International Students: Starting A Business In The Usa

International students in the United States on an F-1 visa are often interested in starting a business. While the law does not directly prevent F-1 visa holders from establishing a business, there are several limitations and complexities to navigate. Students can create a business plan and launch their venture, but they cannot actively engage in the day-to-day operations or receive compensation. To overcome this, some students explore options like transitioning to an E-2 investor visa or applying for Optional Practical Training (OPT) to gain valid employment authorization. The process of starting a business as an international student in the US involves understanding various rules, regulations, and visa requirements, making it a challenging yet enriching pursuit.

F1 visa rules and limitations

The F1 visa is a non-immigrant visa that allows international students to pursue academic studies at accredited US colleges, universities, or other academic institutions. It is the most popular type of student visa, with over one million students currently enrolled in authorized academic institutions. The visa allows students to stay in the US for the duration of their international education, plus 1-3 years of Optional Practical Training (OPT), and an additional 60 days. The OPT is considered a valid form of employment authorization, allowing students to gain work experience in their field of study.

While F1 visa holders can plan to start a business and launch their own company, they are not permitted to run the business or engage in daily operations. They cannot conduct business activities or receive compensation/salary. F1 visa holders can, however, invest in their company and receive dividends. They can also hire employees, providing all relevant employment laws and regulations are complied with.

To start a business, F1 visa holders must conduct market research and create a business plan. They can use personal savings or loans to fund their business. The business must comply with all relevant laws and regulations, and obtain the necessary licenses and permits required by state and federal regulations.

F1 visa holders can apply for a green card, but they must meet certain requirements, including maintaining their student status and good academic standing. Violating the terms of an F1 visa can result in deportation or bars to re-entering the US.

Business planning and compliance

International students on an F-1 visa are allowed to create a business plan and launch a business in the US. However, they are not permitted to run the business or engage in its operations, including receiving compensation or a salary. This means that they can invest in a company and become passive partners or passive investors, but they cannot be self-employed or own the business. To be involved in running the business, F-1 visa holders must apply for Optional Practical Training (OPT), which allows them to work in the US for up to 12 months, with a possible extension of 24 months for STEM majors.

When planning a business, international students must conduct market research to determine the need for their product or service in the US market and identify any regulatory requirements that must be met. They should create a comprehensive business plan that outlines their business goals, strategies, financial plan, and methodology.

To ensure compliance with US laws and regulations, F-1 visa holders should be aware of the following:

• The business must comply with all relevant laws and regulations, including state and federal regulations.
• The business must be protected by the necessary licenses, permits, and insurance required for the specific business type and location.
• International students cannot work for their own businesses while on an F-1 visa. They can, however, hire employees, as long as they comply with employment laws and regulations.
• F-1 visa holders can receive dividend income from their business but must file an annual income tax return.
• Any partnership or investment arrangement must comply with visa rules, with the student as an investor or passive partner rather than being actively involved in day-to-day operations.
• International students should regularly stay updated on immigration and visa laws, as they are subject to change.

It is essential for international students to seek legal advice or consult with an attorney or accountant to ensure their business complies with all applicable rules and regulations in the US.

Passive investment and partnership options

International students on an F-1 visa in the US face limitations on the types of jobs they can take and the number of hours they can work. However, they can generate passive income through investments and partnerships.

Passive income is money earned without active involvement, such as from investments and royalties. F-1 visa holders can open a brokerage account with a US-based or online broker and start trading stocks, bonds, exchange-traded funds (ETFs), or other securities. They can also invest in the stock market, mutual funds, or other securities. Investing can generate income from dividends, interest, or capital gains without requiring much time or effort from the investor.

Another option for passive income is through real estate. International students can purchase property in the US with their own funds, a mortgage, or a partnership, and rent it out to tenants or Airbnb guests. They can also sell the property after holding it for a certain period to benefit from its increased value or market price.

F-1 visa holders must file a US tax return (Form 1040-NR) and report their worldwide income, including investment income, to the IRS annually. They may need an Individual Taxpayer Identification Number (ITIN) or a Social Security Number (SSN) to receive payments from their passive investments.

It is important to note that not all passive income sources are legal or feasible for international students, and there may be tax implications, legal risks, or visa violations. Therefore, consulting an immigration lawyer or accountant is essential before making any investment decisions.

OPT and other visa options

International students on an F-1 visa are allowed to establish a business in the US, but they cannot run it or be engaged in its operations. They can, however, apply for Optional Practical Training (OPT) which is considered a valid employment authorization for working as long as the employment is related to their field of study. F-1 visa holders can also invest in their company and receive dividends, but they must file an annual income tax return.

Students with an F-1 visa can use Curricular Practice Training (CPT) or OPT to start their business in the US. Both allow student founders to work in the business for up to a year while they are still in school. However, OPT can be used after graduation, whereas CPT cannot. For STEM students starting a STEM-related business, OPT can be extended by two years post-graduation. After OPT expires, students have 60 days to find alternative work authorizations or they will have to leave the country.

There are several other visa options for international student entrepreneurs who want to remain in the US after graduation. They can apply for a temporary (non-immigrant) visa like an O-1A, H-1B, E-2, or TN. The EB-1A and EB-2 NIW visas are also options, but the latter does not give immediate work authorization, and the former has strict eligibility requirements.

Access to capital and funding

To navigate this challenge, international students can consider the following options:

• Passive Investment: F-1 visa holders are permitted to become passive investors or passive partners in a startup. This option allows them to invest in a company without actively participating in its day-to-day operations, which aligns with the restrictions of their visa status.
• Partnership: International students can form a partnership where they take on the role of a limited partner, contributing capital to the business without engaging in its management. This structure ensures compliance with visa rules and allows the student to have a financial stake in the business.
• Optional Practical Training (OPT): International students can apply for the OPT program, which allows them to operate a business related to their field of study for up to one year. However, this option has time limitations and may not be suitable for long-term business goals.

It is important to note that international students should carefully consider their visa restrictions and seek legal advice when exploring funding options. The rules and regulations regarding visas and business ownership can be complex and are subject to change. Additionally, keeping the business in compliance with all rules and regulations is crucial to avoid any legal issues.

Frequently asked questions