Incorporating in the U.S. as an undocumented immigrant

My business partner and I are currently a partnership. We run a business in which we publish apps to iOS and Android. We are generating enough profits that we want to incorporate so we can hire employees, grow the company, and offer stock options. We are both located in the San Francisco Bay Area.

Both my partner and I came to the U.S. at a very young age (we were both around 3 years old at the time), our parents brought us here illegally and we've been here ever since ( we are in our mid 20s now). We both attended elementary, high school, and college in California. We ended up dropping out of college to run our business full-time.

We are "undocumented immigrants" we don't have #SS, for filing/paying taxes we use an ITIN (yes we pay taxes on all our income). We are unable to get a drivers license in California (we drive without one) but we can get car insurance (which we do have). Going back to our home country is not an option, both of us do not speak the native language very well and we have no family back in the home country. We've grown up and lived in the U.S. our an entier lives and this the only country we consider home.

We talked to an immigration lawyer, he told us that it is basically impossible for us to take funding form a VC and probably most Angels because they run background checks on you and our issue would come up. We didn't bring up if incorporating would be an issue (that's why I'm posting this question).

Is it possible for us to incorporate the business? Will not having the "proper" documentation be an issue? We are not planning to higher people and pay under the table, we are trying to do this as legitimately as possible with the situation that we are in.

You can form a corporation - no problem. I have helped dozens of foreign clients (non-citizens, no social security number) go through that process.

With a bit of effort, you can obtain an Employer Identification Number for the corporation. Please see "Foreign Company Alert: Obtaining an EIN may be your Biggest Challenge in the U.S." at http://danashultz.com/blog/2009/11/30/foreign-company-alert-obtaining-an-ein-may-be-your-biggest-challenge-in-the-u-s/.

Your greatest limitation will be that you cannot legally work for the corporation without a work visa - which, I suspect, you will not be able to obtain because your undocumented status would become known. And if you were to raise funds, you would be legally obligated to raise this fact, likely frustrating your efforts.

However, (1) you can be directors of the corporation (please see "Visa Basics for Foreign Entrepreneurs, Part 2: What Constitutes Work?" at http://danashultz.com/blog/2011/01/18/visa-basics-for-foreign-entrepreneurs-part-2-what-constitutes-work/ ), (2) the corporation can hire employees and independent contractors, and (3) the corporation can enter into contracts to carry out its business objectives.

The situation you are describing may be unusual here in the Bay Area, but it is not all that unusual in the Southwestern U.S. I was interviewed by a writer in Arizona who told me that it is quite common for undocumented immigrants there to form LLCs so they can obtain an EIN and, thus, be able to accept payments legally and pay taxes.

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.

If you're trying to be legitimate, it's time to become a citizen in "the only country [you] consider home." Then you can incorporate, receive VC funds, vote, file tax returns (required for your corporation), and generally never worry about this again. That you can provide a paper trail of your life in the USA, plus the fact you're financially solvent, should cut through any "illegal alien" red tape.