People on an H1B can own a non-US business that does not make US-source income. The tricky bit is that there are two major considerations to avoid having the business' income sourced to the US: (1) permanent establishment, and (2) the IRC 861-863 income sourcing rules.

Without going into much detail, permanent establishment generally defines when a business is treated as operating in a country. The specific conditions are set forth in various tax treaties between the US and other countries. Generally, having an employee residing in the US and working for the business (whether or not as owner) is usually treated as resulting in a US permanent establishment, meaning the business is treated as operating in the US. If you are from a country which does not have a tax treaty with the US, the issue is generally much simpler: does the business have any income-generating operations in the US?

The second consideration is sourcing of income. IRC 861 and 862 define what income is US-sourced and what income is foreign-sourced. Generally, income from US customers or US payors is US-sourced income, and the same income from foreigners is foreign-sourced. For income taxation purposes, this distinction doesn't matter but it does matter for non-tax purposes. The H1B restricts the employee from engaging in US employment or business activities, but does not restrict their non-US employment or business activities.

A blog hosted on a foreign host, targeting a foreign audience, and earning foreign ad dollars is not a US business and generally should not violate the H1B rules, however you need to talk to an immigration attorney to make sure the analysis applies to the specific blogging activities you would be engaging it.

Thank you! The "ads on a blog" was just the most trivial example. The rule applies to any side project as an attempt to make extra $

IANL, but at one time I was on H-1B and now US citizen. It is not illegal to own a US business on H-1B. Also, there is no issue with business owned by H-1B having revenue, for example from ads on a blog. If you own a business, you can issue dividend to owners even on H-1B without any issue.

What you can't have on H-1B is the wage from 'unapproved' sources. You will need to get H-1B for every wage source. But there is no restriction on you receiving dividends, capital gains, etc.

Don't confuse "revenue" with income and "wage" with income. Income can be wage, dividend, capital gains, etc. H-1B only restricts 'wage'.

How about if the income is in your country of origin? Can't your side project just pay out where ever you're from? It's the Internet, websites aren't really located anywhere.

It is doable, but still not legal :)

It's not legal to launch a web service in your home country that makes money from people in your home country? How do other businesses operate?

No :) It's not legal in America for people resident in America on an H1B visa to operate businesses.

You could just ignore this, like I do, but if you're in America on an H1B visa, which I'm not, then you're probably best off following the rules, lest they expel you and never let you back in, without giving you time to organise getting all your stuff back first.

To be clear, we're talking about running a country in your home country, not in America, while you are currently on an H1B in America. I'm sure you know more about this than I do -- could you provide me with a link? I'd love to learn more.

It's perfectly fine to own a foreign business (i.e., not located in the US). But it's generally a violation of the H1B to run (i.e., operate/manage/supervise) that business from the US because the foreign business is then generally treated as having a US presence. See "permanent establishment" and the US tax treaty with whatever country you're from.

It is legal to open the business abroad, but technically you can't work for this business from the US on a H1B.

That is not true. You can be on H1B and not work for a business as an employee but can own a business. Making money on ads on a blog is perfectly legal.

It's a tricky hole to thread: if the blog is being run as a business it could violate the terms of the H1B. On the other hand, a blog that is run as a hobby and that makes incidental/minimal income should not violate the H1B. Generally, the difference between the two is that a business blog is intended and managed to maximize revenue (even if it actually does not make money), while a hobby blog is not intended to make money(even if it actually does).

Right, and if I can't work for that business what difference does it make?

Do you have any links that show that ads on a blog are legal? All the research that I've done came to the same conclusion.

Ask your mom,brother,uncle,etc to open a Google / iTunes developer account, get a little creative here :)

I understand... it is doable, but still not legal :)

We should not have to come up with "creative ways" to do something simple like ads on side projects (be it a blog or a free app).

I have been looking at your replies at this thread, and I think you are confusing legality with ethics (at least in the nature of the law and visa regulations). I am sure it is perfectly legal to work on something for your brother, while he earns the money off the product/app/website.

The point I am trying to get across is that such restrictions kill (or seriously hurt) any attempt of innovation coming from people on H1B visas. There are a number of ways to try to circumvent the laws, but the risks associated with them make it not worth the attempt.

I would not risk my status here or the possibility of owning a green card for a side project that makes me a couple hundred dollars a month. It is not worth it.