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Embarking on an entrepreneurial journey is a challenging endeavor for anyone, but for immigrant students in the United States, it presents a unique set of obstacles. In June 2022, when Unshackled was still in the works, we emailed 2,500 people, primarily immigrants on temporary visas, and asked a simple question:
What are the top 3 questions you would like Unshackled to answer?
Within a few days, we got over 300 questions from the community. Surfing through them all, the most asked question on the F-1 OPT was this:
Can I start a company on my F-1 visa?
In this article, we'll answer this question and share insights on how you can start something of your own as a student.
Starting a Company on F-1
Here's the good news: You can incorporate a company on an F-1 student visa and, by extension, on OPT and STEM OPT.
What's more, you can do it without ever entering the United States on a visa.
However, you probably want to do more than just incorporate a company if you’re an aspiring entrepreneur. You want to additionally raise money, hire employees, build products, and generate revenue. Now that’s where it starts getting tricky. Before we share how you can start and run a company legally as a student, let’s detour for a minute and examine how a different visa provides useful insights into this circumstance.
B-1 As A Barometer
The truth is, the USCIS does not have an article titled Things You Can Do On F-1 As An Entrepreneur. (We wish it did!)
So the closest guidance is what the government has shared about the B-1 visa. The B-1 is a temporary business visa meant for folks who participate in “business activities.” These travelers cannot technically work but can conduct business. The government has some guidance on what you can and can’t do on a B-1 visa.
Table: What you can and cannot do on a B-1 visa
Now, since there is no specific guidance for F-1 students, immigration lawyers use the B-1 as a reference – or a barometer – to gauge what activities are allowed on an F-1 student visa before getting work authorization. In the table below, we’ve mapped activities undertaken by entrepreneurs to what’s allowed under the B-1 visa.
Table: Entrepreneurial activities allowed on F-1 before work authorization
The activities with a “No” against them all require valid work authorization. They are strictly prohibited on an F-1 student visa, regardless of if the company is in the U.S. or elsewhere. For example, although you can raise money, you cannot work for the company you just raised money for until you get work authorization (through the EAD or Employment Authorization Card). In most cases, it just makes sense to have work authorization in place before you raise.
Lawyer Up: This can quickly get tricky since the government can be binary on what is and isn’t permitted. They may consider all the activities above to be “work.” So don’t start your venture until you talk to a lawyer with experience helping entrepreneurs navigate this!
That said, the circle of what you can do expands when you get work authorization for your startup through the OPT.
Being self-employed on your OPT
Here’s some great news: you can be self-employed on an OPT.
So the activities mentioned above that are prohibited on an F-1 student visa can be performed on an OPT if you get an EAD card through the company you set up, which is what Yash and his co-founders did. Here are the exact words from USCIS,
“A student on OPT may start a business and be self-employed. The student must be able to prove that he or she has the proper business licenses and is actively engaged in a business related to the student’s degree program.”
Let’s break that down. Essentially, you need three things to be self-employed on your OPT:
- Have a proper business license: This just means that you need to incorporate your company, get an Employer Identification Number (EIN), and obtain any additional licenses as required by local, state, and federal law. In the past decade, several startups have come up – such as Stripe Atlas, Clerky, LegalZoom – that make starting a business simple and straightforward. Be actively engaged in your business: This means you need to be working at least 20 hours a week for your company.Ensure your role is related to your degree program: Finally, you need to show a direct relation between your degree and the type of work you’ll be doing. For example, you probably can’t set up a fintech startup to be the CEO after graduating with a degree in human physiology. Barring such outliers, this is straightforward in most cases.
The 12 months of your OPT gives you the perfect opportunity to experiment with an idea, secure funding, and build out your product. Below are the benefits of being self-employed while on an OPT:
- You don’t need a minimum salary.
- You can own 100% equity in your company.
- You can avoid the 90-day unemployment limit.
Even if you’re not self-employed, as we shared above, OPT gives you flexibility in your working arrangement: you can work part-time, for multiple employers, as a contractor via Form 1099, or even just volunteer.
While the OPT gives immense flexibility, things get more restrictive (and less fun) when you switch to the STEM OPT as an entrepreneur.
OPT to STEM OPT as an Entrepreneur
Since the moment it was launched in 2008, the STEM extension has been challenged through several lawsuits. One of the lawsuits filed by WashTech in 2014 claimed that the STEM extension created unfair low-wage competition, making it harder for Americans to compete in the labor market. In response, the Department of Homeland Security (DHS) launched a new version in 2016, with two major changes:
- Students can extend their OPT for an additional 24 months, as opposed to 17 months (which was the earlier length); and
- Employers need to develop a training plan detailing what the student will do to further their training for those additional two years.
The second point changed things for the STEM extension.
While OPT allows for self-employment, STEM OPT does not. Now, you need someone else to sign off for you. That doesn’t mean you can’t continue working for your own company. But you have to satisfy a few more requirements to keep doing so.
- Your company must be E-Verified: Repeating what we shared earlier in the chapter, the company you work for
- be on E-Verify to file your STEM OPT. There is an employer-employee relationship: Once again, you can’t be self-employed on a STEM OPT. You have to be an employee at a company. You can still be a founder, but you need to own less than 50% equity or have a combination of co-founders or a board of directors who can outvote you. Create a training plan, signed off by someone else: STEM OPT requires your employer to submit a “Form I-983.” This is a detailed training plan that tells the USCIS how your role directly relates to your degree, the goals of your training, the performance evaluation process, etc. You need someone else in your company – such as a co-founder, CTO, COO, HR, etc. – to sign off on this. Your company can compensate you: As part of Form I-983, your employer needs to show that they have sufficient resources to compensate you at the level of other employees in similar positions. This can be in the form of money, tuition waivers, housing, and transportation.
As you see, being an entrepreneur on a STEM OPT is much more tricky than being one on an OPT. Too often, international students realize that they made an error or didn’t meet a requirement they were supposed to years later when they switch from the STEM OPT to another visa.
Lawyer Up: If you’re serious about building your startup and continuing to work for it, reach out to an immigration lawyer immediately who can guide you on this transition. Being self-employed on STEM OPT is very much possible. It just needs to be crafted with care.
DISCLAIMER: The information provided in this article is for general informational purposes only and should not be construed as legal advice. Consult a licensed immigration attorney for advice specific to your situation. Want to be connected with one? Email us at email@example.com.