International Students: Starting Businesses In The Usa

International students in the United States often desire to launch a startup or develop their entrepreneurial skills. While the legal work involved in starting a business as an international student can be overwhelming, it is possible. International students on an F-1 visa can create a business plan and launch their own business, but they cannot run the business or be actively involved in its operations. They can, however, apply for Optional Practical Training (OPT) or switch to an H-1B visa to continue working for their startup in the US.

F-1 visa students can plan to start a business but not run it

F-1 visa students can plan to start a business but cannot run it. While the F-1 visa allows international students to study at accredited colleges and universities in the United States, it also permits a number of business activities that do not constitute "work." For example, F-1 visa holders can incorporate a corporation or form an LLC, sign a commercial lease agreement, open a business bank account, meet with partners and investors, purchase equipment and inventory, and hire employees. These activities are considered "preliminary business planning" and not "engagement."

However, once the business is fully established, F-1 visa holders must cease any engagement in its operations. They are not allowed to conduct business activities or receive compensation or a salary. F-1 visa holders can, however, invest in their company and receive dividends, for which they must file an annual income tax return.

To ensure initial success, F-1 visa holders should conduct market research to determine the need for their product or service in the U.S. and check for any regulatory requirements. They should also create a business plan that outlines their goals, strategies, financial plans, and methodology, and consider factors such as business location and name.

F-1 visa students can also apply for Optional Practical Training (OPT) to gain work experience in their field of study. OPT can be used during the program, such as during summer break, and is considered valid employment authorization. After OPT ends, F-1 visa holders may no longer be able to work unless they qualify for and receive a nonimmigrant or immigrant status that authorizes them to continue working in the United States.

International students can invest in their own company and receive dividends

International students on an F-1 visa are prohibited from "engaging in business". However, they can still establish a business as this is considered preliminary business planning and not "engagement". Once the business is fully established, the F-1 visa holder must not engage in the running of the company or conduct any business activities. They can, however, invest in their company and receive dividends.

Dividends are considered a type of unearned income and are taxed in the same way as taxable interest and capital gain distributions. International students on an F-1 visa who receive dividend income will need to file an annual income tax return. They will need to report all of their income, both earned and unearned, and convert any foreign income into US dollars on their US expat tax return.

Dividend tax rates vary depending on the circumstances. Nonresident aliens are generally subject to a 30% dividend tax rate on dividends paid out by US companies. However, this rate can be lower depending on treaties between the US and the alien's home country. Certain dividends, such as those from real estate investment trusts (REITs), do not qualify for this 30% rate. Instead, they are taxed at a rate of 0-20%, depending on the situation.

To ensure compliance with tax laws, US expats may need to file additional forms, such as Form 8938, if their total foreign assets exceed certain thresholds. They can also take advantage of tax credits, such as the Foreign Tax Credit, to avoid double taxation. It is important for international students to consult with an attorney or accountant to ensure they are complying with all the necessary rules and regulations when starting a business in the United States.

Students can apply for Optional Practical Training (OPT) to work for a business related to their field of study

International students on an F-1 visa are prohibited from "engaging in business". However, they can apply for Optional Practical Training (OPT) to gain valuable work experience in their field of study. OPT is a type of work permit that allows students to apply their education in a real-world setting, developing their skills, gaining work experience, and building their professional networks.

To be eligible for OPT, students must be enrolled full-time for one full academic year at a college or university certified by the U.S. Immigration and Customs Enforcement (ICE) Student and Exchange Visitor Program (SEVP) to enroll F-1 students. The proposed employment must be directly related to the student's major area of study, and the student must not have used all their optional practical training at their current level of study.

The OPT application process involves several steps and players. First, a Designated School Official (DSO) must recommend OPT by endorsing the student's Form I-20 and making the appropriate notation in the Student and Exchange Visitor Information System (SEVIS). The student must then file Form I-765, "Application for Employment Authorization," with the required fee and supporting documentation within 30 days of the DSO's recommendation. Once the student's OPT is approved, USCIS will issue an Employment Authorization Document (EAD), and the student can begin working in their field of study.

It is important to note that OPT is temporary employment, and students must comply with all requirements to maintain their student status. Working in the United States without authorization can result in serious consequences, including deportation and bars to re-enter the country.

International students can hire employees for their businesses if they comply with employment laws

International students on F-1 visas can start a business in the United States, but they are not permitted to run the business after it has been founded. They can, however, hire employees for their businesses if they comply with all relevant employment laws and regulations.

F-1 visa holders are allowed to invest in their company and hand it over to a capable team they trust. International students cannot work for their own businesses while on an F-1 visa, but they can apply for Optional Practical Training (OPT), which is considered valid employment authorization as long as the work is related to their field of study.

International students with F-1 visas can work on-campus for up to 20 hours per week while school is in session and full-time when it is not. They can also work off-campus after their first academic year under certain conditions, such as in cases of severe economic hardship. However, they must receive authorization from a Designated School Official and U.S. Citizenship and Immigration Services (USCIS) before starting any off-campus work.

F-1 visa holders must also be enrolled as full-time students, demonstrate English proficiency or be enrolled in courses to achieve it, and show they can afford school and living expenses. They must also maintain a residence abroad, which they do not intend to give up, and their school must be approved by the Student and Exchange Visitors Program.

In summary, international students on F-1 visas can hire employees for their businesses in the United States, but they must ensure compliance with all relevant employment laws and regulations, including those specific to F-1 visa holders.

Students can change their F-1 status to E-2 status to focus on their business and earn an income

International students on an F-1 visa can start a business in the United States, but they cannot run the business or be involved in its operations. They can, however, receive dividend income from their company and hand over the business to a capable team they trust. F-1 visa holders can also apply for Optional Practical Training (OPT), which allows them to gain work experience in their field of study. OPT can be used during their studies or after completion, and it can be extended for STEM majors.

To change their F-1 status to E-2 status, international students must meet specific requirements. Firstly, they must have been lawfully admitted to the United States with a valid F-1 visa and maintain their student status by being in good academic standing. Secondly, they must have graduated from an accredited U.S. college or university or completed an approved English language training program. By meeting these requirements, international students can apply for a green card and subsequently change their visa status to E-2, which allows them to focus on their business and earn an income.

The E-2 visa is a non-immigrant visa that allows individuals to enter and work in the United States based on an investment in a U.S. business. The investment must be substantial and generate enough income to support the visa holder, indicating that the funds are at risk in a bona fide enterprise. The business must be active and not marginal, and the visa holder must have a controlling interest in the enterprise. Additionally, the E-2 visa requires the individual to intend to depart the United States upon the expiration of their status.

It is important to note that changing from an F-1 to an E-2 visa can be complex, and there may be other requirements or considerations depending on the student's specific circumstances. Consulting with an immigration attorney or specialist is advisable to ensure compliance with all relevant laws and regulations.

Frequently asked questions