Entrepreneurship For International Students In The Usa

The United States has long been a destination for top talent from around the world, with its ability to attract entrepreneurs leading to path-breaking innovation and the creation of new jobs, industries, and opportunities. For international students in the US, the prospect of starting a business can be both exciting and daunting, with visa concerns, access to capital, and the challenge of exiting the business at the right time being key considerations. While the F-1 student visa is the most common for international students, it comes with restrictions on owning and operating a business. However, there are alternative pathways and visa options that aspiring international student entrepreneurs can explore to turn their dream business ideas into a reality.

F-1 visa limitations and how to get paid

International students on an F-1 visa can create a business plan and launch their own business in the US. However, there are several limitations and considerations to keep in mind. Firstly, the business must be directly related to the student's major area of study, and they must have Optional Practical Training (OPT) authorization. The OPT must relate to the student's program of study and can occur either before (pre-completion OPT) or after the completion of the program (post-completion OPT). F-1 students are also restricted in terms of working hours, with a limit of 20 hours per week for those participating in pre-completion OPT.

Another important limitation is that F-1 visa holders are prohibited from engaging in the day-to-day running of the company and cannot receive compensation or a salary. They can establish a business and create a business plan, but they cannot conduct business activities or receive payment. This means that they cannot "run" their own business, as working without pay is not considered volunteering and is forbidden for F-1 visa holders. To overcome this challenge, F-1 visa holders can ensure they have a capable team in place to run the business, invest in the business remotely, or obtain OPT authorization.

To receive compensation for their business endeavours, F-1 visa holders may need to transition to a different visa status or explore other pathways. One option is to apply for a nonimmigrant or immigrant status that authorizes work in the US, such as the E-2 Treaty Investor or EB-5 Immigrant Investor visas, which require a certain level of investment. Other pathways include the International Entrepreneur Rule, which requires a central and active role in the business operations and substantial potential for rapid growth and job creation.

It is important to note that the process of changing visa status or applying for different pathways can be complex and time-consuming. F-1 visa holders interested in starting a business in the US should carefully research the requirements and consult with their Designated School Official and the US Citizenship and Immigration Services to ensure compliance with all rules and regulations. Additionally, they should be prepared to demonstrate their eligibility and provide the necessary documentation, such as proof of funds, during the application process.

Temporary and permanent pathways for non-citizen entrepreneurs

International students on an F-1 visa can create a business plan and launch their own business in the US. However, they are prohibited from "engaging in business" and cannot run the company or conduct business activities. They can, however, invest in their own company and receive dividends.

There are several temporary and permanent pathways for non-citizen entrepreneurs to work in the US. These include:

• The International Entrepreneur Rule (IER): This requires the entity to lawfully conduct business in the US, have been formed within the preceding five years, and have the potential for rapid growth and job creation. Under the IER, the Department of Homeland Security (DHS) may grant a period of authorized stay to entrepreneurs who demonstrate that their stay will provide a significant public benefit through their business venture.
• E-2 Treaty Investor or EB-5 Immigrant Investor: These pathways require the entrepreneur to invest.
• L-1A Intracompany Transferee Executive or Manager: This pathway requires the entrepreneur to be in a managerial or executive position.
• H-1B Specialty Occupation: This pathway requires the entrepreneur to work in a specialty occupation related to their degree.
• O-1A nonimmigrant classification or EB-1A first-preference immigrant visa classification: These pathways are for individuals with "extraordinary ability" who will continue to work in their field of expertise.
• Nonimmigrant or parole pathways: These pathways allow non-citizens to temporarily live and work in the US. While they do not provide a path to lawful permanent resident status, they can provide time to demonstrate eligibility for a permanent resident pathway.

The International Entrepreneur Rule

International students on an F-1 visa can create a business plan and launch their own business in the United States. However, there are challenges when it comes to running the company and engaging in daily operations. F-1 visa holders are prohibited from being found "engaging in business" and receiving compensation or a salary.

