Top 5 Reasons why L Visas for Start-Ups Are Frequently Denied

The L-1 visa allows multinational companies to transfer key employees to their U.S. operations. Navigating the complex requirements of the L-1 category are particularly challenging for start-ups and small businesses.  Although the total L-1 visa approval rate hovers around 94%, 40% of the approvals were issued to 2% of the filers. These filers were larger companies petitioning between 10 and 1000 L1 workers.  Accordingly, it is more accurate to say that the approval rate for the vast majority of filers or petitioners sponsoring less than 10 L1s is closer to 60% approval rate. Two thirds of the approvals for were L-1A Managers or Executives and one third of approvals for L1B specialized workers.

Below we focus on the most common challenges for start-ups with regard to obtaining an L1 approval.

A. Failing to Demonstrate Qualifying Relationship

One of the primary reasons start-ups face L-1 visa denials is the inability to clearly demonstrate the qualifying relationship between the U.S. and foreign entities. The L-1 visa requires a parent, branch, subsidiary, or affiliate relationship between the companies involved in the employee transfer.

USCIS closely scrutinizes the ownership structure and control of both the U.S. and foreign entities to ensure they meet the stringent L-1 visa requirements. Start-ups must provide comprehensive documentation that establishes the qualifying relationship, such as:

• Corporate formation documents
• Organizational charts
• Proof of ownership or control

Inconsistencies in the submitted documentation or a lack of clear evidence can quickly lead to visa denial. Utilizing immigration resources tailored to start-ups, such as those offered by Alma, can help entrepreneurs prepare and submit the correct documentation to evidence a qualifying relationship.

B. Insufficient Proof of Doing Business

Start-ups, particularly those in nascent stages, may struggle to showcase significant business activities. Unlike established corporations, start-ups might lack documentation evidencing operations.  Sample supporting documents can include:

• Client and Vendor Agreements: Provide copies of agreements that reflect active engagements with clients and suppliers.
• Transaction Records: Submit a series of financial transactions that demonstrate consistent business activity.
• Operational Financials: Include financial documentation that presents a clear picture of the business’s operational status.
• Business plan including goals, forecasts and summary of operations.

C. Inadequate Evidence of L-1B Specialized Knowledge

When applying for the L-1B visa, start-ups often encounter difficulties in proving that the transferee possesses the necessary specialized knowledge critical to the U.S. operation. This knowledge must be both unique and indispensable, setting the employee apart from the existing U.S. workforce. Start-ups, with their dynamic roles and evolving structures, may find it challenging to clearly delineate the specialized nature of an employee's expertise.

To present a strong case, start-ups should compile a detailed dossier that highlights the employee's unique skills and contributions. This may involve providing comprehensive job descriptions that capture the specialized roles the employee has filled, coupled with evidence of their contributions to proprietary projects or initiatives. Highlighting specific technical expertise or industry insights that the employee offers can further reinforce their unique value.

• Detailed Project Records: Include documentation of significant projects led or influenced by the employee, illustrating their unique role and impact on company success.
• Professional Accolades: Submit records of awards or recognition that underscore the employee's exceptional skills and industry contributions.
• Market Analysis: Demonstrate through analysis why the employee's expertise is not commonly found within the domestic market.

Additionally, start-ups must effectively illustrate how this specialized knowledge is integral to their U.S. operations. This involves articulating the direct impact of the employee's skills on the company's strategic initiatives and how these contribute to a competitive edge in the market.

D. Insufficient Staffing and Organizational Structure

USCIS requires evidence that the L-1 visa beneficiary is genuinely in a managerial or executive capacity, necessitating a team of subordinates to manage. This role must be substantiated by more than just a title; it should reflect genuine managerial duties.

The lean nature of start-up teams often complicates the portrayal of a traditional hierarchy. The fluid roles within such companies can obscure lines of authority and responsibility. It is crucial to articulate the roles and responsibilities within the organization clearly, even if the structure does not resemble that of larger entities. Precisely documenting these roles will aid in demonstrating the necessity of the managerial or executive position.

To tackle these issues, start-ups should focus on crafting a strategic business plan that addresses both current staffing and future organizational development. This plan should detail:

• Future Staffing Plans: Outline anticipated team growth, explaining how the company intends to expand operations and the strategic role of the L-1 visa beneficiary in facilitating this growth.
• Visual Organizational Maps: Provide diagrams of current and proposed organizational structures, clearly indicating the beneficiary’s role and their managerial duties.
• Strategic Role Definition: Articulate the strategic significance of the beneficiary’s position, emphasizing their leadership's contribution to achieving business goals.

By presenting a well-thought-out business plan, start-ups can effectively convey their vision for growth and the pivotal role of the L-1 visa beneficiary. This approach not only aligns with USCIS expectations but also highlights the beneficiary’s essential role in driving the start-up’s future success.

E. Lack of Physical Office Space

For start-ups seeking L-1 visas, establishing a credible business presence requires more than just operational capability—it demands a tangible, physical office. USCIS sets expectations for having an adequate space that supports the company’s stated activities, ensuring the U.S. entity is not operating solely on paper. Start-ups that initially opt for virtual or shared environments can find meeting this requirement challenging. To mitigate this, start-ups should explore securing a dedicated office that aligns with their operational scale and future growth plans.

We recommend that start-ups document their office space with the below supporting evidence:

• Lease Documentation: Submit clear, comprehensive lease documents detailing the terms, ensuring they reflect a commitment to the business's operational longevity.
• Office Setup Visuals: Provide visual representations of the office setup, such as diagrams or photographs, showcasing the space's functionality for business activities.
• Operational Assets: Include evidence of office infrastructure, such as technology and equipment, highlighting the readiness of the space to support business objectives.

By ensuring their physical presence meets USCIS standards, start-ups not only comply with regulatory expectations but also demonstrate a commitment to establishing a credible and lasting footprint in the U.S. business landscape.

Navigating the L-1 Visa Process for Start-Ups

By combining expert legal guidance with strategic use of detailed resources and maintaining a commitment to thorough preparation, start-ups can effectively navigate the complexities of the L-1 visa process. This multifaceted approach not only increases the likelihood of securing the visa but also positions the start-up for long-term success in establishing a presence in the U.S. If you're a start-up seeking to transfer key personnel to the U.S., get started with a free consultation today, and let us help you unlock the potential of the L-1 visa for your business.