Student Entrepreneurs:

Introduction

• The U.S. government has historically discouraged student status from being a primary avenue for employment. This was due to concerns that some students might enroll in classes merely as a nominal activity, while their main intent was to generate income.
• Presently, students’ employment options are restricted to:
  • On-campus employment, typically involving roles like research, library, or dining hall positions.
  • Work that’s an integral part of their academic program, often referred to as curricular practical training (CPT), for example, off-campus internships.
  • Employment directly tied to their major after graduation, known as optional practical training (OPT). Students are initially eligible for twelve months of OPT. Furthermore, they may apply for a 24-month extension if they graduate with a qualifying degree in science, technology, engineering, or mathematics (STEM fields).
• Students desiring to pursue entrepreneurial ventures need to align their activities with one of these defined categories or consider switching to a less restrictive visa type such as H-1B or O-1. However, transitioning from a student visa to embark on a new venture entail forfeiting the CPT and OPT benefits associated with a student visa.

1. F-1 Student Visa For Entrepreneurship

• This option is suitable for students studying at a U.S. University on an F-1 visa who wish to establish and operate their own startup either during school or after graduation.
• It’s important to note that while creating a business under F-1 status with OPT work authorization is generally compliant with regulations, founders must ensure they adhere to unemployment or self-employment restrictions within this classification.

Work Authorization Constraints  

• Regulations clearly define the scope of work authorization for F-1 students, limited to on-campus work, Curricular Practical Training (CPT), and Optional Practical Training (OPT).
• Off-campus employment, whether for an employer or independently, is prohibited unless explicit permission is granted by USCIS.
• Funding avenues, initial grants, and similar programs may have restrictions favoring permanent residents and U.S. citizens, potentially complicating the process for founders who hold a significant share in the company.

Distinguishing Between Investment And Active Work

• It’s crucial for students to understand the distinction between investing in a business and actively participating in its operations.
• While a student on an F-1 visa can be a passive owner, engaging in day-to-day business activities is strictly prohibited.

Important Note on Visa Intent

• The F-1 visa is designated as a “non-immigrant intent” visa, indicating it’s meant for temporary stays. Immigration officers may deny visa renewals if they suspect any intention of permanent immigration to the U.S.
• Applicants should be prepared to demonstrate strong ties to their home country and discuss their long-term goals, reasons for returning home, and future prospects in spite of entrepreneurial activities.

2. While on The F-1 Visa

• Consider an F-1 student with a startup idea. Working for an external business without specific work authorization from the foreign student adviser is generally not allowed on the F-1 visa. The employment regulations for F-1 students are stringent. Limited situations might warrant such authorization, but groundwork for a new company can be laid while maintaining F-1 status. During this time, the student can:
  • Develop a business plan
  • Talk to potential investors.
  • Secure investments from investors
  • Consult with tax advisors and corporate attorneys
  • Conduct market research
  • Gather feedback from customers
  • Search for office space, etc.
• It’s imperative that these activities not compromise the student’s primary educational pursuits.

Clarification on Investing And Working

• It’s crucial for students to discern when they transition from investing to actively working. A student on an F-1 visa can hold a passive ownership in a business but shouldn’t get involved in its day-to-day operations.

3. While on The OPT

• Post-graduation OPT work authorization offers an excellent opportunity to initiate and develop a business, generating revenue, provided it aligns with the student’s degree. This period allows students to explore various working or investment visa options and establish the groundwork for the chosen visa as the company progresses.

IMPORTANT:
It’s advisable to discuss with an immigration lawyer and consider visa options right from the inception of the business idea.

• Entrepreneurial Activities Authorized After EAD
  • Receiving compensation through salary.
  • Building and developing your business.
  • Hiring and managing employees.
  • Overseeing day-to-day operations.
  • Simultaneously lay the groundwork for an H-1B or O-1 petition.
• Self-Employment on OPT
  A student on OPT can start a business and be self-employed, provided they can demonstrate active engagement in a business related to their degree program.
• Benefits of Self-Employment on OPT
  • No minimum salary (prevailing wage) requirements.
  • Exemption from the 90-day unemployment limit.
• Other Flexibilities under OPT
  Even for non-self-employed individuals, OPT provides significant flexibility in working arrangements. This includes part-time employment, working for multiple employers, contracting via form 1099, or unpaid work.
• Transition to STEM OPT As An Entrepreneur
  It’s important to note that while OPT provides substantial flexibility, the transition to STEM OPT as an entrepreneur introduces more restrictions.

4. While on STEM OPT

• Unlike OPT, self-employment is not permitted during STEM OPT. In this case, you must have someone else officially endorse your activities. This doesn’t mean you can’t continue working for your own company, but additional criteria must be met:
  • Your company must be E-verified.
  • An employer-employee relationship must be established.
  • Your company must have the financial ability to pay you.
  • A training plan must be devised and approved by another party.
• Challenges For Foreign Co-founders
  • The initial twelve months of OPT provide a more open and secure window where self-employment is permitted. During this time, an F-1 student can operate their startup and develop a visa strategy after the OPT period concludes.

    However, the additional twenty-four months available under the new STEM rules come with more restrictions.

5. Exploring Options Beyond OPT

• After the OPT period, F-1 students can explore creative approaches to initiate or sustain their entrepreneurial ventures.
• One potential solution is to establish a corporate structure akin to the practices employed by H-1B entrepreneurs who hold ownership in their U.S. startup. This structure might involve elements like:
  • Independent board members with voting authority, ensuring the ability to terminate the H-1B relationship if necessary.
  • Formulating an employment contract.
  • Implementing measures for intellectual property (IP) assignment.

These strategies can provide a framework for F-1 students to continue their entrepreneurial pursuits beyond the OPT phase.

Conclusion

Embarking on the U.S. entrepreneurial journey as a student entrepreneur on an F-1 visa is both challenging and full of potential. Whether you’re still studying or transitioning to OPT, we’re here to help you navigate the complexities of starting and growing your business while maintaining your visa status.

We’re not just about facilitating startups; we’re about empowering dreams. Our dedicated team guides you from ideation to launch, ensuring your entrepreneurial activities align with F-1 visa regulations and helping you explore long-term visa options. We handle all your immigration needs, so you can focus on turning your ideas into a thriving business.

The success stories of student entrepreneurs on F-1 visas inspire us. If you’re ready to take the next step in your entrepreneurial journey while ensuring compliance with your visa requirements, Schedule A FREE Assessment with our seasoned USA Immigration Lawyers today, and let’s build something extraordinary!