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Starting a Business as an Immigrant: What You Need to Know

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Small businesses are a key engine for the U.S. economy and, within that category, immigrant-owned companies play a pivotal role. Businesses founded and operated by non-American born individuals generate significant economic activity, unite communities and create jobs. In 2014, immigrant-owned businesses generated more than $65 billion in business income, the New American Economy reported, and employed nearly 6 million workers in 2007, which is the most recent year data available.

As of 2015, more than 43 million people living in the U.S. were born in another country, according to the Pew Research Center. Many of these immigrants have opted to start their own businesses, accounting for about 30 percent of all U.S. entrepreneurs, up from about 13 percent in 1996, according to the Ewing Marion Kauffman Foundation. Some go on to achieve the highest level of success: about 40 percent of all Fortune 500 companies have at least one founder who was foreign-born or had immigrant parents, New American Economy noted.

One recent success story is Chobani yogurt, founded by Turkish immigrant Hamdi Ulukaya, who came the U.S. on a student visa with no savings and limited English skills. He purchased a defunct Kraft Foods factory in upstate New York and built a business worth an estimated $1.5 billion. Ulukaya has also made it a priority to hire immigrants and about 30 percent of Chobani’s employees are non-U.S. born.

For many immigrants, owning a small business in the U.S. is a pathway to both employment and financial independence. Some immigrants who come to the U.S. may face barriers to traditional employment, such as language, certification and training, that could prevent them for pursuing similar employment in a similar field as in their home countries. By opening a business, an individual can establish a new career in the U.S. and create an economic foundation.

However, immigrant business owners can face some challenges that are very similar to other small business operators, including funding, managing operations and expanding. They may also encounter unique obstacles, such as navigating immigration status and legal concerns, language barriers and difficulty accessing credit.

Before investing in any business, small business and immigration rights advocates recommend that immigrants – regardless if they are naturalized U.S. citizens, green card holders, visa holders or undocumented immigrants – consult with an experienced immigration attorney to confirm their employment status and any other necessary legal concerns.

Creating a business — including how you do it and what you do — could have an impact on your immigration status, your ability to get a visa, possible violations of your visa and even a future green card or citizenship application, so it is very important to get advice from a qualified immigration attorney,” said Joshua Escalante Troesh, a business advisor and founder of Purposeful Strategic Partners and professor of entrepreneurship and business at El Camino College.

For additional assistance, Escalante Troesh recommends immigrants reach out to local nonprofits, colleges and universities, which may offer entrepreneurial services, business consulting, legal referrals, translation services and training.

Challenges for foreign-born small business owners

Working requirements: For immigrants, immigration status and employment status are among the biggest concerns and potential hurdles to establishing a small business. To lawfully work in the U.S., all immigrants must either be naturalized citizens, hold a green card (also known as permanent resident status) or a qualifying visa. It’s also important to note that, if a foreign-born business owner plans to hire employees, federal law requires them to verify that those people are authorized to work in the U.S.

Federal immigration laws and visa requirements can change frequently, so it is advisable to stay in contact with a knowledgeable immigration lawyer.

The most common immigration classifications that relate to employment include:

Naturalized U.S. citizen: A foreign-born, naturalized U.S. citizen will typically have the most options and access to resources to start a new business. For instance, to qualify for an SBA-backed loan, the borrower must be a U.S. citizen.

Green card holder or permanent resident status: This permit allows you to live and work permanently in the United States.

Employment Authorization Document (EAD): Also known as a work visa, this document establishes that you are allowed to work in the U.S. for a specific period of time.

Visitor for Business (B1 Visa): This permit is typically granted to a person visiting the U.S. for business on a temporary basis.

Student visa: Some students visiting the U.S. on student visas may be eligible to work. For specific rules, check with your host academic institution or consult an immigration attorney.

Undocumented immigrant: Foreign-born individuals without authorization to live and work in the U.S.

To increase access to services and expand opportunities, including access to credit, an immigrant might choose to pursue citizenship. While not required, this could be beneficial, Escalante Troesh said. “Citizens have more options and capabilities to start and operate a business, but the U.S. is extremely accepting of all people trying to start a business,” he said.

Access to capital

Like many small business owners, immigrant entrepreneurs may need an infusion of cash to start or grow their business. However, immigrants, particularly those who have recently arrived in the U.S., may find their funding options limited. To qualify for a small business loan through a bank or a Small Business Agency-approved lending program, borrowers often need to show a credit history and solid personal financials. In some instances, they may need to personally guarantee a loan or provide other collateral to secure funding.

Immigrants may also be wary of participating in the U.S. banking system. For instance, if someone comes from a country with a loosely regulated banking industry and an unstable economy, they may avoid traditional banking and hesitate to establish accounts with a U.S. bank. In addition, immigrants may not have U.S.-issued credit cards or personal loans, like a car loan or mortgage, which can help establish credit history and financial viability for future business banking.

