Overview
The question of whether student F1 visas can be used to open companies is one that is often asked. There are a number of factors that come into play when considering this question, including the laws of the particular country in which a person wishes to establish a business, the requirements governing student visas, and the individual’s ability to obtain said visa. In this article, these issues will be examined in detail and insight will be provided on the specifics of ownerships rights and regulations under an F1 visa.
Background Context
The F1 student visa is designed specifically for those pursuing an education at colleges, universities, conservatories, seminaries, academic high schools, language training programs, and any other school approved by the U.S. Immigration and Customs Enforcement. While students with this visa are able to study, purchase, and hold investments in a professional capacity, prohibited activities include working as a manager of a business, a partner of a partnership, or a shareholder of a corporation.**
In the United States, the US Small Business Administration (SBA) defines a small business as one that has fewer than 500 employees. In terms of opening a business using an F1 visa, the SBA notes that the visa holder may not be the owner of the business, but instead may be an employee.**
The visa holder may, however, form an LLC, or limited liability company, as a lawful business structure while in the United States on an F1 visa. The US States Department of State prohibits a person with an F1 visa from opening a traditional business, such as a sole proprietorship, a partnership, or a corporation. However, a person with an F1 visa can own a business as an LLC, so long as he or she does not directly manage it.**
Expert Opinion
Many experts caution potential budding entrepreneurs from attempting to open a business while on an F1 visa, particularly those from other countries.
According to Professor Luigi Giannone, a business law professor at Harvard Business School, it is almost never a good idea for a student entering the United States on an F1 visa to open a business, even if it is structured as an LLC.**
Giannone notes, “The visa status of being an international student on an F1 visa creates many restrictions and additional paperwork. There may be licensing and additional tax considerations as well. The legal issues can become quite complex, and are usually not worth the time and money required on top of a student’s academic studies.”**
Attorney Linda Cavanaugh, who specializes in immigration law, echoes Giannone’s sentiments, noting that the visa limitations imposed on F1 visa holders can be a major obstacle to opening a business.**
Cavanaugh points out, “Because F1 visa holders are not allowed to work for a company or open any kind of business structure other than an LLC and are not allowed to actively manage the business, it can be extremely difficult to start a business and meet the requirements of the F1 visa.”**
Access to Funds
When attempting to open a business using an F1 visa, access to funds is often an issue. According to the SBA, foreign investors may not use funds derived from export transactions, commercial loans, credit guarantees, or foreign assistance programs as capital for a business.**
In addition, any business that receives funds from foreign investors must be documented and reviewed by the U.S. government. Giannone explains, “The U.S. government takes a very dim view of foreign investors who use student visas as a way to get around immigration and tax laws.”**
He continues, “It is important for a person who is considering investing in a business under an F1 visa to obtain advice from a qualified attorney so as to ensure that all necessary steps are taken to be in compliance with the laws.”**
Tax Considerations
Tax considerations are also an important aspect of opening a business on an F1 visa. According to Cavanaugh, “The tax implications of starting a business while on an F1 visa can be complex, and can have a significant impact on the success of the business.”**
She explains, “It is important to understand the various tax implications of various types of business structures and investments, as well as the tax implications of receipt of funds from foreign investors. A qualified attorney can help navigate these issues and ensure compliance with the law.”**
Finding an Attorney
For a student wishing to open a business on an F1 visa, finding a qualified attorney is of paramount importance. According to the American Bar Association (ABA), the best way to locate a qualified attorney is to ask for referrals from people you trust.**
It is also important to discuss your legal needs and concerns with the attorney before hiring him or her. The ABA provides a number of resources for people looking for a qualified attorney, including a list of state and local bar associations, as well as a legal resource directory.**
Entrepreneurial Opportunities
In many cases, a student on an F1 visa may be able to explore entrepreneurial opportunities that are compliant with the F1 visa regulations. According to Cavanaugh, “While it may be difficult to open a business while on an F1 visa, there are many opportunities for students to explore the field of entrepreneurship.”**
She explains, “From consulting, to freelancing, to technology development, there are a number of avenues for students to pursue. Many of these opportunities are compliant with F1 visa regulations, and can be pursued without the need for additional permits or paperwork.”**
Navigating the system as a foreign student on an F1 visa can be a challenge. Cavanaugh notes, “It is important to understand the laws and regulations governing a student’s stay in the U.S., as well as the implications of the visa regulations on any business activities.”**
She adds, “The good news is that there are many knowledgeable people out there who can help guide a student through this process. Having a team of professionals, including an attorney and an accountant, is oftentimes the best way to ensure a successful outcome.”**
Labor Law Considerations
Labor law considerations are another important factor to consider when opening a business on an F1 visa. According to Giannone, “It is important to understand the requirements of the Fair Labor Standards Act, as well as any other applicable labor laws.”**
He adds, “The requirements for minimum wage, overtime, and other labor regulations vary from state to state and must be taken into consideration when opening a business. A qualified attorney who specializes in business law can help ensure compliance with these regulations and help protect both the employer and the employees.”**
Conclusion
The question of whether student F1 visas can be used to open companies is an important one. Even though an F1 visa holder can own an LLC, the individual may not actively manage the business and must comply with the laws and regulations of the United States. It is therefore important to seek expert advice and to do thorough research before attempting to open a business while on an F1 visa.
