Lori Meadows
International students in the United States on an F-1 visa can start a business, but there are several limitations and considerations to keep in mind. F-1 visas are the most common type of student visa, allowing foreign students to pursue academic studies at accredited colleges and universities in the US. While the F-1 visa has restrictions on employment, it does enable some limited business-related activities. To stay compliant, international students must ensure their business is directly related to their field of study and does not hinder their academic progress. They may also need to apply for Optional Practical Training (OPT) to work for their own company, and even then, their engagement is restricted to a specific timeframe. Additionally, F-1 visa holders cannot earn revenue or a salary from their business and must explore other funding sources while complying with visa regulations.
| Characteristics | Values |
|---|---|
| Type of visa | F-1, E-2 Treaty Investor Visa, H-1B |
| F-1 visa holders | Can create a business plan and launch a business, but cannot run the business |
| OPT | Optional Practical Training allows international students to operate a business related to their field of study for one year |
| OPT extension | F-1 students with a degree in STEM may be eligible for a 24-month extension |
| OPT employment | Students can work up to 20 hours a week during pre-completion OPT |
| OPT completion | After OPT completion, students must exit the US and are not guaranteed re-entry |
| OPT approval | Constitutes permission to start an entrepreneurial venture within one's area of study |
| F-1 visa limitations | Cannot own a business, earn revenue, or receive a salary |
| F-1 visa benefits | Allows students to stay in the US for a longer period of time than other visas |
| F-1 visa work | Students can work up to 20 hours a week on campus during the academic year |
| Business registration | Must select a form of organization (LLC, corporation, etc.), register the name, and obtain necessary permits and licenses |
| Funding sources | Personal savings, loans, investors (must comply with F-1 visa regulations) |
| Passive roles | International students can become passive investors or partners in a startup |
| Active roles | Becoming too active in a startup's operations may result in F-1 visa revocation |
| Compliance | Keeping the business in compliance with rules and regulations is crucial |
| Insurance | General liability insurance and other industry-specific insurance are required |
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What You'll Learn
F-1 visa limitations
The F-1 visa is a nonimmigrant visa that allows international students to pursue academic studies at accredited colleges, universities, or other academic institutions in the United States. It is the most popular type of student visa, with over one million students currently enrolled in academic institutions authorized by the U.S. government to accept foreign students.
One limitation of the F-1 visa is that students are typically restricted in when and where they can work. F-1 students may not work off-campus during their first academic year but may accept on-campus employment, working up to 20 hours a week during academic terms and full-time during academic breaks. After the first academic year, F-1 students may engage in three types of off-campus employment: Curricular Practical Training (CPT), Optional Practical Training (OPT), and the OPT STEM extension. CPT allows students to work in a job directly related to their major field of study while still enrolled, contributing valuable industry connections. OPT allows students to work with any employer, including their own startup company, for up to 12 months after graduation, with a possible 24-month extension for STEM majors.
Another limitation is that F-1 visa holders cannot be found "engaging in business." While they can establish a business and receive dividend income, they cannot run the business or conduct business activities that result in compensation. They must either leave the business to a capable team, invest remotely, or have OPT authorization. F-1 visa holders can, however, hire employees for their businesses and apply for an E-2 Treaty Investor Visa or H-1B visa to operate a company legally.
F-1 visa holders must also maintain a residence abroad with no intention of giving it up and have sufficient funds for self-support during their studies. They must also ensure their business complies with all relevant laws and regulations, including obtaining necessary licenses, permits, and insurance.
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Funding and visas
International students on an F1 visa can create a business plan and launch their own business. However, they are not allowed to engage in the daily operations of the business or earn revenues or a salary from the business. To do so, they must change their visa status to an E-2 Treaty Investor Visa, H-1B Visa, or another visa that permits employment.
Funding
International students can use personal savings, borrow money from family and friends, or take out loans from banks. They can also seek funding from venture capitalists, angel investors, and venture capital firms, but these sources may be hesitant to invest due to the student's visa status. Students may also want to consider finding a business partner or co-founder who can contribute financially.
Visas
The F1 visa is the most popular visa for international students in the US, but it is restrictive when it comes to owning and operating a business. F1 visa holders can establish a business and create a business plan, but they cannot run the business, earn compensation, or receive a salary. To operate their business legally, F1 visa holders must change their visa status to an E-2 or H-1B visa.
The H-1B visa is a good option for international students who want to start a business in the US. It allows holders to work in a specialty occupation related to their degree. After the initial three-year period, the visa can be extended for an additional six years, after which the holder is eligible to apply for a green card.
Another option is the Optional Practical Training (OPT) program, which allows international students to work for up to 12 months in any job related to their field of study, including their own startup. F1 visa holders can apply for OPT authorization, which is considered valid employment authorization. However, after the OPT period ends, they must exit the US and are not guaranteed re-entry unless they apply for another visa.
Other visa pathways for entrepreneurs include the L-1A Intracompany Transferee Executive or Manager visa, the O-1A nonimmigrant classification, and the EB-1A first-preference immigrant visa classification. These visas are for individuals with specific skills or abilities and may require the applicant to work in a managerial position or continue working in their field of expertise.
