Janice Lozano
International students who want to open a startup in America face several challenges, including visa concerns, access to capital, and navigating the complex immigration and business landscape. While it is possible for international students to found startups in the US, they cannot work for or earn income from these businesses unless they obtain work authorization. This can be achieved through various visa options, including the F-1 visa with Curricular Practical Training (CPT) or Optional Practical Training (OPT), which allows students to work for their startups for a limited time. After OPT, international founders can explore other visa options such as the O-1, H-1B, or the International Entrepreneur Parole (IEP) Program. Additionally, having an American co-founder or a diverse team can help navigate visa and investment challenges. Despite the complexities, many international students have successfully launched startups in the US, and resources like Legalpad offer support with visa and immigration processes.
| Characteristics | Values |
|---|---|
| Visa options | O-1, H-1B, F-1, J Exchange Visa, M Visa, IEP |
| Work authorization | Required for international students to work for their startup |
| CPT | Allows F-1 students to work full-time during fall and spring semesters, and part-time during winter and summer breaks |
| OPT | Allows F-1 students to work temporarily for one year before or after graduation in a job related to their college major; can be extended up to 36 months for STEM fields |
| Business incorporation | Required for startup to employ international students |
| EIN number | Application required |
| Mailing address | U.S. address needed |
| Business license | Application may be required, depending on the state |
| Investor diligence | Visa status will be considered by investors |
| Marketing | International background can be an asset for marketing expansion potential |
| Team diversity | Having American citizens on the team can help attract investors |
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What You'll Learn
Student visa requirements
International students who wish to study in the US must obtain a student visa. The most common types of student visas are F-1 and M-1 visas. F-1 visas are for international students pursuing academic studies full-time, while M-1 visas are for those pursuing vocational studies full-time. To obtain an F-1 visa, you must be enrolled in an academic educational program, a language-training program, or a vocational program that culminates in a degree, diploma, or certificate. Your school must also be approved by the Student and Exchange Visitor Program (SEVP) and authorized by the US government to accept foreign students.
The J-1 exchange visitor visa is another option for international students. This visa is for foreign nationals participating in work-and-study-based exchange programs, such as visiting scholars, camp counselors, au pairs, or research assistants.
To obtain a student visa, you must first be admitted to the United States by US Customs and Border Protection (CBP) officials and then separately apply to the US Citizenship and Immigration Services (USCIS) for a change of status to student (F or M) before your program starts. You will need to provide various documents, including a Form I-20 issued by your SEVP-approved school, and you may be required to attend a visa interview at a US Embassy or Consulate. There are also visa fees, including a non-refundable visa application fee and a visa issuance fee, depending on your nationality.
It is important to note that F-1 visa holders cannot actively work in the US without proper work authorization, but they can engage in passive work, such as incorporating a US company and applying for an EIN. However, if you plan to work during your studies, you should explore options like the Optional Practical Training (OPT) program, which allows temporary employment directly related to your field of study. After completing your studies, you can explore other work visa options like the O-1 visa, H-1B visa, or the International Entrepreneur Parole (IEP) Program.
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Work authorization
International students on an F-1 visa can create a business plan and launch their own business. However, they cannot actively work for the company or earn an income from it, unless their work falls under the guidelines for CPT or OPT.
Curricular Practical Training (CPT) allows F-1 students to work temporarily after completing one full academic year at their university. Students can work full-time during the fall and spring semesters, and part-time during the winter and summer breaks.
Optional Practical Training (OPT) allows F-1 students to work temporarily for one full year either before or after graduation in a job related to their college major. Students can work for their startup on OPT as long as their role and company fit within the OPT guidelines. This means that the startup and the student's role must relate to their degree program.
After OPT expires, students have a 60-day grace period before they will need to leave the U.S. Therefore, it is important to look into future visa options in advance. Here are some options to consider:
- O-1 visa: For individuals with "extraordinary ability" who have sustained national or international acclaim in their field of expertise.
- EB-1A visa: For individuals with "extraordinary ability" who are in the top 1% of their field. This is the most difficult immigrant visa to acquire.
- H-1B visa: A temporary (nonimmigrant) visa.
- International Entrepreneur Parole (IEP) Program: Requires the entity to lawfully conduct business in the U.S., to have been formed within the five years preceding the initial application, and to have substantial potential for rapid growth and job creation.
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Visas and immigration
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 be compensated or receive a salary. They can, however, apply for Optional Practical Training (OPT), which allows them to work temporarily for one full year, either before or after graduation, in a job related to their college major. This means that their startup and role must relate to their degree program.
After the OPT year, F-1 visa holders must exit the United States and will have a 60-day grace period before they need to leave. Therefore, it is essential to look into future visa options in advance. Options include the O-1 visa, the H-1B visa, and the International Entrepreneur Parole (IEP) Program. The O-1 visa is for individuals with extraordinary abilities who will continue to work in their field of expertise. The H-1B visa allows individuals to work in a specialty occupation related to their degree.
