Lori Meadows
International students with an F-1 visa in the United States are allowed to start a business and invest in their own company, receiving dividends. However, they are prohibited from actively running the business and receiving compensation. This means they can launch the business but cannot engage in operations. To work for their startup, international students can apply for Optional Practical Training (OPT), which allows them to work temporarily for up to 12 months, with a possible extension of 24 months for STEM majors. Alternatively, they can enter an agreement with their education institution, where the institution acts as an agent or contractor for the startup, while the student is employed by the institution. To avoid legal risks, international students should carefully navigate the complex process of starting a business, seeking professional advice to ensure compliance with all rules and regulations.
| Characteristics | Values |
|---|---|
| Student visa type | F-1 |
| Business planning | Allowed |
| Running the business | Not allowed |
| Investing in the business | Allowed |
| Receiving dividends | Allowed |
| Employment authorization | Optional Practical Training (OPT) |
| Work duration | 12 months, extendable to 24 months for STEM majors |
| Work type | Related to the field of study |
| Business licenses and permits | Required |
| Business insurance | Required |
| Business structure | H-1B visa applicants must not have day-to-day management control |
| Co-founder | Preferably an American citizen or green card holder |
| Work authorization | O-1 visa |
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What You'll Learn
- International students with F1 visas can plan to start a business but not run it
- Students can invest in their company and hand it over to a capable team
- Students can apply for Optional Practical Training (OPT) to work in their field of study
- Students must conduct market research and check regulatory requirements
- Students can work with their education institution for the operation of their startup
International students with F1 visas can plan to start a business but not run it
International students on an F1 visa in the United States can plan to start a business but are not permitted to run it. This means that they can establish a business entity, but they cannot be actively involved in its daily operations or management. They can, however, be limited partners in a business, investing capital but not participating in its day-to-day running.
F1 visa holders can use personal savings, loans, or venture capitalist funding to start their business. They can also hire employees, as long as all employees are legally authorized to work in the US and any fellow students hired do not exceed 20 hours of work per week during the semester, and the work is related to their field of study.
International students on an F1 visa can also invest in their company and receive dividends, as this is considered passive income. They will need to file an annual income tax return if dividend income is earned.
To work for their startup, F1 visa holders can apply for Optional Practical Training (OPT) or Curricular Practical Training (CPT), which allows them to work temporarily if the employment is related to their field of study.
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Students can invest in their company and hand it over to a capable team
International students on F1 visas can plan to start a business in the United States but cannot run the business after it has been founded. However, they can invest in their company and hand it over to a capable team. This is because F1 visa holders are not allowed to conduct business activities or receive compensation or a salary.
To successfully hand over their company to a team, international students should consider the following steps:
Market Research
Students must conduct market research to determine the need for their product or service in the U.S. and check for any regulatory requirements that must be met to start their business. This step will help them understand the market demand for their product or service and ensure that they comply with all relevant laws and regulations.
Build a Supportive Team
Even before launching their business, students should start building a supportive team that they can rely on. This team can provide valuable advice and support throughout the entrepreneurial journey. It is recommended to co-found the business with a partner, especially if they are an American citizen, green card holder, or have work authorization. This will help with getting the startup off the ground.
Utilize University Resources
Many universities have entrepreneurship centres or venture studios that offer resources, mentoring, and networking opportunities. These centres can provide valuable support, such as office space, access to experts, and funding opportunities. University libraries also offer access to software, data, and media resources that can be utilized for market research and business development.
Participate in Competitions and Grants
Students should take advantage of competitions, grants, and stipends available for startups. These can provide the necessary funding to build a product, run marketing campaigns, and fund operations. Winning such competitions also adds credibility to the startup and can attract further investment.
Prepare for Long Hours and Time Management
Running a business while studying requires a significant time commitment, often involving long hours. Students should be prepared for the demands on their time and set strong boundaries to allocate their time effectively between their studies and their business.
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Students can apply for Optional Practical Training (OPT) to work in their field of study
International students with F-1 visa status are prohibited from "engaging in business". However, they can apply for Optional Practical Training (OPT), which allows them to work in their field of study. OPT is a type of temporary employment authorisation directly related to an F-1 student's major area of study.
To be eligible for OPT, students must have been lawfully enrolled full-time for one academic year at a college or university certified by the U.S. Immigration and Customs Enforcement (ICE) Student and Exchange Visitor Program (SEVP) to enrol F-1 students. Students can apply for up to 12 months of OPT employment authorisation before or after completing their academic studies. All OPT employment must be directly related to the student's major area of study.
Students can engage in "passive work" while on an F-1 visa, including incorporating a U.S. company, applying for an EIN, establishing a mailing address, and applying for a business license. They can also hire employees for their business as long as they comply with relevant employment laws and regulations.
