Douglas Olsen
International students in the US often harbour dreams of turning their innovative ideas into thriving businesses. However, the process of starting a business in the US can be complex and intimidating, with several legal and practical considerations. The type of visa an international student holds is a key factor in determining whether they can incorporate a business in the US. F-1 visa holders, for example, can create a business plan and launch a business but cannot engage in daily operations or receive compensation. To actively work for their business, F-1 visa holders must apply for Optional Practical Training (OPT) or change their visa status to an E-2 Treaty Investor Visa or H-1B visa. Other visa pathways for entrepreneurs include the International Entrepreneur Rule, L-1 nonimmigrant visa, O-1A nonimmigrant visa, and EB-1A immigrant visa. International students must also be mindful of visa limitations when raising capital and consult professionals such as immigration attorneys and business advisors to ensure compliance with legal requirements.
| Characteristics | Values |
|---|---|
| Visa type | F-1 visa |
| Who can use it? | Foreign national students |
| What does it allow? | Pursuing academic studies at accredited colleges, universities, or other academic institutions |
| Can F-1 visa holders start a business? | Yes, but they cannot run the business or be compensated for their work |
| Can F-1 visa holders invest in a business? | Yes |
| Can F-1 visa holders hire employees? | Yes, if they comply with employment laws and regulations |
| Can F-1 visa holders own a business? | No, they cannot earn revenue or salary from a business they operate |
| Can F-1 visa holders become passive investors or partners? | Yes |
| Can F-1 visa holders apply for Optional Practical Training (OPT)? | Yes, for up to 12 months, with a possible 24-month extension for STEM majors |
| Can F-1 visa holders change their status to an E-2 Treaty Investor Visa or H-1B visa? | Yes |
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What You'll Learn
F-1 visa holders can start a business
International students on an F-1 visa can create a business plan and launch their own business in the United States. However, they are not permitted to run the business or engage in its daily operations, including any activities that could result in compensation or a salary. In other words, F-1 visa holders can establish a business but cannot be "engaged in business".
To work around this stipulation, F-1 visa holders can launch their business and then leave it to a capable team, invest in the business remotely, or have OPT authorization. OPT, or Optional Practical Training, allows international students to operate a business that is related to their field of study, but only for one year. To qualify for OPT, the business must be directly related to the student's major area of study, and they must have a financial stake in its success. 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.
F-1 visa holders can use personal savings, loans from family and friends, or approach venture capitalists for funding. They can hire employees for their business as long as they comply with relevant employment laws and regulations. They can also be a passive investor or partner in a startup, but they should be cautious about becoming too active in the startup's operations, as this may result in revocation of their visa.
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International students can't run the business
International students on an F-1 visa can create a business plan and launch their own business in the US. However, they cannot run the business or engage in its daily operations. This means that they cannot conduct business activities or receive compensation or a salary from their company. F-1 visa holders can, however, invest in their company and receive dividends. They can also hire employees for their business as long as they comply with relevant employment laws and regulations.
International students on an F-1 visa can apply for Optional Practical Training (OPT) to gain valid employment authorization, but this employment must be related to their field of study. The OPT program allows international students to operate a business that is related to their field of study, but only for one year. 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. After the OPT period ends, they may not continue to work for their business unless they qualify for and receive a nonimmigrant or immigrant status that authorizes them to continue working in the US.
International students on an F-1 visa can also become passive investors or passive partners in a startup in the US. They can set up a business structure, open a bank account, and participate in tasks that are not considered employment, such as planning and marketing. However, they cannot actively work for the business without employment authorization.
The E-2 visa is another option for international students who want to run their own business in the US. The E-2 visa is for individuals from countries with a special treaty of commerce and navigation with the US. It allows individuals to run a business based on an investment they make in the company.
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Students can apply for Optional Practical Training (OPT)
International students on an F-1 visa are permitted to start a business in the United States, but they cannot run the business or be actively engaged in its operations. They can, however, apply for Optional Practical Training (OPT), which allows them to work for their own company. OPT is considered a valid form of employment authorization, provided the work is related to their field of study.
OPT is a 12-month work authorization available to F-1 international students who have been full-time students for at least two consecutive semesters. Students can apply for OPT in their last semester and must be seeking employment in their major field of study. During the OPT period, students must be working or actively seeking employment, with a minimum of 20 hours per week. Students on post-completion OPT may have up to 90 days of unemployment.
There are two types of OPT: pre-completion OPT and post-completion OPT. Pre-completion OPT allows students to work up to 20 hours per week while they complete their studies. Post-completion OPT allows students to work full-time after they have graduated.