To build your financial position, small business and immigration advisors recommend taking several steps:

1. Get an ITIN number

Also known as an Individual Taxpayer Identification Number, this is a nine-digit tax processing number issued to individuals who are required to pay taxes in the U.S., but do not have a Social Security number. An individual can apply for an ITIN number regardless of immigration status; however, an ITIN number does not provide you with legal immigration status or work authorization.

For a foreign-born business owner, an ITIN number can have future purposes, including to open a bank account and to obtain a license in some states. Also, during immigration proceedings, an ITIN number could demonstrate how long a person has been in the U.S. and paying taxes based on federal tax returns.

2. Open a bank account

Immigrants should open a bank account at a U.S. bank or credit union to safeguard their money, establish a financial history for lenders and easily pay bills. Many banks offer starter accounts with low minimum requirements. In addition, in some larger communities, there are banks and credit unions that service particular immigrant communities, and may have even been founded by immigrants. These institutions may offer materials in both English and the community’s native languages, as well as employ bilingual staff members.

3. Open a credit card

For immigrants with an ability to make steady payments, opening a credit card can help establish your credit history and improve your business operations. A credit card can be useful for buying materials and supplies. However, business advisors caution against charging more on cards than an entrepreneur can easily repay and to avoid carrying a balance and accumulating more debt from high interest charges.

4. Crowdsource investment

Outside of traditional lending, immigrants can also get creative when raising funds. Online fundraising platforms, such as Kickstarter or GoFundMe, can be an effective way to collect money, particularly if you’re creating a new product. Use social media and personal networks to spread the word about your product and generate buzz, and then ask for seed funding. Even small amounts can help get a business off the ground, Escalante Troesh said. “It is a form of credit — 0% interest credit — and a powerful way to provide liquidity, especially for small entrepreneurs just starting off,” he said.

5. Self-funding

When Escalante Troesh talks to foreign students and immigrants about starting businesses, he urges them to try avoid taking on debt and “bootstrap” their business growth. By this he means to take whatever money they can gather and start a modest version of their business.

The model looks like this: If you’re an entrepreneur who wants to open a cafe, instead of starting a full-service restaurant, begin with a mobile cooktop and a tent and sell food at festivals and street fairs. As you build up profits and a customer base, expand to a food truck, buy some tables and chairs and a banner with an eye-catching logo. As your business grows, eventually you may be able to save enough to open a physical location and, ideally, the customers who’ve been with you since the beginning will be frequent diners and bring their friends and families. Under this model, Escalante Troesh, the business owners success enables them to generate revenue, save and fund future expansion without the burden of loans or investors.

Language barrier

For some immigrants, particularly those who have recently arrived in the U.S., language barriers and difficulty communicating can also be obstacles to building your business. Non-English speakers or immigrants with limited English proficiency can have trouble communicating with customers and vendors, and negotiating contracts and agreements. This challenge can leave a business owner frustrated and, at the most extreme, vulnerable and disadvantaged in negotiations. To improve their position, immigrants should consider several options:

Take a language class:

By enrolling in an English class at a local college, cultural institution or business center, immigrants can advance written and spoken English, practice their language skills and connect with other immigrants. Online resources can also aid immigrant business owners. For instance, the Department of Immigration offers online dictionaries to help Spanish speakers navigate the construction industry with an English-Spanish directory of 2,000 common OSHA (Occupational Health and Safety Administration) and construction industry terms.

Access in-language and English-speaking immigrants:

In many communities, immigrants can turn to community organizations and members of their community with advanced English skills or individuals who have been in the U.S. longer and have more language experience. This can be key to successful training. “Attracting immigrants to business development programs is often best achieved when orientations, trainings and seminars are taught in foreign languages; classes and programming are hosted in an immigrant community and/or by people who share customs and culture; and delivered by organizations that have established credibility and trust with the immigrants they serve,” noted a report by Welcoming America.

Hiring an English-speaking employee can also help when a language barrier complicates operations.

Community resources:

In some areas, particularly large cities with significant immigrant populations, immigrants can access resources in their native languages that will help build their English proficiency and develop entrepreneurial skills. In Minneapolis-St. Paul, the Neighborhood Development Center assists immigrant business owners with business training and consulting services available in six languages, including English, Spanish, Arabic, Hmong, Vietnamese and Somali.

Know your rights

Depending on where you live, local or state laws may impact your rights to disclose your immigration status. It is important to learn the laws in your area. In New York City, for instance, the local government says residents do not have to answer any questions about their immigration status unless they are applying for public benefits.