Up to three entrepreneurs per startup can be eligible for parole under the IER. Entrepreneurs may be either living abroad or already in the United States, but the startup entity must have been formed in the United States within the past five years. The rule requires entrepreneurs to have a substantial ownership interest (at least 10% at the time of the initial application) in the startup business and have a central and active role in its operations. The investment requirements present a potential hurdle for entrepreneurs, with a minimum investment of $250,000. The rule also places more importance on investment generated than revenue generated, at least during the initial parole period.

The IER was published in the Federal Register at the end of the Obama administration and was scheduled to go into effect on July 17, 2017. However, USCIS delayed this effective date until March 2018, leading to a lawsuit challenging the delay as unlawful. On December 1, 2017, a federal court ordered USCIS to implement the IER without further delay. The new investment and revenue amounts will become effective and apply to applications filed on or after October 1, 2024.

Nonimmigrant or parole pathways

International students on an F-1 visa can create a business plan and launch their own business in the United States. However, there are challenges when it comes to running the company and engaging in daily operations. F-1 visa holders are prohibited from "engaging in business" and cannot directly pay themselves a salary or wage from the business. They can, however, receive dividend income as it is considered passive income.

To overcome this, F-1 visa holders can apply for Optional Practical Training (OPT) if they plan to start a business. OPT must relate to the student's program of study and can occur before or after the completion of the program. F-1 students who have graduated with a degree in a STEM field may be eligible for a 24-month extension of their authorized period of post-completion OPT if their degree is listed on the Department of Homeland Security STEM-Designated Degree Program List.

Some nonimmigrant pathways that allow entrepreneurs to temporarily live and work in the United States include:

• L-1 nonimmigrant visa classification: Requires the new office to have a qualifying relationship (parent, subsidiary, or affiliate) with a foreign business that employed the applicant abroad for at least one year.
• O-1A nonimmigrant visa classification: For individuals with "extraordinary ability" who have sustained national or international acclaim.
• H-1B Specialty Occupation: Requires the applicant to work in a specialty occupation related to their degree.

Other pathways that require investment include:

• E-2 Treaty Investor: Requires the capacity to develop and direct the enterprise.
• EB-5 Immigrant Investor

Tax laws and regulations

As an international student entrepreneur in the US, you will need to navigate tax filing requirements in the US and potentially in your home country. Your business will likely need to file federal income tax and state income tax, depending on the state where it is registered. There is also the possibility of self-employment taxes if you take owner's draws to cover your living expenses. You might also owe taxes on your business profits in your home country, so consulting a tax advisor there is crucial.

Navigating US tax laws can be tricky, so seeking professional help is highly recommended. A qualified US tax advisor can be your guide, helping you understand your filing obligations, determining the exact tax forms you need, and ensuring you take advantage of all available deductions and credits.

US tax laws and regulations are not static, so staying informed is vital. The IRS website is a valuable resource, providing tax law updates and guides for international businesses. Bookmark it and check back periodically.

As an international student, you may be on an F-1 visa, which is quite restrictive regarding owning businesses. Under the F-1 program, international students are not allowed to own a business or earn revenues or a salary derived from a business they operate. However, F-1 visa regulations do allow international students to invest in their own company and receive dividends. An income tax return will have to be filed annually if dividend income is earned.

To start a business as an F-1 visa holder, you must ensure you leave the business to a capable team after the preliminary planning phase, invest in the business remotely, or have OPT authorization. The business must be directly related to your field of study and must not hinder your progress. You can also apply for Optional Practical Training (OPT), which is considered valid employment authorization as long as the employment is related to your field of study.

There are other visa pathways to consider as well, such as the International Entrepreneur Rule, which requires you to have a certain amount of ownership in the startup entity, or the E-2 Treaty Investor or EB-5 Immigrant Investor, which require you to invest. The L-1 nonimmigrant visa classification requires the new office to have a qualifying relationship with a foreign business that employed you abroad for at least one year.

Frequently asked questions