It is unfortunate but the reality is that H1B laws are very complex just like most US visas. You already know you cannot work for that company. So what is the p

It is unfortunate but the reality is that H1B laws are very complex just like most US visas. You already know you cannot work for that company. So what is the point in just setting up a company ? If you want to do your pet project, why not just build the project just as your own project. Don't work on it as a business including doing things like sales,marketing etc until you get the green card. What is the issue with that ? If you are questioned about this company while entering the US from outside, you could get yourself into trouble. It is very hard to convince the immigration officials that you have a company but you don't work for it. So technically it is legal to create a company while on H1B but in practice, you are opening yourself to unnecessary scrutiny. It sucks but that is the truth. Accept it, get the green card and then work on your company.