Meanwhile, in Texas, a federal appeals court recently upheld portions of a new immigration law that allows local authorities and law enforcement to ask about immigration status, if they choose to, but only during a lawful stop or arrest. Individuals can’t be detained on the basis of being undocumented, but local authorities can provide the information to Immigration and Customs Enforcement, if they choose to.

In general, the American Civil Liberties Union advises any individual who is stopped and questioned about their immigration status to behave respectfully and exercise their rights. You have the right to remain silent and do not have to discuss your immigration or citizenship status with police, immigration agents or any other officials.

If an immigration official asks for documentation, you should produce any and all papers, the ACLU advised. The organization also recommends that anyone with documentation carry that paperwork with them at all times, as well as any photo identification. Individuals should never lie about their status or provide false documents, the ACLU cautioned.

What you need to start a business as an immigrant

To get their business up and running, immigrant entrepreneurs should follow many of the same steps as any other U.S. business owner. To create a solid foundation for a new business, small business advisors recommend immigrant entrepreneurs take the following steps:

Create a business plan: Outline what product or service you will be providing. Who are your customers? Why will they use your business? What do you offer that is different in the market?

Seek professional advice: For any small business owner, including immigrants, it is wise to consult with an attorney to determine the best way to structure your business, such as a sole proprietor or Limited Liability Corporation, among other options. If you have partners, an attorney can help draft and review relevant partnership and investor agreements. A certified public accountant can help review your financial plans and sort through your tax requirements.

Outline your finances: Create a budget and identify where the money will come from to start your operation. If you need to apply for a loan or pursue other funding, such as online crowd sources or identifying investors, map out how this process will work.

Understand laws and regulations: Depending on your area of business, your operation may need to obtain permits from local, state or federal agencies. You may need to follow compliance and safety rules. Local business nonprofits, such as the Small Business Development Council, local agencies and immigrant organizations can help an entrepreneur navigate these requirements, as can an experienced business attorney.

Establish your location (physical and online): Determine where your business will operate, including locating real estate and signing a lease, if necessary. Before signing any contracts, including for real estate, immigrants should have a lawyer or business services nonprofit review documents, particularly if they are not native English speakers. Businesses should also create a website, including a web store if appropriate, and create social media accounts for their operations.

As an immigrant, this process can be more difficult if you have language barriers, limited access to credit or restrictions because of your immigration status. To understand your options, entrepreneurs should consult an experienced immigration attorney.

Resources for immigrant business owners

Immigrants seeking to start a business can draw on an array of resources in their communities for advice and support.

Consult with established immigrant business owners:

Go directly to the source and talk to other immigrant business owners who have successfully launched and built small businesses. These veteran entrepreneurs can share their experiences and refer an aspiring business owner to financial resources, legal and accounting experts and provide support. They may also be able to identify investors or recommend financial institutions with favorable lending opportunities.

Build a relationship with your banker:

By opening a checking and savings account at a local bank or credit union, an immigrant can create a banking history and establish a relationship with a lender. As the business grows, if they apply for a loan with that institution, the loan officer can access their banking records and see a solid financial profile. That may increase the likelihood of securing a loan at favorable terms. Some businesses may be eligible for SBA-backed loans from approved vendors, but the terms vary by loan program, so immigrants should consult with their lenders.

Seek out local nonprofits and organizations:

In many communities, nonprofits and government agencies exist to help immigrants establish their lives in the U.S., including launching and building businesses. Many have resources to assist entrepreneurs, such as the Welcoming Center for New Pennsylvanians, which created guides on how to open flower shops, coffee shops and grocery stores and provides information on local laws and ordinances. In Detroit, which is home to a significant immigrant population from the Middle East, Access, a nonprofit immigrant support organization, offers entrepreneurship courses in both Arabic and English, business coaching and a microloan program for startups.

Attend local conferences and events:

In some cities, particularly those with large immigrant populations, local governments and business organizations, such as the Chamber of Commerce, may hold events designed for immigrant business owners. Last year in Cleveland, for instance, the SBA hosted a gathering for new immigrants and first-generation Americans on how to grow their business and access government resources.

Take a class:

Across the country, local universities, colleges and community colleges offer classes in small business and entrepreneurship. Immigrants can use these classes to build their business plans, learn about the American small business environment, and seek advice from professors and guest speakers. Non-English speakers can also take English as a Second Language classes to boost their language skills.

The bottom line

Immigrant-owned businesses play a pivotal role in our economy and that trend shows no sign of slowing down. Immigrant entrepreneurs make up about a quarter of businesses in the U.S. and nearly 40 percent of businesses in states with large immigrant communities, including California and New York, according to the National Bureau of Economic Research and Harvard Business School.

By improving access to business support and development, more funding and credit counseling and language education, future immigrant business owners will be poised to carry on this legacy with future successful operations.


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