At a Glance
The job market in the U.S. is challenging, especially for international students. If you're finding it hard to secure employment, why not consider starting your own business? This digital era offers many opportunities to be your own boss, particularly if you're skilled with social media, like many Gen Z students. However, as an immigrant, especially on an F1 visa, it's crucial to understand how to proceed without jeopardizing your immigration status.
Entrepreneurs on F1 visas face complexities in navigating regulations and obtaining work authorization. This guide emphasizes understanding F1 visa restrictions and outlines steps for starting a business. Compare different type of companies and which one is suitable for F1 students, how to maintain legal working status, and how to file tax, etc.
Starting Your Business on an F1 Visa: Step-by-Step
As an F1 student, you can start a business in the U.S. by using OPT or CPT, provided you comply with certain restrictions. Failure to adhere to these regulations can have serious consequences, such as becoming ineligible for future immigration benefits or programs, or being barred from reentering the United States for a period of time.
1. F1 Work Authorizations & Entrepreneurship
While on OPT
There are few restrictions for those using OPT during their first year. It is crucial to prove that your business and job description align with the major you graduated in. This initial OPT year does not require you to have actual income or even have a job offer to apply for work authorization. However, it does have an "unemployment days" record. If you cannot find an ideal job within 90 days after obtaining an EAD card, you will have to leave the U.S. In this situation, you might consider starting your own company and becoming an entrepreneur to seek new opportunities while maintaining your OPT status.
Additionally, during the first year of OPT, you are not required to be a full-time employee throughout your active OPT period. You can consider securing a paid or unpaid internship at a company that offers return-offer opportunities and future H1B sponsorship. Meanwhile, you can use the remaining 20 hours per week to work on starting your own business.
While on STEM OPT
STEM OPT can be challenging due to its additional restrictions compared to regular OPT. For example, you must be employed by an e-verified company, meet a minimum salary requirement, and be able to prove that you can be "fired," which means there should be other people in the company acting as your supervisors.
It is difficult for an international student to start their own business during their first year of OPT and generate sufficient revenue in the second year to meet these requirements. Therefore, if you truly want to be an entrepreneur, STEM OPT may not be very helpful, unlike those who simply wish to be employed.
However, there is an alternative: Day 1 CPT.
While on Day 1 CPT
CPT (Curricular Practical Training) is a type of work authorization issued by the school’s DSO (Designated School Official). The type of job you can pursue using CPT depends on the program you are enrolled in. At Day 1 CPT universities, programs are designed to integrate work and study, encouraging students to find internship opportunities as a complementary method to classroom learning.
If you are in an MBA program, especially one focused on entrepreneurship (such as the Techpreneurship program at Harrisburg University), it is legitimate to use CPT to work for yourself, although the CPT approval process might be unique compared to other internships. You will need to discuss with your DSO how to arrange the CPT agreement.
Typically, if the company is not started solely by you, and you have partners or senior supervisors, the process will be easier.
Reminder: Doesn't matter it is OPT or CPT, prior to work authorization, you won’t be permitted to receive income from your business or engage in the day-to-day operations of the company, whether on a full- or part-time basis. To ensure your business takes off with minimal delays, consider co-founding the company with a U.S. citizen or green card holder. This collaborative approach allows your co-founder to manage the operational tasks of the business while you focus on securing work authorization, ensuring compliance with immigration regulations.
2. Market Research and Business Licensure
Even before securing work authorization, you can begin to lay the groundwork for your business by securing an Employer Identification Number (EIN) from the IRS for taxation and official communications.
You can also dive into market research, analyzing current trends and competition, as well as identifying your target audience. Engage in customer discovery activities to gather insights into customer needs and refine your business model accordingly.
Additionally, you can take steps toward licensing your business. Research and complete necessary applications, aligning your business with specific industry regulations. Given the complexities of the F1 visa, consider consulting an attorney to ensure that the business activities you’re engaged in comply with visa regulations.