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Business registration
International students on an F-1 visa can create a business plan and launch their own business in the US. However, they are not permitted to run the business or engage in its operations after it has been founded. They can, however, invest in their company and hire employees who comply with relevant employment laws and regulations.
The process of registering a business as an international student in the US is as follows:
Registering a business and obtaining the necessary licenses depend on the state where the business is located. It is important to get acquainted with local laws to avoid any violation issues. Typically, this involves selecting a form of organization (LLC, C-corp, etc.), registering the name of the company, and obtaining the necessary permits or licenses.
Funding Sources
An investigation into funding choices is necessary. This includes personal savings, borrowing money from banks, or looking for investors. It is important to ensure that the funding sources comply with F-1 visa regulations, as some sources come with limitations on how funds can be used.
Legal Structure
Selecting an appropriate business entity is crucial. This includes considering the visa holder's plans and seeking legal advice to ensure compliance with visa regulations.
Tax Obligations
Knowledge of tax obligations is vital as they differ depending on the type of visa held and the business structure. Taking proactive steps through effective tax planning will help avoid unexpected liabilities.
Insurance
International students starting a business in the US will need to purchase a general liability insurance policy, as well as any other insurance policies required for their type of business.
Overall, it is important for international students to keep their business in compliance with all rules and regulations and to consult with attorneys or accountants to ensure they are following the correct procedures.
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Practical Training (OPT)
International students on an F-1 visa are not permitted to run a business after it has been founded. However, they can apply for Optional Practical Training (OPT), which allows them to operate a business related to their field of study for one year. OPT is a type of temporary employment directly related to an F-1 student's major area of study.
To be eligible for OPT, an international student must have been a full-time student for one academic year at a SEVP-certified college, university, conservatory, or seminary. They must not be studying English as a Second Language and must seek employment related to their major area of study. OPT provides an opportunity for experiential learning and gaining work experience within their field of study.
The OPT application process involves several steps and requires the student to apply for a work permit with the U.S. Citizenship and Immigration Service (USCIS). The student must submit Form I-765, Application for Employment Authorization, along with the required fee and supporting documentation. A Designated School Official (DSO) will make a recommendation by endorsing Form I-20, Certification of Eligibility for Nonimmigrant Student Status. The student must not begin working before receiving their Employment Authorization Document (EAD) from USCIS.
F-1 students are generally authorized up to 12 months of OPT, which can be part-time pre-completion OPT and post-completion OPT combined. Students who graduated with a degree in STEM fields may be eligible for a 24-month extension of post-completion OPT if their degree is listed on the Department of Homeland Security STEM-Designated Degree Program List.
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Running the business
Running a business as an international student in the US comes with a unique set of challenges and opportunities. Here are some key considerations for international students looking to run a business in the US:
Understanding Visa Restrictions
The F-1 visa is the most common type of student visa in the US, allowing international students to pursue academic studies. While it provides some flexibility for business creation, it has strict limitations on operational involvement. F-1 visa holders can engage in “preliminary business planning” but cannot actively run the business or receive compensation. To overcome this restriction, students can apply for Optional Practical Training (OPT), which allows them to work for up to 12 months, with possible extensions for STEM fields. Alternatively, students can explore changing their visa status to E-2 or H-1B, which offer more favourable options for running a business.
Complying with Regulations
International students must ensure their business complies with state and federal regulations. This includes registering the business, selecting the appropriate legal structure (LLC, corporation, etc.), obtaining necessary permits and licenses, and understanding tax obligations specific to their visa status. Seeking advice from immigration attorneys and business advisors can help ensure compliance with all relevant laws.
Funding and Investment
Accessing capital as an international student can be challenging. US investors may be hesitant due to visa status concerns. International students should carefully consider their funding sources, ensuring compliance with visa regulations. They can use personal savings, loans from family and friends, or seek venture capital, but comprehensive documentation and a solid business plan are crucial to attracting investors.
Operational Considerations
International students running a business in the US should be mindful of day-to-day operations. This includes hiring employees, ensuring compliance with employment laws, and maintaining clear financial records. While they cannot actively work for their business, students can hire capable teams and remain involved in tasks that aren't considered employment, such as planning and marketing.
Exit Strategies
International students should also consider exit strategies in case their business venture doesn't succeed. Understanding the grace periods and visa requirements will help them navigate any potential challenges. Additionally, seeking professional advice from immigration lawyers and business advisors can provide valuable guidance on running a compliant and successful business in the US.
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Frequently asked questions
Yes, international students on an F-1 visa can create a business plan and launch their own business. However, they are not permitted to run the business or be actively involved in its operations. They can invest in the company and receive dividends, but they cannot earn a salary or revenue from it.
Some challenges include visa restrictions, accessing capital and funding, and legal and regulatory compliance. Obtaining the necessary work authorisations and visas to remain in the US after starting a business can also be difficult.
International students can seek advice from professionals such as immigration attorneys and business advisors. They can also explore different visa options, such as the Optional Practical Training (OPT) program, H-1B Visa, or E-2 Treaty Investor Visa, to find the best path for their business goals.
