June 24, 2016

F-1 Visas for Entrepreneurial Students

F-1 Visas for Entrepreneurial Students

Over 1.1 million international students are studying in the USA today, and most of them hold the most common type of student visa: the F-1. But the F-1 visa has limitations on employment, and the law makes very few allowances for unauthorized employment. What exactly are the limitations? And what are the best strategies for an entrepreneurial F-1 visa holder?

LIMITATIONS ON F-1 VISA EMPLOYMENT

The U.S. government has historically discouraged student status as a vehicle for working. The concern was that a student could nominally sign up for classes, but really the primary purpose for being in the United States to make money. In most cases, such students were involved with jobs that had nothing to do with their academics, like working in a restaurant.

Therefore, students are now limited to either

  • on-campus employment (often research, library, or dining hall jobs);
  • work that is required as part of the academic course of study, often called curricular practical training, or CPT; or
  • employment directly related to the major after graduation, called optional practical training, also known as OPT. Students are eligible for twelve months of OPT and may apply for a 24 month extension if they graduate with a qualifying degree in science, technology, engineering, or mathematics (STEM fields).

Students who want to pursue entrepreneurial ventures must limit their activities to one of these categories or change to another type of visa that is less restrictive. Keep in mind that it is generally easier to study on a work visa than work on a student visa. However, leaving a student visa for a new venture means losing the CPT and OPT benefits of a student visa.

PATH OF THE F-1 VISA STUDENT ENTREPRENEUR

WHILE ON THE F-1 VISA
As an example, let’s consider an F-1 student with a good idea for a startup business. While on the F-1 student visa, the student cannot work for an outside business unless there is specific work authorization from the foreign student adviser. F-1 employment rules are quite strict. There are limited situations where this kind of work might be authorized. However, the groundwork for a new company can be laid while in F-1 status. The F-1 student can do the following:

  • talk to potential investors
  • meet with a tax advisor and corporate attorney
  • do market research
  • develop a business plan
  • look for office space, etc.

However, it is essential that these activities do not interfere with the student’s primary educational interests.

POST GRADUATION
Then, post-graduation OPT work authorization may provide a good window of opportunity to open the business, work on developing it, and receive revenue – as long as the business is related to the student’s degree. During OPT, the student can explore options for other types of working or investment visas, and use the OPT time to set up the other visa as the company grows. This may be a challenge, but it is always easier if visa options are considered from the time the idea for a new business is first discussed.

New STEM OPT rules issued in March 2016 make it difficult for a foreign co-founder to actively manage and direct his or her startup. The only open and secure window is the first twelve months of OPT, where self-employment is still allowed. During that time an F-1 student can work for his or startup and develop a visa strategy after OPT ends. The additional twenty-four months available under the new STEM rules are more restrictive. They require a written training program, employer and employee attestations, additional reporting requirements to schools, possible government site visits, and an employer/employee relationship.

BEYOND OPT
Beyond OPT, some creativity may allow F-1 students to start or continue their entrepreneurial endeavors. For example, the employer/employee relationship could be addressed by creating a corporate structure similar to what is done now with H-1B international entrepreneurs who own a significant stake in their U.S. startup, including independent board members with voting rights to fire the H-1B; employment contract; intellectual property (IP) assignment; etc., consistent with guidance for entrepreneurs issued by USCIS. This particular option is discussed in more detail on our H-1B visa page.