If an F-1 student has already received one year of full-time pre-completion OPT, they will not be entitled to any period of post-completion OPT employment authorisation. However, if they have earned a degree in certain STEM fields, they may apply for a 24-month extension of their post-completion OPT.
It is important to note that working in the United States without proper authorisation can result in serious consequences, including removal from the country. Therefore, international students interested in applying for OPT should carefully review the requirements and consult with an International Student Adviser to discuss their options.
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Students must conduct market research and check regulatory requirements
International students with an F-1 visa are permitted to start a business in the United States, but they must not be involved in the running of the company once it is established. This means that they cannot engage in business activities or receive compensation for their work. However, there are ways for international students to be involved in their business ventures. Firstly, they can conduct market research to determine the demand for their product or service in the US market. This is an essential step to ensure the success of their business.
Additionally, international students must be aware of and comply with all relevant regulatory requirements. They should check federal and state regulations to ensure they have the necessary licenses, permits, and insurance policies for their business. For instance, they may need to apply for an EIN number, establish a US mailing address, and obtain a business license. Complying with these requirements will help international students avoid legal issues and ensure their business operates within the law.
Furthermore, international students can invest in their company and receive dividends as passive income. They can also hire employees for their business, as long as they comply with employment laws and regulations. Another option is to collaborate with their educational institution, where the institution acts as an agent or contractor for the startup, handling the substantive work while the student is employed to contribute in this capacity.
International students can also explore visa options to work for their startup directly. They can apply for Optional Practical Training (OPT), which allows them to work temporarily in a role related to their field of study. Alternatively, they can consider the H-1B dual-intent visa, which requires an employer sponsor and a valid employer-employee relationship. However, this option mandates that someone other than the student has authority over the startup.
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Students can work with their education institution for the operation of their startup
International students can face several challenges when starting a business in a foreign country. One way to overcome these challenges is to leverage the resources and support offered by their educational institutions. Here are some ways students can work with their schools to operate their startups successfully:
Incubator and Accelerator Spaces
Many universities have incubator or accelerator facilities designed to support student entrepreneurs. These spaces provide a physical office for the startup, which is critical for early-stage success. They also offer resources such as maker spaces or retail showrooms where student entrepreneurs can build prototypes and showcase their work to potential customers. London Metropolitan University, for example, has an entire accelerator facility dedicated to accommodating student entrepreneurs and new startups.
Mentorship and Networking
Universities often have entrepreneurship centres or venture studios that help students develop their ideas, access resources, and receive mentorship. These centres can connect students with experts, advisors, and alumni networks, which can be invaluable for guidance and support. For instance, a student at King's College London received mentorship and visa sponsorship through the King's20 accelerator programme.
Competitions and Funding
Universities may offer competitions, grants, and stipends specifically for student startups. These provide not only much-needed funding but also help student entrepreneurs maintain control over their cap table and raise money on favourable terms.
Internships and Work Experience
Students can take advantage of long summer holidays to gain relevant internships or work experience that complements their business ventures. This allows them to develop skills and knowledge that can be applied to their startups.
Safe Space for Innovation
Higher education institutions can provide a safe environment for students to test their ideas and take calculated risks. This supportive ecosystem surrounds students with people who are invested in their success and willing to provide advice and guidance.
By leveraging these resources and support systems, international students can more effectively navigate the challenges of starting and operating a business in a new country. It enables them to access expertise, funding, and networking opportunities that can contribute to their entrepreneurial success.
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Frequently asked questions
Yes, international students with F-1 visas can plan to start a business in the United States, but they are not permitted to run the business after it has been founded. 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.
Here are some steps to set up international students for success in their business endeavors:
- Conduct market research to determine the need for their product or service in the U.S.
- Check for any regulatory requirements that must be met to start their business.
- Create a successful business plan that outlines their business goals, strategies, financial plan, and methodology.
- Determine the business location, which will decide the customer base and additional costs like rent and utilities.
- Decide on the company name, which will be a decisive factor for recognition and marketing.
International students can consider the following visa options:
- F-1 Visa: This is the most common visa for international students, allowing them to set up a business structure, open a bank account, and participate in tasks that aren't considered employment, such as planning and marketing. However, F-1 visa holders cannot actively work for or receive compensation from their business.
- H-1B Visa: This visa is for specialty occupations and allows full-time work for the company. It is for foreign nationals with a Bachelor's Degree or an equivalent foreign degree who are coming to the US to work in a specialty occupation.
- E-2 Visa: This visa is for citizens of countries with a special treaty of commerce and navigation with the US. It allows them to run their own business based on an investment they make in the company.
