If you are an international student entrepreneur, wanting to start a business make sure to seek legal counsel.
Here is what the USCIS states:
F-1 Student Visa
The F-1 Visa (Academic Student) allows you to enter the United States as a full-time student at an accredited college, university, seminary, conservatory, academic high school, elementary school, or other academic institution or in a language training program. You must be enrolled in a program or course of study that culminates in a degree, diploma, or certificate and your school must be authorized by the U.S. government to accept international students.
M-1 Student Visa
The M-1 visa (Vocational Student) category includes students in vocational or other nonacademic programs, other than language training.
F-1 students may not work off-campus during the first academic year, but may accept on-campus employment subject to certain conditions and restrictions. After the first academic year, F-1 students may engage in three types of off-campus employment:
- Curricular Practical Training (CPT)
- Optional Practical Training (OPT) (pre-completion or post-completion)
- Science, Technology, Engineering, and Mathematics (STEM) Optional Practical Training Extension (OPT)
For both F-1 and M-1 students any off-campus employment must be related to their area of study and must be authorized prior to starting any work by the Designated School Official (the person authorized to maintain the Student and Exchange Visitor Information System (SEVIS)) and USCIS.
For more information on the Student and Exchange Visitors Program, see the Student & Exchange Visitor Program, Immigration & Customs Enforcement and the Study in the States Training Opportunities in the United States pages.
Here are some suggestions:
First, abide by the law. The INS and USCIS has very strict rules. Know the rules, if you need help ask professional, do not believe in hearsay and everything you read on the web. Do not take the change to be come and illegal alien and be deported, or not being able to enter the US again.
Most international students enter the country with a F-1 visa. With a F-1 visa, one can own a business. However the business cannot be operating, meaning no revenue or salary to the owner whom with F-1 Visa. In this case, the entrepreneur has two options. One is to use Optional Practical Training (OPT) or acquire H-1B visa, which most of people choose to do.
OPT is granted to both undergraduate and graduates students after at least a year of studying in order for them to pursue jobs that are related to their study. OPT is effective for 12 months. Although it is a relatively easy way to practice, there are several drawbacks if you are an entrepreneur. First, it only lasts for a year. After that time, one must leave the country. Second, OPT has to be related to the most recent degree that one acquired. If you are master student you cannot relate the job to your undergrad degree.
Starting a business with OPT is not sustainable so many people choose to acquire H-1B visa. H-1B visa allows foreigners to work for three years, extendable to six years. People with H-1B visas either extend their visa or transfer to green card after certain time period. However, H-1B visas have strict application process. Below are criteria for H-1B Visa:
- You need bona fide employer/employee relationship
- You cannot sponsor yourself
- You cannot have majority ownership of the company
- Employer must pay prevailing wage and agree to labor condition attestation
Once you have a visa to legally work in the United States, the next step is to decide what type of company your venture should be. Each type of formation has pros and cons so one should consider the proper form regarding liability of owners and managers, centralization and flexibility of management, ownership interests, cost of formation and maintenance, and tax consequences.
The ability for an individual on an H-1B to own or start a business first depends on the structure of the entity. There is one particular corporate structure that as a general rule does not allow foreign ownership: S-Corp. This kind of corporation cannot have shareholders that are not U.S. citizens. If the corporation is a C-Corp or LLC, H-1B holders can typically own a small percentage of the business.
The typical path that H-1B holders take when starting a business in the US is to become a passive shareholder in the new entity (similar to holding stock in a public company) while remaining employed at the company that the H1B is associated with. The H1B holder will have to hire someone to actively run the new business, since s/he cannot. The H1B holder remains entitled to the ownership rights associated with owning a portion of the business, but cannot take an active role in the company.
But, it is important to mention that as an H-1B holder you won’t be able to run the business as CEO. Because H-1B visas are granted mainly to individuals who have special skills and knowledge, the rights and obligations of H-1B workers are strictly linked to the services that they are performing for their sponsors. In other words, you can only work for the company that sponsored your H-1B and under the terms that were included in your application form (Form I-129).
The process for starting a business as an H-1B non-immigrant is very similar to the process for U.S. citizens with the exception that you must set up an entity that has control over your duties and your salary.
Here we will provide a summary of the steps in (This is an educative summary, there is a lot more involved, so please seek professional advise):
- Develop a solid business plan/model that shows that your business can succeed
- Take some time to research the different business structures such as a corporation, LLC, corporate partnership, or sole proprietorship
- Create and register a name for your business with both the local state corporation services of the secretary of state
- Petition the IRS for a TIN (Tax Identification Number), since you do not have a Social Security Number you will need this. You can get the forms form the IRS website
- Apply for an EIN (Employer Identification Number). This number will serve as the tax payment number for your business as a separate legal entity. To get your EIN in as little as a few minutes, visit the IRS website
- Depending on what type of business your are creating get a business location whether it be an office space or even a co-working space
- Make sure to have all of the licenses, permits, and certifications to perform your business legally
- Because each U.S. state has different requirements regarding worker’s compensation, benefits, insurance, health codes, and state taxes, it is important to research every aspect of your business to prevent future legal problems
- No matter which route you choose to take, you need legal guidance
(If you want more granular explanation and guidance on how to start your business, send us an email to email@example.com)
Legal work may seem overwhelming when preparing a startup in the United States as a foreigner, but it is not impossible. If you see an opportunity that you want to pursue, review what you legal implications there may be, seek legal advice, and execute step by step.
While starting a business on H-1B status is possible, these cases are heavily scrutinized by the USCIS and have a much lower success rate than cases where an established employer has petitioned for the beneficiary. Always be sure to consult a qualified immigration attorney every step of the way.
New INS initiatives may be changing the current immigration policy (politics is unpredictable, so we can’t offer much insight into what may happen, unfortunately). This means that in the short term we may see significant changes in immigration policies and regulation, which in turn could affect the rights and obligations of H-1B holders.
Disclaimer: Startup Port, our associates/partners, provides strategic business advisory services only, not legal or financial advice. Accordingly, information provided is not legal or financial advice and should not be acted on as such. Seek your own professional financial and legal advice.