Janice Lozano
International students in the US who want to start a business must navigate a complex web of visa regulations, funding options, and legal requirements. While the F-1 visa is the most popular option for international students, it comes with limitations on business ownership and operations. However, F-1 visa holders can create a business plan, launch a business, and invest in their company. To actively run their business, international students may consider applying for Optional Practical Training (OPT) or switching to an H-1B or E-2 visa. Accessing funding and complying with tax obligations are other critical aspects that aspiring international student entrepreneurs must carefully navigate.
Can international students own a company?
| Characteristics | Values |
|---|---|
| Visa type | F-1 visa |
| Business activities | Incorporate a corporation, form an LLC, negotiate and sign a commercial lease agreement, open a business bank account, meet with partners and investors, purchase equipment and inventory, enter into contracts with clients, hire employees |
| Limitations | Cannot run the business after founding it, cannot work for the business without authorization (e.g. OPT), must comply with visa regulations and legal prerequisites |
| Funding sources | Personal savings, loans from family and friends, investors, venture capitalists, banks |
| Business structure | Sole proprietorship, partnership, LLC, corporation |
| Legal considerations | Consult immigration lawyers, seek advice from professionals, be aware of local laws and licensing requirements |
| Visa transition | May require changing from F-1 to E-2 Treaty Investor Visa or H-1B visa to operate the company legally |
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What You'll Learn
F-1 visa regulations and limitations
The F-1 visa is a non-immigrant visa that allows foreign students to pursue academic studies at accredited academic institutions in the US. It is the most popular student visa in the US, with over one million enrolled students. While F-1 visa holders can start a business, they cannot legally work for or run their own company. This includes any form of self-employment or freelance work. This is because the visa is intended to ensure that students are in the US to study, not to work, and that they devote their energy to their studies rather than a startup.
F-1 visa holders can, however, own a business entity and be involved in certain business activities that do not constitute "work". They can, for example, incorporate a corporation or form a limited liability company (LLC), negotiate and sign commercial lease agreements, open a business bank account, meet with partners and investors, purchase equipment and inventory, and enter into contracts with clients, as long as they do not receive compensation. They can also hire employees to work for their company and receive dividend income.
To be able to work for their own company, F-1 visa holders would need to adjust their visa status, for example, to H-1B, or apply for Optional Practical Training (OPT), which is considered valid employment authorization as long as the work relates to their field of study. Alternatively, they can partner with a US citizen to manage operations while they remain a passive investor.
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Funding sources and compliance
Funding Sources
As an international student, you may face challenges in accessing funding for your business due to visa restrictions. F-1 visas, for instance, restrict the use of funds for personal income. However, you can explore various funding options:
- Bootstrapping: Utilize your personal savings or generate initial capital through pre-sales.
- Grants and Competitions: Look for grants and competitions specifically catering to international student founders.
- University and Government Programs: Research the funding opportunities provided by your university and government initiatives.
- Angel Investors: Wealthy individuals known as angel investors may be interested in backing early-stage ventures and could appreciate your unique perspective as an international student.
- Crowdfunding: Platforms like Kickstarter or GoFundMe allow you to access a broad online audience for raising capital.
Compliance
Compliance with laws and regulations is paramount when starting a business as an international student. Here are some key considerations:
- Visa Restrictions: Ensure that your business activities comply with the restrictions of your visa status. F-1 visa holders, for example, are generally not allowed to engage in unauthorized employment, including running their own businesses.
- Business Registration: Familiarize yourself with state and federal regulations regarding business registration, organization structure (LLC, corporation, etc.), naming, and obtaining necessary permits and licenses.
- Immigration Law: Consult with immigration attorneys or specialists to ensure your business plan adheres to visa-specific rules.
- Employment Authorization: If eligible, consider applying for Optional Practical Training (OPT) or Curricular Practical Training (CPT), which can provide a pathway to valid employment authorization related to your field of study.
- Taxation: Understand the tax implications, such as the requirement to file an annual income tax return if you earn dividend income from your business investments.
Remember, it is crucial to seek professional advice and stay informed about the specific laws and regulations applicable to your situation.
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Business structure and registration
International students on an F-1 visa are allowed to invest in their own company and receive dividends. They can also create a business plan and launch their business. However, they cannot be actively involved in the daily operations of the business.
The F-1 visa is designed for full-time students and is quite restrictive when it comes to owning businesses. F-1 visa holders are not allowed to earn revenues or salaries derived from a business they operate. They can, however, work on-campus for up to 20 hours a week during the academic year and full-time during academic breaks.
To actively run a business, an F-1 visa holder may need to change their status to an E-2 Treaty Investor Visa or an H-1B visa. The H-1B visa allows international students to work in the U.S. for up to three years but does not allow them to hold a majority stake in their company.