Another option for international students who wish to start a business in the US is to have a co-founder who is an American citizen, green card holder, or has work authorization. This person can handle getting the startup off the ground while the international student works on obtaining proper work authorization. Additionally, international students can become passive investors or partners in a startup, but they should be cautious about becoming too active in the startup's operations, as this may result in the revocation of their F-1 visa.
It is important to consult with an attorney or an experienced immigration team specializing in immigration law to guide you through the complex process of starting a business in the US as an international student and to ensure compliance with all relevant laws and regulations.
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Funding and investors
As an international student, you may face some challenges when seeking funding and investors for your startup in the United States due to visa restrictions and regulations. Here are some important considerations and options to explore:
Understanding Visa Restrictions
Before actively seeking funding, it is crucial to understand the limitations imposed by your visa status. Many international students in the US hold an F-1 visa, which does not allow them to own a business or earn revenue from a business they operate. However, F-1 visa holders can become passive investors or partners in a US startup. To actively own and operate a business, you may need to change your visa status to an E-2 Treaty Investor Visa or an H-1B visa. Consult with an immigration attorney to determine the best path for your specific situation.
Exploring Funding Options
When considering funding sources, you have several options to explore:
- Personal Savings: You can use your personal savings to fund your startup, but ensure that you comply with visa regulations regarding the use of funds.
- Loans: You may be able to borrow money from banks or other financial institutions, but again, ensure that you comply with visa regulations.
- Investors: Seeking investors for your startup is an option, but it can be challenging. Some US angel investors and venture capital firms may be hesitant to invest in startups with international student founders due to visa status concerns. However, having a diverse team that includes American citizens or permanent residents can help assuage these concerns. Additionally, an international background can be a marketing asset when attracting foreign investors.
Visa Options for Entrepreneurs
To strengthen your position when seeking funding, consider the following visa options specifically designed for entrepreneurs:
- Optional Practical Training (OPT): OPT allows F-1 students to work temporarily for one year in a role related to their field of study. This includes working for your own startup, provided it aligns with your degree program.
- O-1 Visa: The O-1 visa is for individuals with extraordinary ability who have achieved national or international recognition in their field. You can strengthen your eligibility by building a strong portfolio, seeking awards and memberships in reputable organizations, and getting featured in the press.
- E-2 Treaty Investor Visa: This visa option requires you to have a certain level of investment or ownership in the startup, and you must demonstrate that your business has the potential for substantial growth and job creation.
- EB-5 Immigrant Investor Visa: Similar to the E-2 visa, the EB-5 visa requires a significant investment in the startup but does not require you to have a specific role or position.
- International Entrepreneur Rule: This pathway is designed for startup entities with high growth potential and requires you to have a certain amount of ownership in the business.
Remember, each visa option has its own specific requirements and considerations. It is essential to seek professional advice from immigration attorneys and business advisors to ensure compliance with visa regulations and maximize your chances of securing funding for your startup.
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Exiting the business
As an international student, exiting your startup in the United States may seem like a daunting task. However, selling your startup should be celebrated as a personal and financial success. It is important to note that selling your business does not mean you have to abandon your plans to stay in the US. You can hire attorneys to help negotiate with the buyer regarding their support for your H1-B or other visa status, allowing you to pursue a green card. If your startup fails, you are allowed three months of unemployment before leaving the US on an H1-B visa.
If you are on an F-1 visa, you must leave the business to a capable team after the preliminary planning phase, invest in the business remotely, or have OPT authorization. This means that you can launch the business but cannot engage in its operations. You can use personal savings, loans from family and friends, or venture capitalist funding.
If you wish to continue working for your startup after your OPT authorization expires, you can consider the H-1B dual intent visa. This visa allows you to work in the US for three years, after which you may extend it for another six years and become eligible for a green card. However, obtaining an H-1B visa can be challenging for international students owning startups, as it requires demonstrating a valid employer-employee relationship.
Overall, exiting your startup as an international student in the US requires careful planning and consideration of your visa status and future goals.
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Frequently asked questions
Yes, international students can start a business in the US. However, there are several visa-related restrictions and complications that they should be aware of.
International students on an F1 visa cannot own a business, earn revenue, or receive a salary from a business they operate. They can, however, become passive investors or partners in a startup. To work for their startup, international students must obtain work authorization such as CPT or OPT, which allows them to work temporarily for one full year before or after graduation, provided their role and company are related to their degree program.
Navigating the immigration and business landscape in the US as an international student can be complex. International students may face challenges in accessing capital as US angel investors and venture capital firms may be hesitant to invest in startups with international student founders due to their visa status.
International students have several options to start a business in the US, including:
- Obtaining CPT or OPT authorization to work for their startup temporarily.
- Applying for a work visa such as the O-1, H-1B, or participating in the IEP program.
- Working with a co-founder who is an American citizen or has work authorization to handle the initial setup of the startup.