Students who have graduated with a degree in a STEM field (science, technology, engineering, and mathematics) may be eligible for a 24-month extension of their post-completion OPT. To qualify for the STEM OPT extension, students must meet certain requirements, including having their degree listed on the Department of Homeland Security STEM-Designated Degree Program List.
The OPT application process can be complex and involves several steps and deadlines. Students must file Form I-765, "Application for Employment Authorization," within 30 days of receiving their OPT recommendation. They must also report any changes in their legal name, address, or employment status to their Designated School Official (DSO) while on OPT.
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International students can be passive investors
International students on an F-1 visa in the US are allowed to invest their money and generate passive income. Passive income can be a valuable source of supplementary income for international students, helping them cover living expenses, tuition fees, travel costs, and savings goals.
F-1 visa holders are considered non-immigrant students authorized to pursue a full-time course of study at an accredited academic institution in the US. They are subject to strict rules and regulations regarding employment and income opportunities. While they are not allowed to own a business or engage in day-to-day business operations, they can become passive investors or partners in a startup. They can also invest in the stock market, bonds, mutual funds, exchange-traded funds (ETFs), or other securities.
To invest, F-1 visa holders can open a brokerage account with a US-based or online broker and start trading stocks, bonds, or other securities. Most US stock brokerage firms require a Social Security Number (SSN) for stock trading, but it is not mandatory. Foreigners without an SSN can use an Individual Taxpayer Identification Number (ITIN) for tax-related purposes. F-1 visa holders are considered non-resident aliens for tax purposes and are subject to a flat 30% withholding tax on their US-source passive income, unless they qualify for a reduced rate or exemption under a tax treaty. They are required to file a US tax return (Form 1040-NR) and report their worldwide income, including investment income, to the IRS annually.
International students on an F-1 visa can also start a business in the US, but they cannot run it or be compensated for their work. They can create a business plan, launch the business, and invest in it, but they must hand over operations to a capable team. They can hire employees as long as they comply with employment laws and regulations. To work for their own business, F-1 visa holders must qualify for and apply for Optional Practical Training (OPT), which allows them to work if the employment is related to their field of study.
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Consult an immigration lawyer for guidance
International students in the United States on an F-1 visa can establish a business and launch it, but they cannot run the business or be compensated for their work. They can, however, apply for Optional Practical Training (OPT) to work for their business, but only for one year and only if the work is related to their field of study.
The process of starting a business in the US can be complex, and even more so for international students due to visa concerns, access to capital, and the potential difficulty of exiting the business. Consulting an immigration lawyer can help international students navigate these challenges and maximize the opportunities for a successful startup.
Immigration lawyers can provide guidance on complying with all relevant laws and regulations, including obtaining the necessary licenses and permits. They can also advise on the different business structures available and help students avoid common pitfalls. For example, international students should be aware that they cannot choose an S corporation as their business entity because this structure bars non-resident aliens from becoming investors.
Additionally, an immigration lawyer can help international students understand the limitations of their F-1 visa and how to navigate the process of applying for OPT. This includes explaining the requirements that the OPT, and thus the business, must relate to the student's program of study. Lawyers can also advise on the possibility of extending the OPT period and the implications of exiting the US after the OPT year.
It is important to choose an immigration lawyer carefully, ensuring they are authorized to provide legal advice and have experience in immigration law and similar cases. While it may be possible to file a petition without a lawyer, consulting one can provide valuable guidance and increase the chances of success.
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Frequently asked questions
International students on an F-1 visa can create a business plan and launch their own business. However, they are not permitted to run the business or engage in any operations once it is established. They can invest in their company and receive dividends, but they cannot earn revenue or a salary from it.
The F-1 visa is quite restrictive for international students owning businesses. The biggest risk is that violating the terms of the visa can lead to deportation or bars to re-entering the US. F-1 visa holders cannot engage in unauthorized employment, and they must ensure their business complies with all relevant laws and regulations.
International students can apply for the Optional Practical Training (OPT) program, which allows them to work for up to 12 months in a field related to their major area of study. F-1 students with STEM degrees may be eligible for a 24-month extension. After OPT, students must exit the US and are not guaranteed re-entry. Another option is to change the visa status to an E-2 Treaty Investor Visa or an H-1B visa, which allows operating a company legally.
International students should be aware of the legal and practical implications, including selecting the appropriate business entity, understanding tax obligations, and registering their company. They should also consider funding sources, keeping in mind any limitations related to their visa status. Consulting professionals, such as immigration attorneys, business advisors, and accountants, can provide valuable guidance and help ensure compliance.
