Douglas Olsen
International students who want to start a business in the United States face a complex process, with visa concerns, access to capital, and the need to comply with rules and regulations. The F-1 visa is the most popular type of student visa, but it restricts students from owning a business and earning revenue or a salary from it. However, F-1 visa holders can become passive investors or partners in a startup and incorporate a company, apply for an EIN, establish a mailing address, and apply for a business license. To actively work in the US, international students need work authorization, such as the Optional Practical Training (OPT) program, which allows them to work for a business related to their field of study for one year. After OPT, international students can explore other visa options like the O-1, H-1B, or the International Entrepreneur Parole (IEP) Program. Additionally, they can consider changing their status from F-1 to an E-2 investor visa, which allows them to focus on growing their business and earning an income.
| Characteristics | Values |
|---|---|
| Visa type | O-1, H-1B, IEP, TN, E-3, E-2, F-1 |
| Work authorization | OPT, CPT, pre-completion OPT, post-completion OPT |
| Business entity | C corporation, LLC |
| Business location | Affects rent and customers |
| Business partners | Having an American citizen as a co-founder can help |
| Business activities | F-1 students can hire a managing employee to operate the company and generate revenue |
| Investors | AngelList, startup events |
| Insurance | General liability insurance, state-specific insurance |
| Time | OPT lasts for one year |
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What You'll Learn
- International students can become passive investors or partners in a US startup
- International students on an F-1 visa cannot own a business, but they can hire a managing employee
- International students can work for their startup on CPT or OPT if their role and company fit within the guidelines
- International students can change from an F-1 to an E-2 visa if they own at least 50% of a US business
- International students can qualify for the O-1 visa by founding a startup, raising funding, and going through an accelerator
International students can become passive investors or partners in a US startup
International students on an F-1 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. This means that they can incorporate a US company, apply for an EIN, establish a mailing address, and apply for a business license. These are all considered "passive work," which is allowed for F-1 visa holders without proper work authorization.
If you are an international student on an F-1 visa and want to become a passive investor or partner in a US startup, there are a few things you should keep in mind. First, it is important to conduct thorough market research to determine the need for your product or service in the US market. You should also be aware of any regulatory requirements that must be met to start your business, including any necessary licenses and permits. Without these, you may face large fines or be forced to close your business.
Another thing to consider is your business plan. This should outline your business goals, strategies, financial plan, and methodology. At this stage, you should also consider drawing up agreements with any business partners or co-founders. It is also worth noting that your business location will determine your customer base and additional costs, such as rent and utilities.
If you are looking to become a passive investor in a US startup, it is important to remember that visa status will be included in investor due diligence on the company and its founders. However, having a diverse startup team, including some founders with American citizenship, can be an asset when it comes to attracting investors. Additionally, an international background can be beneficial when it comes to marketing your expansion potential and ability to attract foreign investors.
Finally, when it comes to choosing a business entity, it is important to note that the S corporation bars non-resident aliens from becoming investors. Therefore, you will likely need to choose either a C corporation or an LLC as your business entity.
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International students on an F-1 visa cannot own a business, but they can hire a managing employee
International students on an F-1 visa are prohibited from "engaging in business" and cannot be actively employed by their own startup. However, they can still establish a business and hire a managing employee to run it. This is because starting a business is considered "preliminary business planning" and not "engagement".
International students on an F-1 visa can create a business plan, launch a business, and obtain the necessary licenses, permits, and insurance. They can also incorporate a U.S. company, apply for an EIN, establish a mailing address, and apply for a business license. However, once the business is fully established, F-1 visa holders must cease any engagement in the running of the company and cannot be compensated or receive a salary.
To navigate this restriction, F-1 visa holders can leave the management of the business to a capable team or hire a managing employee. They can also obtain OPT authorization, which allows them to work for their startup as long as their role and company fit within the OPT guidelines. OPT stands for Optional Practical Training and allows F-1 students to work temporarily for one full year before or after graduation in a job related to their college major.
Another option for F-1 visa holders is to have a co-founder who is an American citizen, green card holder, or has work authorization. This co-founder can handle getting the startup off the ground while the F-1 visa holder works on obtaining proper work authorization. Additionally, F-1 visa holders can consider applying for other visas, such as the O-1 visa, which has no degree or wage requirements and can be extended indefinitely.
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International students can work for their startup on CPT or OPT if their role and company fit within the guidelines
International students on an F-1 visa are permitted to stay in the United States for the duration of their international education, as well as an additional 1-3 years of OPT training and 60 days after that. However, they cannot "actively work" in the US without proper work authorization. They can, however, "engage in passive work", which includes activities such as incorporating a US company, applying for an EIN, establishing a mailing address, and applying for a business license.
International students can work for their startup on CPT or OPT as long as their role and company adhere to the CPT and OPT guidelines. CPT stands for Curricular Practical Training, which is an alternative work/study, internship, or other type of required practical training that a sponsoring employer offers through cooperative agreements with the student's college or university. CPT must be integral to the student's program of study. OPT stands for Optional Practical Training and allows F-1 students to work temporarily for one full year either before or after graduation in a job that relates to their college major.
