Starting a business at any age is a difficult but rewarding pursuit. Many students start businesses, turning their academic brainstorming into actual business models. With over 1.2 million international students in the United States living on an F-1 student visa, they are more than a few who are looking to become entrepreneurs.
But can students on an F-1 visa start a business?
Starting a business as an F-1 visa holder is possible, but it also has limitations. In short, international students on an F-1 visa can create a business plan and launch their own business. However, there are challenges when running the company and engaging in daily operations.
This article will explain what an F-1 visa is, what it allows holders to do, and how to start a business as an international student.
What is an F-1 Visa?
The F-1 student visa was created for foreign national students who want to study at a U.S.-based academic institution. It is a nonimmigrant visa for students pursuing degrees, diplomas, or certificate programs at an accredited institution. It is the most popular student visa the U.S. offers, currently held by over 1.2 million students.
Dos and Don’t s While On an F-1 Student Visa
The F-1 student visa was designed to give as many opportunities as possible to foreign nationals while studying in the United States. However, there are limitations to what they are lawfully allowed to do while residing in the U.S.
The following are some common dos and don’ts that F-1 student visa holders should follow to avoid jeopardizing their visa status:
F-1 Student Visa Dos:
- Maintain full-time or part-time student status at an accredited U.S. academic institution.
- Enroll in OPT during or after the study course or program to gain valuable work experience in a U.S.-based company or organization.
- Become a passive investor in a new or established business.
- Get married to a U.S. citizen, a U.S. lawful permanent resident (LPR), or the holder of another visa type.
- Change their visa status from an F-1 visa to another visa, including those in the H, O, L, E, or G categories.
F-1 Student Visa Don’ts:
- Engage in “gainful employment,” aka conducting any work where the student receives a salary in exchange for work without the proper authorization.
- Overstay the F-1 student visa without applying for an extension, OPT, or seeking another valid visa extension or change of visa status.
Starting a Business on an F-1 Visa
In short, it is prohibited for students with F-1 visa status cannot be found “engaging in business.” However, there are some ways to work around this stipulation. The law does not directly prevent an F-1 student visa holder from establishing a business. Starting a business is considered “preliminary business planning” and not “engagement.”
Once the business plan is enacted and the business is fully established, however, the F-1 visa holder must cease any engagement in the running of the company. They are not allowed to conduct business activities or do anything that would result in receiving compensation or a salary. Essentially, they can launch the business, but they cannot actually engage in operations.
A common question asked is whether an international student can “run” their own business without being paid, which isn’t allowed because working for a for-profit company without receiving pay cannot be considered volunteering and is therefore forbidden for F1 visa holders.
Immigration law allows International Students and F1 visa holders to invest in their own company and receive dividends. An income tax return will have to be filed annually if dividend income is earned. Students are able to receive dividend income because it is passive.
Steps for Students Starting a Business
For F-1 visa holders who decide to go ahead and create their business plan, there is a process to ensure their initial success. As long as they ensure they leave the business to a capable team after the preliminary planning phase, invest in the business remotely, or have OPT authorization, they can proceed with starting their business.
The following steps will set any F-1 international student up for success in their business endeavors:
- Conduct market research
Students must conduct market research to determine the need for their product or service in the U.S. They must also check for any regulatory requirements that must be met to start their business.
- Create your business plan
Students should create a successful business plan that outlines their business goals, strategies, financial plan, and methodology. At this stage, agreements should be drawn up with business partners or co-founders.
- Fund your business
F-1 visa holders can use personal savings, loans from family and friends, or go through a venture capitalist. Investors may want to see a business plan or pitch deck, so it's important to be prepared with all documents before setting any meetings.
- Pick a business location and name
The business location will determine the customer base and additional costs like rent and utilities, and the company name will be a decisive factor for recognition and marketing. For example, opting for a physical location versus operating online can change the entire operational structure of the business. Students should think carefully about what kind of name and location their customer base will best engage with.
- Choose a business structure
The business structure will determine how the business is taxed and how the owner is liable. United States law recognizes four main types of business structures: sole proprietorship, partnership, limited liability company (LLC), and corporation.
Students must file the appropriate paperwork within the state where they intend to start the business. This is considered the official start of the process and allows the F-1 visa holder’s business to operate legally.
- Get federal and state tax IDs
All U.S. businesses must have a federal tax ID. This is known as the Employer Identification Number (EIN) and can be obtained by applying for it on the IRS website.
- Apply for licenses and permits
Without the necessary licenses and permits, business owners can be subjected to huge fines or even forced to close their doors. These range from permits for specific machinery to licenses for selling certain products like alcohol. F-1 holders should be especially careful to obtain all required documentation, as their immigration status could be jeopardized by failure to obtain the necessary licenses and permits.
- Open a business bank account
A business bank account keeps all personal and business finances separate. A business bank account is professional and gives the business credibility.
- Purchase an insurance policy
Finally, students may purchase insurance to protect themselves and their businesses in case of an accident or lawsuit.
After following these steps, students will be well prepared to launch their business in the U.S. Maintaining compliance with all laws and regulations is one of the most crucial things to remember while starting a business as an F-1 visa holder. It’s a good idea to have a trusted attorney and/or accountant accessible for any questions or concerns during the process.
FAQs For F-1 visa start a business
Can F-1 student visa holders start a business in the United States?
Yes, foreign national students with F1 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, invest in their company and hand it over to a capable team they trust.
Can international students work for their own businesses while on an F1 visa?
International students cannot work for their businesses while on an F1 visa. 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.
What kind of businesses can international students start while on an F1 student visa?
F1 student visa holders can plan to start any business if it complies with all relevant laws and regulations.
Do F1 student visa holders need to apply for special permits to start a business in the United States?
Like all businesses, those started by international students must be protected by the necessary licenses and permits required by both state and federal regulations.
Can F1 student visa holders hire employees for their businesses?
Yes, international students on F1 visas can hire employees for their businesses if they comply with all relevant employment laws and regulations. In addition, all employees must be legally authorized to work in the U.S. If they plan to hire fellow students, they must ensure they are not exceeding 20 hours a week of work during the semester and that the work is related to their field of study.
Starting a business as an international student on an F-1 visa is possible, but there are important considerations to keep in mind. While the F-1 visa allows individuals to study in the United States, the primary focus should be on academics. However, if the business is directly related to the student's field of study and does not hinder their progress, it can be pursued. It is crucial for students to consult with their Designated School Official and the U.S. Citizenship and Immigration Services to ensure compliance with the rules and regulations. With careful planning and adherence to the guidelines, international students on an F-1 visa can explore entrepreneurial endeavors while continuing their education.