Option A a person on h1 wants to open 100% subsidiary of his…

Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
Your work in the U.S. is employer-specific (i.e. limited to employment with the approved employer/petitioner) so working for your company and receiving any kind of compensation for your work is strictly not allowed.
You could have a company (not sole proprietorship ), and you could employee your spouse as long as they were legally allowed to work in the US.
You would have to be a C corp or S corp as LLC single member is sole proprietor. If you are not US resident alien you cannot have the S corp.

It is wise to look at your options. A person on an H1B or other temporary work visa in the United States is legally allowed to invest in any venture.

If you wanted to work for that company and earn a salary, you would need to without obtain prior approval from the USCIS

Yes but the second option too was covered as I said you can invest in a passive way.

Correct, dividends paid with C corp and S corp K1

LLC is not an option by itself because then you are sole proprietor.

You could set up a corporation, perhaps pay a fee to someone to actually "run" the business, invested in the business, and received the profit.

Then you would be within the IRS understanding of investment and no compensation (implying wages or salary).

The INS would typically employ the IRS definition.

An LLC with one member is a sole proprietor ship and not an investment.

No, you cannot do that.

An LLC does not issue the profits to a sole member using K1.

All the profits of the LLC single member passes directly to the member using Schedule C attached to the US tax return.

A single member LLC is not a passive investment at all.

A single member LLC would file showing profit on your return. If you chose S corp (remember resident alien rule ) then teh S corp files but you would receive a K1 and you would pay the actual tax

Option A is ok as long as it is a corporation. The main point in either is to remain passive investor. No day to day, no salary,

Owned by a foreign corporation with you still as the only owner. That is a direct line to you. In most scenarios the IRS looks past that to see where true ownership lies. This is true when withholding issues arise and for taxation.

As the business would be in the US the foreign entity ownership would not go much further then you .

A corporation is 25% foreign owned if it has at least one direct or indirect 25% foreign shareholder at any time during the tax year. This opens the need to also file form 5472. As I advised, the INS would follow the IRS.

The LLC if owned by a foreign entity in more than 25% would require the additional form. If you are just a stockholder in the foreign entity then no, as long as your shares are not significant.
If you own all the stock in the foreign company then that is no different then you owning the LLC.

Correct

Correct

You would need an employee that managed everything first. Your wife needs the visa before she can work for the US company in the US.

I was advising employee first because you would need someone to actually be doing the work.

There are E1 and E2 (for spouses) you stated your wife has an E3 VISA, that VISA may not allow her emplyment outside the initial traders business.

If she does not have a clear authorization to be employed then no.

C corp would define your activity as a an investment. S corp would require a salary be paid to the shareholder that is doing actual work for the company.
C corp would certainly distance you from any direct relationship other than investment.

You set it up as a C corp it would file it's own taxes. The shareholders of a C corporation may elect S status and, the corporation will avoid a corporate-level federal tax on its operating income or on gain resulting from the sale of its business. Items of income, deduction, gain, loss, and credit are generally taken into account only by the shareholders and not by the corporation in computing taxable income and tax.

I would say to decide what you want to do and set up that way from beginning

Yes, C corps do pay tax twice.

The C corp itself and then the shareholders on divdends

S corp can but you need to not be doing anything for the S corp

The C corp with it's own employees and workers running it removes you further.

Proof

That 's a good question

An agent could loo to see what your active role was in the business based on what the business does and who is doing it (who has been hired)

Correct

I would not advise it but it is not disallowed.

We have been chatting for over an hour

The actions of the C corp, which would be hiring others to do the work and run the business

You are most welcome.
Your positive rating is always thanks enough.