By taking legal steps toward establishing your business, focusing on market research and customer discovery, you can set the stage for a successful entrepreneurial venture in the United States.
3. Choose the Right Business Structure
Today, when formalizing their business structure, most people opt for either a limited liability company (LLC) or a corporation. LLCs and corporations each offer distinct advantages. A key difference lies in their organizational flexibility and management. LLCs provide a more flexible structure, allowing members to manage the company directly or to designate managers.
Corporations, on the other hand, have a rigid hierarchical structure with a board of directors overseeing officers who manage day-to-day operations. Another key distinction involves taxation. LLCs generally pass through profits and losses to members, while corporations face double taxation on profits. Additionally, LLCs often have fewer compliance requirements than corporations, making them an attractive option for small businesses seeking simplicity and adaptability.
When comparing the pros and cons of starting a business as an LLC or a corporation, you should make an informed decision based on your personal circumstances and needs. An LLC's flexibility and simplicity make it an attractive choice for small businesses, offering personal liability protection and pass-through taxation.
However, corporations boast a well-defined structure that may appeal to you if you seek to attract investors and issue stock. Despite the potential for double taxation, corporations can benefit from tax advantages, particularly in terms of employee benefits. Your decision rests on factors such as the size of your business and your plans for future growth.
4. Secure Funding for Your Business
To embark on a successful business venture, you may need to explore diverse funding avenues. First, to the extent that it’s possible, consider tapping into personal savings, which will demonstrate your commitment to the venture. Additionally, consider loans from family and friends. If you require substantial investment, consider venture capitalists, who offer financial backing in exchange for equity.
To attract potential investors, you’ll need to craft a compelling pitch deck. Clearly articulate your business idea, outlining its unique value proposition and growth potential. Consider attending startup events and networking with industry professionals to gain attention and establish valuable connections.
Securing adequate funding is a pivotal early step in your entrepreneurial journey, transforming your business concept into a reality. A well-rounded funding strategy, coupled with effective networking, improves your prospects for success in a competitive business landscape.
5. Secure Work Authorization
Before you are able to receive income from your business or actively work, you will need to secure work authorization through OPT or CPT.
OPT:
- Eligibility Check:
- Ensure that you are an F-1 student in good standing.
- Confirm that you have been enrolled in a U.S. school for at least one academic year.
- If you are enrolled in STEM OPT, please note that your company must participate in E-Verify
- Apply for OPT:
- Request an OPT recommendation from your designated school official (DSO).
- Complete Form I-765, Application for Employment Authorization.
- Gather required supporting documents, including photos, fees, and a copy of your Form I-20.
- Submit the Application:
- Mail your application to the appropriate USCIS Service Center.
- Pay the required application fee.
- Wait for Approval:
- USCIS will process your application. You can check the status online.
- Once approved, you'll receive an Employment Authorization Document (EAD).
- Secure Employment:
- You can start working once you receive your EAD.
- Your job duties must be directly related to your major field of study.
- Reporting Requirements:
- Inform your DSO of any changes in your employment status, address, or contact information.
CPT:
- Eligibility Check:
- Confirm your eligibility with your DSO.
- Typically, students must have completed one academic year before applying.
- CPT Authorization:
- Request CPT authorization from your DSO.
- Your DSO will update your Form I-20 with the CPT information.
- Apply for Employment Authorization Document (EAD):
- Complete Form I-765, Application for Employment Authorization.
- Submit supporting documents, including the updated Form I-20 and job offer letter.
- Submit the Application:
- Mail the application to the appropriate USCIS Service Center.
- Pay the required application fee.
- Wait for Approval:
- USCIS will process your application. You can check the status, as well as current processing times, online.
- Once approved, you'll receive an EAD.
- Start CPT Employment:
- You can only work for and be paid by your business during the authorized dates.
- A representative of your company–who has the authority to fire you–should sign your CPT agreement.
