How to Start a Business as an International Student on an F-1 Visa
Starting up a business at any age can be rewarding but difficult especially as an F-1 visa holder because there are certain rules and regulations that need to be followed to avoid being kicked out or jeopardizing your immigration status.
This article gives more insight into what an F-1 visa is, the dos and don’ts of an F-1 visa holder, and the necessary steps needed to successfully start up your own business in the US while studying without jeopardizing your immigration status.
What is an F-1 visa?
F-1 visa is a type of non-immigrant visa authorized by the US for international students who wish to pursue degrees, diplomas, or certificate programs at an accredited college, university, or other academic institution provided they maintain a full course of study.
The F-1 visa is an authorized way for the US government to accept international students thereby giving them a stay duration in the US that is determined by the program of study identified on the l-20 form. A grace period of 60 days is also given to students to remain in the US once the course of study is completed.
To enable you to work in the US for a period of up to 12 months, you need to apply for OPT (Optional Practical Training) which can be done either during your course of study or on completion of your program of study. It can also be extended for 24 more months for certain STEM (Science, Technology, Engineering, and Mathematics) majors.
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Dos and Don’ts while on an F-1 student visa
The F-1 visa has been authorized by the US government to give opportunities to foreign students. while on an F-1 visa, there are certain conditions and limitations given by the US government while residing in the US that must be followed to avoid being kicked out or jeopardizing your visa status either during your course of study or on completion. Below are some of the things that can and cannot be done as a student on an F-1 visa;
Dos
- Students must make sure to maintain a full-time or part-time student status at an accredited US academic institution.
- You should enroll in OPT either during or after your course of study in other to gain valuable working experience in an IS-based company or organization.
- Students are allowed to get married to a US citizen, a holder of another visa type, or a US Lawful Permanent Resident (LPR).
- Being a passive investor in a new or established business is also allowed for students
- You can also wish to change your visa status from an F-1 visa to another one of your choices including those in the H, O, L, E, or G categories.
Don’ts
- F-1 visa students are not allowed to take part or engage in ‘gainful employment ‘ which is, they are not allowed to conduct any work where salary is received in exchange for their services without getting the proper authorization.
- They are also not allowed to overstay the F-1 student visa without the application for an extension, OPT, or another valid visa extension or change of visa status.
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Starting your business on an F-1 visa
F-1 visa holders are not allowed to partake in gainful employment but they are allowed to establish their business as long as they are going in line with the rules and regulations set aside for them.
They are allowed to launch their business but cannot engage in operation which means they can set it up, leave it to a capable planning phase, invest in it remotely have OPT authorization, and also receive dividends (passive) in which income tax return will be filed annually if dividend income is earned.
Steps for students starting a business
There are various steps you need to take if you wish to start up your own business as an international student on an F-1 visa. They are as follows;
Conduct market survey:
The first step in starting up a business is to conduct a market survey which can be done by talking to potential customers, talking to other business owners in your industry, or conducting online surveys.
This step is necessary because it determines the need for your products or services in the US. You will also need to determine if any regulatory requirements must be met for your products and services to be sold in the US.
Create your business plan:
Once the market research is done, the next step is to come up with a successful business plan. The business plan contains your business goals, strategies you need for your business, and how you plan to achieve them.
You should note that if you’re planning to start up your business with another person, there will be a need to create a partnership agreement that will contain each person’s roles and responsibilities as well as how the profits obtained in the business should be divided.
Creating a business plan is an important step as it helps you stay organized and right on track so it needs to be prepared meticulously and be sure to cover all areas of your business.
Fund your business:
After setting up your business plan, the next thing to do is to get funding for your business which can either be your savings, loans from family and friends, or going through a venture capitalist.
You can get to meet with potential investors when you attend start-up events, which are events where start-ups and investors come together to network or you can also meet investors through online platforms.
Investors may want to take a look at your business plan or pitch deck (which contains your business plan and what you are looking for in terms of funding) so it’s important to be prepared with all documents before getting to meet with them.
After meeting with the investors, the next is to negotiate investment terms and once an agreement between both parties has been met, a contract needs to be drawn outlining the terms of the agreement and signed by both parties.
Pick your business location:
Choosing your business location will determine the customer base including additional costs like rent and utilities. It also determines the amount you’ll pay as rent and the types of customers that will visit your business.
A decision will be made on either to have a physical location or an online location. If you decide on a physical location, there’ll be a need to locate a place zoned for commercial use. You will also need to decide if you want your business to be located in a high-traffic area or if you are willing to go for a lower rent price.
After making your decision, a lease agreement will be signed which will contain the terms of your lease like how long you will be renting for and the amount to be paid in a specific amount of time. If you decide to run your business online, you will need to set up a website.
Choose a business structure:
When choosing a business structure, you should know that there are 4 main types of business structure in the US which are; sole proprietorship, partnership, Limited Liability Company (LLC), and corporation.
This step will help you determine how your business will be taxed and your legal liability. The type of business structure to choose will depend both on the size and type of business you are starting up and once that is done, the appropriate paperwork needs to be filed which will officially create your business and allow you to open legally.
Choose your business name:
A business name is important because it gives your business an identity; a name customers will use to identify your business anywhere and everywhere. You have to make sure the name you are choosing is not already in use by another business.
Also, make sure your business name is available as a domain name and also available to be trademarked which is the process of registering your business name.
This also officially creates your business and allows you the freedom to operate legally. Next is to create a logo that will be used on your website, marketing materials, and business cards.
Get federal and state tax IDs:
Employer Identification Number (EIN) also known as federal tax ID is a must if you want to own a business in the US and it can be obtained by applying for it on the IRS website.
You may also need to obtain a state tax ID which depends on the state in which the business is being operated and can be applied for on the website of your state’s tax agency. The process of applying for a federal tax ID is quite similar to this process.
Apply for licenses and permits:
Starting up a business without the necessary licenses and permits will subject business owners to hefty fines or even being forced to shut down.
As a student with an F-1 visa starting up a business in the US, you should be especially careful to make sure to obtain all the required documents, licenses, and permits to avoid jeopardizing your immigration status. Always make sure your business is by all the necessary licenses and permits to avoid paying huge fines.
Open a business bank account:
The next step is to open a business bank account which helps you to separate all personal finances from business finances. A business bank account makes your business look professional and also gives credibility to the business.
Business licenses, permits, EIN (Employer Identification Number), and also a US bank account is necessary when opening a business bank account. Then you need to get a business credit card which can be indeed very helpful when starting to make purchases for your business and to build a business credit history.
Purchase an insurance policy:
Purchasing an insurance policy is the final step in starting up your business and this is done to protect both the business owner and their business in the case of lawsuits or accidents.
A general liability insurance policy will be purchased as well as all other required insurance policies for your business type.
Final thoughts
Starting up a business in the US as an F-1 visa holder is possible but then as a student, you should make sure your primary focus should be on academics.
However, it is essential to always consult with your designated school official and the US citizenship and immigration services to make sure they are always in accordance with the stipulated rules and regulations to avoid jeopardizing their immigration status.
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