By Farhad Sethna, Attorney and Counselor; © 2014
Often, I hear enterprising and creative clients ask me – “Farhad, can I start a business in the USA”. Many times, these clients have student visas and are working toward completing a degree from a U.S. university. For all those entrepreneurs out there on student visas, this article presents some strategies to successfully navigating business issues while following immigration regulations and procedures!
There are two aspects to this discussion:
1. While the student is still participating in the course of study – ie, before graduation; and
2. After the student has graduated and is on OPT
Let us examine both these conditions separately:
1. Self employment before graduation:
There is no law that prevents a student who is in legal valid non-immigrant student status from starting up his or her own business. However, the student must remain in valid student status, registered as a full time student, or be between semesters. Another issue of importance is whether the student will receive any remuneration from the business. Before graduation, the student cannot be an “employee” of his or her own business. If he or she was an employee, he or she would have to be paid a wage by the business. Payment of a wage signifies employment, which – unless the student is permitted to accept such employment – is prohibited under the immigration law. If the student violates the terms and conditions of his or her student status, he or she will fall out of status and potentially face removal (deportation).
That being said, how does a student set up and operate a business? What form should the business be in?
The student can incorporate a business or potentially even set up an LLC. The preferred method might be for the LLC to be a subsidiary of an overseas company- let’s say, the student’s family has a family business in another country. That company might hold the majority of the shares in the US company, or might be a member in the US company if the US company is an LLC. The student can then set up a company, either as a corporation [sub-chapter “S” is not permissible as all shareholders must be either U.S. Citizens or Legal Permanent Residents], or as an LLC.
The student would have to obtain the necessary certificate of incorporation and /or LLC organization, and the federal employer identification number (FEIN).
However, as stated above, the company cannot pay the student a salary or a wage unless the student is authorized to work for the company under his or her CPT (Curricular Practical Training). While the company can declare dividends or profits, there is an open question as to whether the disbursement of such dividends or profits to the student might constitute impermissible income under the immigration act. However, please note that there is no statutory or case law authority directly on point on this issue.
The leading case regarding remuneration to a non-employment authorised non-immigrant visa-holder is Matter of Hira, 11 I&N Dec. 824 (BIA, 1966; Affirmed, Attorney General). Hira involved a B-1 (Business Visitor) visa holder who came to the USA to collect measurements for mens’ suits and sent those measurements to his Hong-Kong based employer, Mohan’s Limited. The BIA considered that facts that Hira, was not receiving any salary in the USA (his salary was sent directly to his parents in India), and was receiving only a small amount of money in the USA for “living expenses”. Consequently, the BIA held that Hira was not “employed” in the USA and had not therefore violated the terms of his visitor-visa status.
Thus the BIA’s holding in Hira may be used to support an option where the student could repatriate any and all profits to an overseas dollarized bank account in the name of the company name (not in the individual’s name). The company could then use the money deposited in that bank account as it sees fit, including, for example – disbursement to the student in the United States for incidental and necessary living expenses.
In sum, while the statute does not preclude a formation of a company or entrepreneurship, the underlying restrictions must be strictly observed: maintenance of student status, and non-payment of any remuneration or salary to the student in the United States directly from the company, unless the student is on record as being employed by the company under the student’s CPT period.
2. Self-employment after graduation:
While on post-completion OPT, a student may set up his or her own company and be hired by that company. The BIA (Board of Immigration Appeals) has held that since a corporation has a separate legal existence from its employees and shareholders, the corporation can hire, fire and control employees – even though the employee may be the person who founded the company and is its’ sole employee. This result has held through a long line of cases: Administrative Appeals Office (AAO) cases: Most recently, in a Vermont Service Center case, decision issued February 23, 2006, the AAO held that a graphic designer who started up his own company and hired himself is eligible for H-1b classification; see also: Matter of X (SRC 98-101-50785, August 1999); and Board of Immigration Appeals (BIA) cases Matter of Aphrodite, 17 I&N 530 (BIA, 1980), and Matter of —, 8 I&N 24 (BIA, 1958; A.G., 1958).
For other information on the criteria for H-1b employment and the H-1b application process, please see other articles on this website, www.immigration-america.com
The USCIS has clearly held that an F-1 student on post-completion OPT may also be self-employed. See, “Policy Guidance For Student and Exchange Visitor Program and Designated School Officials of SEVP-Certified Schools with F-1 Students Eligible for or Pursuing Post-Completion Optional Practical Training” (Policy Guidance 1004-03 – Update to Optional Practical Training; USICE, April 23, 2010), at page 18:
“Self-employed business owner. 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.”
An F-1 student on post-completion STEM (the 17 month extension for Science, Technology, Engineering and Mathematics majors) can also continue with self-employment after the initial 12 month OPT period. See, the same memo, at page 19:
“Self-employed business owner. A student on a 17-month extension can start a business and be self-employed. In this situation, the student must register his or her business with E-Verify and work full time. 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 his or her degree program.”
Naturally, a student with an entrepreneurial spirit who is considering self-employment can and should consider the above options. However, be careful to consult a qualified attorney both in the formation of the business, to ensure the correct entity selection and set-up, and thereafter, for the immigration applications. Be aware that immigration law is constantly changing and in a state of flux. The key is good, solid preparation based on good, solid legal grounds. Good luck!
About the author:
Attorney Farhad Sethna has practiced law for over 20 years. Since 1996, he has been an adjunct professor of Immigration Law at the University of Akron, School of Law, in Akron, Ohio. He is a frequent speaker at Continuing Legal Education and professional development seminars on various immigration-related topics. His practice is limited to immigration and small business. With offices in Cuyahoga Falls, Akron and Dover, Ohio, Attorney Sethna represents clients in all types of immigration cases. Our number is: (330)-384-8000. Please send your general immigration questions to AttorneySethna@immigration-america.com. We will try to answer as many questions as possible.
IMPORTANT: This is only general legal information. Please consult a qualified immigration attorney for advice on your specific case.
Copyright, Farhad Sethna, Attorney and Counselor, 2014