Q: I’m on an H1b (or an L) and am working full time for my employer, but I am also working on a startup on the side. I’m not get paid at all by the startup, so this doesn’t count as work, right?
A: Wrong. When you are on an H1b or an L visa, you are authorized to work only for your sponsoring employer. When an H1b or L employee gets an opportunity to be involved with an exciting startup, they frequently try to get around this restriction by agreeing to work for the startup on nights and weekends (and early mornings, and lunch breaks…) for free, until the startup itself is able to sponsor them for an H1b or green card. The rationale is that since they are not getting paid, it is not really “work.”
This is not the view that immigration law takes, however. If you are performing duties for which a person would normally get paid, you are probably “working” under immigration law regardless of whether or not your are getting paid, and if this startup has not yet sponsored you for a visa, this work is unauthorized. This includes involvement in day-to-day activities and working on substantive projects. So until the startup is able to sponsor you, limit your involvement to activities that are definitely not considered work under immigration law. This includes negotiating contracts, legal entity formation, seeking funding, and similar set-up activities.