How can an nonImmigrant visa holder do startup business

One of my friend is on H1-B Visa in US working for some company, he wants to start his own startup and he is working madly on some of his idea but as he is not US Citizen he feels very said about status thing. Please advise what ways are possible for him to start his own startup as once he leaves his current job, his H1B Status will be gone ?

Non-US citizens can be shareholders and officers in US corporations. I agree with James Black that if he can work from his home country, he may be eligible to return when his startup company can sponsor him.

Alternatively (and realistically), unless he specifically needs the special privileges the H1-B visa confers on him, he can play the numbers game and leave the country every 90 days, visit Canada or Mexico for a bit, and come back in a week.

There's more specific information here:
http://travel.state.gov/visa/temp/types/types_1262.html# A B-1 is not strictly right for his purposes, but it's a very practicable solution.

Partner with someone he trusts, and he can continue to do development when he returns to his country, and his partner can be the face of the company.

Once the business is going well enough he may be able to get another visa to return.

Here is some advice on this from a law firm that may be helpful later:
http://www.murthy.com/startup.html

I was in this situation and left the US while my new startup petitioned for me to get a new visa. It's important that you can demonstrate it's a real business and not just a front to keep you in the country so it helps to have co-founders, other employees, revenue, etc. It also helps if you don't have a controlling interest in the new company.

Why can't he hire a lawyer to incorporate a facade company in the US. After that, it doesn't really matter where he's physically located so long as he keeps getting work done.

That approach worked really well for Peldi, the Balsamiq.com guy

(Note that the Balsamiq "About us" page is upfront about the company being split between countries. I think it's a bad idea to lie to your users about something like that)

What do you need for a start up ?
An idea and I am assuming it would be a web based start up so a domain name. (I am assuming that you are not going into recruitment or such type of business)
Work on your product or idea and then launch it. No need to register a company because of your visa restrictions.
You want to accept payment , use paypal.
Once you get money , show that as extra income in W2 and pay taxes.
Be worried about company registration as LLC or Inc when you hit some decent revenues.