of board of directors’ meetings, corporate bank statements, profit and loss statements, accountant’s reports, or tax returns.
The following sections discuss some aspects of different business structures as they relate to L adjudications.
A sole-proprietorship may not file an L-1 petition on behalf of the owner, as it is not a distinct legal entity separate from the owner. Generally, no special documents are executed when a sole proprietorship is created and commences doing business. In the United States, a sole proprietorship is not required to execute or file any documents of creation and may use the owner’s own social security number as its Employer’s Identification Number.
The most common document provided as evidence of the ownership and control of a sole proprietorship is the owner’s individual federal tax return. In addition, the petitioner may submit contracts, such as leases, employment contracts, or sales agreements that the owner executed on behalf of the sole proprietorship.
In cases where the business is not a separate legal entity from the owner, the petitioner must also provide other evidence that identifies the owner of the business. This evidence may include, but is not limited to, a license to do business, record of registration as an employer with the IRS, business tax returns, or other evidence that identifies the owner of the business.
A sole proprietorship may employ other persons, so a sole proprietorship may file an L-1 petition on behalf of an employee. A qualifying L-1 relationship can exist between a sole proprietorship and a related entity if the common ownership and control of both legal entities can be established.
A joint venture is a business relationship wherein two or more parties agree to share funds, resources, and skills to undertake a particular business project. There are two general types of joint venture business enterprises: equity joint ventures and non-equity joint ventures.
An equity joint venture is created under corporate law and exists when two or more companies create a separate entity and contribute capital to that entity in furtherance of the joint venture. A qualifying L-1 relationship can exist between a contributing company and the resulting venture if the contributing company owns at least 50 percent of the venture and exercises control over the venture.
A non-equity joint venture, on the other hand, is typically a contractual arrangement in which no separate entity is formed. In a non-equity joint venture, cooperative agreements are entered into between the contributing companies to provide noncapital resources (such as manufacturing processes, patents, trademarks, managerial know-how, or other essential services). A non-equity joint venture does not establish a qualifying L-1 relationship, because no separate entity is formed. Therefore, the requisite common ownership and control will not be present in a non-equity joint venture, as the joint venture stands alone outside the two parties that entered into the contractual arrangement.
A partnership is the shared ownership of a business, that is, a relationship existing between two or more persons who join to carry on a trade or business. A partnership may meet the requirements for a qualifying organization if it meets one of the regulatory definitions of a parent, branch, subsidiary, or affiliate. When submitting evidence of ownership and control of a partnership, the petitioner must submit a copy of the partnership agreement. To establish what the partnership owns and controls, other evidence may be necessary. For example, petitioners generally provide partnership agreements and the partnership’s IRS Form 1065 to establish who owns and controls a partnership.
By law, international partnerships that provide accounting services or management consulting services may meet the criteria as qualifying organizations for L-1 purposes. USCIS does not require extensive documentation in such cases.
A corporation is a separate legal entity, owned by its shareholders. It is an association of individual natural persons or organizations created by state law that exists as an entity with powers and liabilities that are independent of its owners. Corporations may meet the requirements for a qualifying organization if it meets one of the regulatory definitions of a parent, branch, subsidiary, or affiliate. A corporation may file an L-1 on behalf of a noncitizen stockholder, as the corporation is a distinct legal entity.
An LLC is a hybrid entity. Earnings and losses pass through to the owners, who include those earning and losses on their personal tax returns. An LLC may file an L-1 petition on behalf of a member (owner), as an LLC is deemed to be a distinct legal entity.
In order to establish a qualifying relationship in an L-1 visa petition that involves franchises, the petitioner must show that the required relationship exists between the foreign entity and the petitioner, not the franchise owned and operated by the petitioner.
USCIS regulations indicate that a petitioner can establish a qualifying relationship by showing ownership and control of the entities. If a franchise agreement only outlines how two independently owned companies can use or license a name or a product, then such agreement does not generally create a qualifying relationship between franchisor and franchisee. A contractual agreement of this nature can be terminated, as opposed to the more permanent association that is created through common ownership.
Claims made by the foreign entity’s shareholder and franchisor statements alone are not sufficient to establish the beneficiary’s claimed employee status. A petitioner’s unsupported statements are of very limited weight and are normally insufficient to carry its burden of proof, particularly when supporting documentary evidence would reasonably be available. The petitioner must support its assertions with relevant, probative, and credible evidence.
[^ 1] See Matter of Penner (PDF), 18 I&N Dec. 49 (Comm. 1982). Penner also discusses the obsolete proprietary knowledge requirement not contained in the current regulations; that portion of the Penner decision therefore is therefore not binding on officers.
[^ 3] De jure means by law and is a straightforward form of control.
[^ 16] See Matter of Soffici (PDF), 22 I&N Dec. 158, 165 (Comm. 1998) (citing Matter of Treasure Craft of California (PDF), 14 I&N Dec. 190 (Reg. Comm. 1972)). See Matter of Chawathe (PDF), 25 I&N Dec. 369, 376 (AAO 2010).