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How to Start a Business as an Immigrant

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Starting and operating a business as an immigrant can have challenges beyond those common to all entrepreneurs. Visa requirements, language skills, unfamiliar laws and lack of credit history are just a few of the additional hurdles immigrant entrepreneurs may face.

This article will guide you through five of the most critical tasks when you’re starting a business as an immigrant.

Write a business plan

Every new business founder — whether an immigrant entrepreneur or otherwise — should write a business plan to guide your operations and explain your goals to investors. It should clearly address at least these four areas:

  1. Company description: What products and services will you sell? How will you obtain and deliver them?
  2. Market analysis: Who are your target customers? Who are your competitors, and why will customers choose you over them?
  3. Organization and management: What critical skills does your team have now, and which do you need to recruit for?
  4. Financial projections: Realistically forecast your sales, expenses and other funding requirements for the next five years, including month-by-month details for the first year, to prepare for immediate financing needs.

Choose a business structure

Choosing the right type of business entity for your company will affect your personal liability, how to pay business taxes, the number of business owners and what financing may be available. Business entity options include a sole proprietorship, partnership, LLC, C corp, S corp and B corp.

Immigrant business owners should be aware that “nonresident aliens” cannot be shareholders in S corps. This means that all shareholders will need to be U.S. citizens, be a permanent resident (a Green Card holder) or meet IRS residency requirements.

Apply for an EIN

After choosing your legal structure, get an EIN (Employer Identification Number) from the IRS. It’s required for every business except a sole proprietorship with no employees, and can be helpful even for those. The person applying must already have a Social Security number or ITIN (Individual Tax ID Number), but immigrant entrepreneurs needn’t worry — ITINs are available regardless of your immigration status.

Obtain a visa

Perhaps the most challenging hurdle particular to starting a business as an immigrant is obtaining the right kind of visa. While there’s no U.S. visa specific to entrepreneurs, these four types — plus one “rule” — are options for immigrant entrepreneurs to consider.

Visa typeWho is it for?Eligibility requirementsDoes it lead to a Green Card?
EB-1 visaIndividuals of “extraordinary ability” in the sciences, arts, education, business or athletics
  • Substantial international recognition
  • Professors, researchers and managers also need proof of job offer
Yes
EB-5 visaImmigrant startup investors
  • Substantial investment, leading to creation of 10-plus jobs
  • Actively manage business
Yes
E-2 visaImmigrant business investors
  • Substantial investment in a business ($100,000-plus is recommended by some attorneys)
  • Actively manage business
  • Be a citizen of “E2 Treaty” country
No, but is renewable
L-1A or L-1B visaExecutives opening a U.S. office or affiliate of a foreign companyMinimum 1 year prior employment with affiliated foreign companyNo
International Entrepreneur RuleImmigrant business owners providing temporary (30 to 60 month) on-site assistance to a startupSubstantially own and actively manage a U.S. startup with rapid growth & job creation potentialNo

Visa rules change frequently, so consult with an immigration attorney to decide which entrepreneurship visa might be best to pursue in your situation.

Find funding

Most immigrant entrepreneurs will need to find funding for their business. It’s tempting to use personal borrowing like credit cards, home equity lines of credit or friends and family loans, but doing so may put your personal credit and assets (and even your personal relationships) at risk. That’s why it’s important for immigrant entrepreneurs to know how to apply for a business loan.

Some types of loans to consider include:

  • Term loans: Businesses receive a lump sum of cash upfront that you’ll then pay back with fixed, regular payments, usually over several years. These are offered by banks, credit unions or online lenders to small businesses, and will typically require at least two years’ operating history evidenced by tax returns. For sudden cash emergencies, startups can turn to short term loans.
  • Lines of credit: Business lines of credit are well suited for temporary funding needs like seasonal inventory. You only borrow what you need, then once you pay off the line, you can borrow again. Lines of credit are a common type of working capital loan.
  • Equipment financing: Equipment financing enables startups or other businesses to get access to vehicles or other large machinery. The equipment often acts as security for the loan, making it accessible even if you don’t have other assets to pledge as collateral.
  • SBA loans: Because they’re guaranteed by the U.S. Small Business Administration, SBA loans offer very attractive terms with comparatively low rates. You don’t need a business operating history, but you do need to be a legal resident of the United States.

Business loan interest rates vary a lot depending on the lender, the terms and your credit history. There are loans available for borrowers with bad credit, but you can expect higher rates and stricter terms.

Manage your business finances

Finally, get ready to manage your business finances after you launch. All business operators, whether immigrant or not, will need to:

  • Open a business checking account. Choose a bank that appreciates doing business with startups in general and immigrant entrepreneurs in particular. Get referrals from other immigrant startup owners and interview several banks. If you need international transactions, such as letters of credit or currency exchange, make sure the bank can handle those.
  • Select financial reporting software. For lower cost and complexity, choose accounting software designed for small businesses that can handle important aspects of your business, such as foreign currency, inventory tracking, project accounting or employee time. Keep it up to date and compare your results every month to your business plan.
  • Set up payroll. Payroll processing demands accuracy, timeliness and understanding of governing regulations. Penalties for late or inaccurate reporting are high — so consider using a payroll service, or at least an expert to help set up and periodically review your process.
  • Get insurance. Business insurance is complex and the marketplace is constantly changing. For a small fee, an insurance broker can recommend what types of insurance are required for your business and will obtain competitive bids from insurers.
  • Separate business and personal finances: Always keep your personal and business accounts (e.g., banking and credit cards) separate, to avoid accounting and tax reporting confusion.

Starting a business as an immigrant is challenging, but it can bring a lifetime of rewards to the entrepreneur who takes time to put the right building blocks in place.

 

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