To work for your startup on CPT, you must follow these general steps:
- Contact your student advisor at your university to find out which CPT programs are available, eligibility requirements, and sponsoring employers.
- Acquire an employment offer letter from your employer with all the required details.
- Apply to the CPT program through your college or university.
To work for your startup on OPT, you must:
- Speak to your student advisor or DSO at your university and request information about applying for OPT.
- Request your DSO at your college or university to recommend you for OPT.
- Complete Form I-765 and send it to USCIS with the required documents and fee.
- Once approved, obtain your Employment Authorization Document (EAD) and start your OPT program on the mentioned start date.
It is important to note that the OPT application process can be lengthy (90+ days), so it is advisable to apply as soon as possible. Additionally, once you've accrued 11 months of pre-completion OPT, you may no longer be eligible for post-completion OPT.
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International students can change from an F-1 to an E-2 visa if they own at least 50% of a US business
International students who are on an F-1 visa can start their own business in the US by using Curricular Practice Training (CPT) or Optional Practical Training (OPT). Both CPT and OPT allow international students to work in their business for up to one year while they are still studying. However, it is important to note that CPT is only available during the course of study, whereas OPT can be used both during and after graduation. Additionally, for STEM students starting a STEM-related business, OPT can be extended by another two years post-graduation.
After the OPT expires, students have 60 days to find alternative work authorizations or they will be required to leave the country. One option for international students to continue working in the US at their own startup is to change to an E-2 visa. The E-2 visa is a non-immigrant treaty investor visa that allows individuals to invest in and work in the US-based businesses in which they have invested. To be eligible for an E-2 visa, the individual must:
- Be a citizen of a country that has a treaty of commerce and navigation, or commerce, with the US.
- Have invested or be in the process of investing a substantial amount of capital in a US business. The investment must be sufficient to establish a legitimate enterprise and must not be a minimal amount.
- Be seeking to enter the US to develop and direct the business in which they have invested. This means that the individual must have at least 50% ownership of the business and must be able to show that they have control over the enterprise's operations and that they are actively involved in its management.
It is important to note that the E-2 visa is not a dual-intent visa, which means that it does not provide a direct path to a Green Card or permanent residency in the US. However, it can be renewed indefinitely as long as the individual continues to meet the eligibility requirements.
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International students can qualify for the O-1 visa by founding a startup, raising funding, and going through an accelerator
International students on an F-1 visa in the United States are allowed to stay in the country for the duration of their international education, as well as an additional 1-3 years of OPT training and 60 days after that. Although international students on an F-1 visa cannot actively work in the US without proper work authorization, they can engage in passive work, such as incorporating a US company, applying for an EIN, establishing a mailing address, and applying for a business license.
International students can consider the O-1 visa, which is a non-immigrant visa for individuals with extraordinary abilities in the fields of art, education, business, or athletics. This visa is suitable for entrepreneurs and startup founders who have raised venture capital funding from angel investors, VCs, or those who have been accepted by famous startup accelerators. The O-1 visa has no degree requirements, no wage requirements, and can be extended indefinitely. However, it can be challenging to qualify for this visa early in your career.
To qualify for the O-1 visa, you must demonstrate a high level of achievement in your field and intend to continue your work in the US in your area of expertise. You will need to provide evidence of a high salary or other substantial remuneration, such as equity in your company. Additionally, you must show proof of participation in a critical or leading role within organizations or establishments with distinguished reputations.
To apply for the O-1 visa, you will typically work with a sponsoring employer or agent to file Form I-129 and submit supporting evidence. It is recommended to engage the services of an experienced immigration team or attorney to guide you through the process and help craft your supporting evidence. They can assist in obtaining detailed recommendation letters and drafting a convincing petition letter that highlights your past achievements.
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Frequently asked questions
International students on an F-1 visa are not allowed to own a business or earn revenue or a salary from a business they operate. However, they are permitted to be a passive investor or partner in a startup. Students can use the Optional Practical Training (OPT) program to work for their startup for one year, as long as it relates to their degree program. After OPT expires, students have a 60-day grace period before needing to leave the US, so it is advised to look into future visa options such as the O-1 visa, the H-1B visa, and the International Entrepreneur Parole (IEP) Program.
One challenge is that US angel investors and venture capital firms may be hesitant to invest in startups with international student founders due to concerns about visa status. International students should also be aware of the complex process of starting a business, including the need for licenses, permits, and insurance. Additionally, exiting the startup may be daunting, as selling the business does not guarantee that the founder can stay in the US.
An international background can be an asset for marketing and attracting foreign investors. Diversity within a startup team is often viewed positively, and many well-known companies have been founded by international students, including Tesla/SpaceX, Moderna, Stripe, Duolingo, and Eventbrite.
First, create a pitch deck to find investors, which can be done by attending startup events or using online platforms. After finding investors, negotiate investment terms and draw up a contract. Additionally, international students should ensure they have the necessary licenses, permits, and insurance to operate their business.