- Reporting Requirements:
- Keep your DSO informed about any changes in your employment or academic status.
As an entrepreneur aiming to launch your own business, you might also consider the advantage of Day 1 CPT programs, allowing you to work for your business right from the start of your academic program. This opportunity bypasses the typical one-year waiting period for traditional CPT, enabling you to gain entrepreneurial experience early on and integrate real-world skills with your academic learning from day one.
Explore Day 1 CPT programs at institutions like the California Institute of Advanced Management (CIAM), Westcliff University, and Harrisburg University. These schools recognize the importance of blending hands-on experience with theoretical knowledge, offering entrepreneurial-minded individuals like yourself the chance to kickstart your business alongside your academic journey.
6. Report to FinCEN
FinCEN is similar to the IRS; the latter focuses on tax collection, while the former concentrates on financial reporting. Starting in 2024, FinCEN will begin tracking the ownership of small companies through tax returns, EIN numbers, and bank records.
To register your business, you'll need to file a report with FinCEN. This report is free of charge and can be completed online via their official website. The process is straightforward and aims to record business owner information to prevent tax evasion. Even if you do not intend to evade taxes or if your company is not currently profitable, you are still required to file this report. The deadlines for submitting the report vary depending on when you formed your company. Missing the deadline will result in a fine of $500 per day.
7. Plan for the Future
Once you have secured work authorization and are working for your business, you need to begin planning for the future of both your business and your journey within the United States.
Focus on Growing Your Business
With your work authorization in place, you now need to focus on growth. Update your business plan regularly to adapt to evolving industry trends and leverage the connections you've made to foster collaborations and partnerships. Plan to attend industry events, join professional associations, and engage with mentors as needed to broaden your network.
Perhaps most importantly, commit yourself to continuous learning, staying up-to-date on industry trends and embracing opportunities for skill development. With resilience, strategic planning, and a focus on steady improvement, your entrepreneurial venture can evolve into a thriving and sustainable business.
Explore Other Visa Opportunities
As you know, F1 visas and their associated work authorizations are not permanent. Since you will likely want to be invested in your business for years to come, plan ahead for your next steps to ensure a smooth transition and continuity in your entrepreneurial journey.
For instance, you might consider applying for an H1B visa post-graduation. Be advised, though, that you will be limited in the activities you can perform for your business on an H1B. Overseeing daily operations or having the authority to hire or fire employees could jeopardize your legal status. However, you will be able to sit on the board of directors and perform ongoing market research to help ensure your business continues to develop.
Another option you may consider is the O1 visa, an employer-sponsored non-immigrant visa for which you must demonstrate extraordinary ability in your field. Owning your own business on an O1 visa does come with some challenges. While you're allowed to own a business, you cannot be the sole employee. According to common interpretations of U.S. immigration law, someone else in your business, like a board of directors or an officer, must have the authority to fire you.
However, the O1 visa does come with distinct advantages for an entrepreneur. It allows for unlimited extensions without renewal limits, making it appealing for those aiming to adjust their status to a green card. Additionally, it does not impose prevailing wage limits, providing flexibility for young, cash-strapped businesses.
Conclusion
Starting a business as an F1 visa holder is a challenging yet rewarding journey. Navigating regulations and work authorizations demands careful consideration and adherence to legal guidelines. As an aspiring entrepreneur, your success hinges on understanding F1 visa restrictions and choosing a business structure strategically.
In a dynamic and competitive business landscape, your commitment to visa compliance, continued learning, and strategic planning will safeguard your legal status and pave the way for a thriving entrepreneurial journey in the United States. Seize the opportunities ahead and embark on your path to entrepreneurial success.
In addition, always stay up-to-date on changes to visa requirements and consider consulting an immigration attorney to navigate immigration laws and safeguard the future of your business.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. If you plan to start your own business, it is advisable to consult with immigration lawyers, licensed accountants, and your Designated School Official (DSO).
