Why the U.S. needs a new visa for foreigners who want to start businesses here. (opens in new tab)

Also, no one has been able to explain to me how someone in another country needs a visa for an idea they're working on. If the country they are from is hostile to startups isn't that something that should be taken up in there. I don't take issue with those that wan't a startup visa to be created. I take issue with the reasons given of why it should exist at all.

To address your second point, without making any pass at politics: Someone once said that states are laboratories of democracies; therefore, each state conducts its internal affairs differently. Michigan allows the formation of a Limited Liability Company with nothing more than the payment of $175 to the state and an online form (ironically, the link to that form appears broken at the moment). Texas is more expensive--$325 for a LLC or a corporation--but offers the same thing. Both states have minimal requirements for non-residents forming and operating corporations under those states' laws, so if NY doesn't suit your needs, there is "something for everyone," even when creating a business entity.

Sure, neither the Startup Visa Act nor the Dream Act go far enough, but they're steps in the right direction, and if we oppose such measures on the grounds that they aren't big enough, it's going to be much harder to get anywhere. It's always easier to convince people to make 20 small changes than it is to convince them to make 1 big one that's 20x the size.

Somewhat off topic (bear with me, I do have a point at the end), but he already does pay taxes in the US: http://www.kalzumeus.com/2007/04/15/taxes-dont-have-to-be-pa...

In fact any person anywhere in the world whether American or not can volunteer to pay taxes to the US government even if he doesn't have a single US-based customer. All you have to do is incorporate in the US with an American nominee director+secretary and yourself as the sole shareholder. Then it's up to you whether you want to tell your local government about all the profits your American business is raking in.

Delaware in particular makes it hard for foreign governments to find out exactly who owns a particular corporation there. This is why you sometimes hear America referred to as the world's largest tax haven: http://www.lectlaw.com/filesh/bbg33.htm

However, for an American citizen living overseas and trying to run a small business, the main reason to incorporate in the US (rather than whatever country you're living in) is not to evade foreign taxes, but to avoid American paperwork. American owners of foreign corporations have to file form 5471 and spend all their time worrying whether any of their income can be classified under Subpart F (particularly Foreign Base Company Services Income --- look it up if you'd like your head to explode), in which case it DOES get taxed in the US as if it were a dividend to you personally. If you're Google and you want to pretend that your office in Bermuda with zero programmers and three lawyers is actually a major profit centre for software income, this is easy. If you're one guy selling bingo software, this is much harder, because you don't have the money to hire an international tax lawyer. Thanks President Kennedy!

Right now all the multinational corporations are deferring US taxes on their foreign subsidiaries by using Form 8832 declarations to create "hybrid entities" (ones which different governments disagree are corporations or pass-through entities). This all started back in 1997, when the IRS amended the entity classification rules in response to perceived abuses. Next year that law might get amended to make that impossible (Obama already tried last year, but failed), at which point all the high-priced accountants and lawyers will comb through the new regulation to find some other bright idea, while I hide under my pillow and cry.

Anyway, rant over, here comes the point I promised: US laws, whether in the field of immigration or taxation or whatever, may start out simple, but they inevitably get amended into increasing complexity until they make no sense at all, because unlike, say, the laws of Vanuatu, there's so many people looking for loopholes. Thus the laws manage to ensure that no one abuses process X, by making it damn near impossible for anyone, abusive or not, to get through process X in the first place. So I don't really have high hopes for this startup visa bill. It may pass, and in the first year hopefully some genuine foreign entrepreneurs will grab on to the chance to get a foothold in the US. But then there will be abuses, or maybe only perceived abuses blown out of all proportion by the media (or by disgruntled competitors who use PR agents to plant stories in the media), and then the law will get amended into oblivion starting from year two.

1. This visa isn't meant to solve every problem. As soon as you try to solve every problem, you've just guaranteed you're not going to solve any problem; and

2. Arguably someone who is small isn't yet of interest to the American government in terms of being a taxpayer.

As for the successful investor example you've made, you've chosen a (quite deliberate, imho) strawman. The argument has several holes:

1. If you have $1m or more to invest in a business, there is an existing green card program for that;

2. I believe you know this, which is why you've said a couple of hundred thousand. The line has to be somewhere. 5-10 years ago, at least for tech companies, $1 million probably made sense. Does it make sense now? Maybe not. If not, address it by changing the requirements for that separate visa class; and

3. The American government has a vested interest in fostering businesses of American citizens and residents rather than those of foreign residents; and

4. If that person was going to seed invest (ie become an angel), a couple of hundred thousand isn't really enough to do that. Each "bet" they make, even if only $25,000 is simply too high a portion of their total investment pool.

As for the requirements being arbitrary, that's a double edged sword. Sure $1m is enough for an investment-based green card. Why not $950,000? Again, the line has to be drawn somewhere. After all, you're a minor up until you turn 18. Is someone 17 years and 11 months old so vastly different?

The positive side of arbitrary requirements is that they have certainty. Someone can look at those rules and clearly know what they mean and whether or not they qualify.

To give you a counterexample, in Australia the ATO (our equivalent of the IRS) has a discretionary test to decide whether you're "in business" to see if you can manage your tax deductions in a certain way. It's completely vague, sort of a "you'll know it when you see it" kind of test.

The problem of course is that there are still grey areas and humans need to make decisions about whether a given situation qualifies or doesn't.

At least arbitrary rules are clear.

I would love to move to the Valley (I'm Canadian) for everything that is there, but there is no outlet for founding a company and moving it south of the border without jumping through multiple legal hoops. I have no debt, I'm not going to go on benefits, I pay my taxes, I have a good degree from one of the world's best uni's, I'm driven, resourceful, etc. Why is there an arbitrary, xenophobic law preventing me from doing so? Canada (and now the UK) seem to provide a much more sensible set of regulations that promote entrepreneurship which have huge and wide-ranging impacts on the local economies.

Current law allows for investment-based immigration, meaning that if you have a certain amount of money to invest in a business you can be granted a conditional green card based on the idea that you'll be creating jobs.

The startup visa would allow foreign entrepreneurs to come to the US if they could secure funding from legitimate angels and VCs.

The first situation allows foreign nationals with foreign money to establish businesses (and residency) in the US. The second allows US residents to establish businesses with foreign entrepreneurs, which is almost the exact opposite of the first.