Another option for F-1 visa holders is to apply for the Optional Practical Training (OPT) program, which allows them to operate a business related to their field of study for up to one year. After completing OPT, students must exit the United States and are not guaranteed re-entry.
When starting a business as an international student, it is important to be aware of legal and practical implications, such as selecting the appropriate business structure. The United States recognizes four main types of business structures: sole proprietorship, partnership, limited liability company (LLC), and corporation. The choice of business structure will impact how the business is taxed and the owner's liability.
Registering a company and obtaining necessary licenses depend on the state where the business is located. It is recommended that international students seek advice from professionals such as immigration attorneys and business advisors to ensure compliance with visa regulations and local laws.
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Hiring employees
International students on an F1 visa are not allowed to own a business or earn revenues or salaries derived from a business they operate. However, they are permitted to become passive investors or partners in a US startup. International students can apply for the Optional Practical Training (OPT) program, which allows them to operate a business related to their field of study for one year. After this period, they are required to exit the US unless they apply for another visa.
Firstly, it is critical to understand the visa requirements and restrictions for both employers and employees. As an international student owner, you must ensure your visa status permits you to hire employees and operate a business. For your employees, you can consider hiring other international students or US citizens/permanent residents. International students on F-1 visas, for example, are eligible to work in internships after the first year of their programs and do not require visa sponsorships. They can obtain work authorization through Curricular Practical Training (CPT), which allows them to work full or part-time during internships.
Secondly, when hiring employees, ensure all required paperwork is completed. For international student employees, a Job Offer Letter is typically the only document required, and the initial OPT application process is handled by the student, school, and USCIS. As an employer, you must confirm an international student's work authorization before their employment start date to prevent any liability for yourself and the employee. All employees must complete their I-9 process when their employment begins.
Thirdly, be aware of the different visa categories and their specific regulations. For instance, F-1 students with STEM degrees may be eligible for a 24-month extension of their authorized period of post-completion OPT, allowing them to work full-time for 36 months after their degree completion. The H1-B visa program is another option for international students who wish to start a business or work in the US. It provides a transition period between OPT and H-1B, allowing individuals to remain employed during this time if the H-1B petition is filed timely.
Lastly, consider the benefits of hiring international students. Organizations that hire international students can gain a competitive advantage due to their global connections and intercultural fluency. Additionally, having a diverse team can foster innovation and protect against groupthink.
Remember, accessing capital for your business as an international student owner might be challenging, as investors may be hesitant due to visa concerns. However, an international background can also be an asset when marketing your expansion potential and attracting foreign investors.
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Applying for Optional Practical Training (OPT)
International students on an F-1 visa are allowed to invest in their own company and receive dividends. However, they cannot run their own business without being paid, as this is forbidden for F-1 visa holders.
Optional Practical Training (OPT) is a type of work permission available for eligible F-1 students. It allows students to gain real-world work experience related to their field of study. OPT is recommended by a Designated School Official (DSO) in SEVIS, but it is the student who must apply for the work permit with the U.S. Citizenship and Immigration Service (USCIS). If approved, USCIS will issue an Employment Authorization Document (EAD). Students must not begin working before the start date on the EAD.
- Students must not file Form I-765, "Application for Employment Authorization," until after the DSO recommends OPT in their SEVIS records and they have the updated Form I-20 with the OPT recommendation.
- The Form I-765 must be filed within 30 days of the DSO OPT recommendation. Applications submitted before the OPT is recommended or after the 30-day post-recommendation period will be denied.
- Any F-1 OPT request in "Requested" status longer than 180 days is automatically canceled by SEVIS.
- While on OPT, students must report any changes in their legal name, address, or employment status to their DSO.
- OPT employment must be for a minimum of 20 hours per week, and it can be paid or unpaid.
- Students can accrue no more than 90 days of unemployment during the post-completion OPT period.
- If you have a degree in certain STEM fields, you may apply for a 24-month extension of your post-completion OPT employment authorization.
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Frequently asked questions
It depends on your visa status. If you're on an F1 visa, you can start a business but you cannot run it or earn a salary from it. You can, however, apply for Optional Practical Training (OPT), which allows you to operate a business related to your field of study for one year. If you're on an H1-B visa, you may be able to own a company, but your ownership must be passive, meaning you cannot be involved in day-to-day management.
The F1 visa is a nonimmigrant visa that allows international students to pursue academic studies at accredited colleges, universities, or other academic institutions in the US. It is the most popular type of student visa.
It may be difficult to get funding from US angel investors and venture capital firms as they may be hesitant due to your visa status. You could consider seeking funding from federally supported programs like the Small Business Innovation Research and Small Business Technology Transfer. However, these programs typically require that a majority of the business's equity is owned and controlled by a US citizen.
The F1 visa allows international students to stay in the US for the duration of their international education, plus 1-3 years of OPT training and an additional 60 days. This provides a longer stay than other types of visas. F1 visa holders can also invest in their own companies and receive dividends.
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