The United States is historically a country of immigrants, and they continue to play a pivotal role in driving its economic success.
If you’re eager to join the ranks of immigrant entrepreneurs in America, you’ll find great opportunities. However, starting your own business takes careful planning. There are many points to consider, from immigration visas to business licenses. This guide covers the basics of entrepreneurship for immigrants in the U.S.
Read on to learn about immigration, entrepreneurship, and small business economics in the U.S. This guide covers:
- The history of immigrant and refugee businesses in the United States
- How to start a business as an immigrant in 5 steps
- Grants and loans available to immigrants
- Mentorships and helpful organizations for immigrant entrepreneurs
- Challenges facing immigrant entrepreneurs
The history of immigrant and refugee businesses in the U.S.
Immigrants have long been leaving their home countries to make their mark on American startup culture, and their presence is growing stronger by the day. According to data sets from the Kauffman Foundation, immigrants owned 13% of startups in 1996. By 2019, their market share had increased to 25%.
On top of that, a SCORE report titled The Megaphone of Main Street: Unsung Entrepreneurs revealed that while the immigrant population makes up 13% of the total U.S. population, they account for 21% of U.S. business owners. Even amidst the chaos of the COVID-19 pandemic, immigrant entrepreneurs kept at it: They were 40% more likely to start a business during the pandemic than the U.S.-born population.
Data from the Kauffman Foundation also showed that entrepreneurs are becoming increasingly diverse. While the share of white entrepreneurs decreased from 1996 to 2019, the percentage of Latino, Black, and Asian entrepreneurs increased. Startup owners are also becoming more diverse in terms of age. New business owners were more likely to be 20 to 30 years old in 1996, but there was a more even representation of all age groups in 2019.
Effect of immigrant businesses on the U.S. economy
Immigrants have long been a cornerstone of American entrepreneurship. They or their children have established some of the biggest brands, including Broadcom, Intuit, Apple, and Costco. Immigrants have founded or co-founded 55% of U.S. “unicorns” or billion-dollar companies. That’s a fantastic success story for the country’s newest citizens.
The 2022 New American Fortune 500 report by the American Immigration Council includes a state-by-state breakdown of immigrant-owned Fortune 500 companies. It also shows real revenue and job creation stats. The most profitable companies were in California, New York, Texas, Washington, and Illinois. Immigrant-owned Fortune 500 companies also employed more than 1 million people in California, Georgia, Illinois, and New York.
Businesses established by immigrants generate revenue, create jobs, and bolster local communities, countering claims that migrants “steal” jobs or hurt the U.S. economy. In fact, immigrant groups have helped rescue the American economy in the past.
For example, immigrant entrepreneurship was critical in the economic development and recovery from the Great Recession, creating a large share of new businesses and jobs from 2007 to 2011.
Immigrants are especially prominent business owners in the fields of retail trade and accommodation and food services. They make up 37% of business owners in accommodation and food services and 24% in retail trade. Clearly, immigrants are a big boon to U.S. economic growth — not a drain.
How to start a business as an immigrant in 5 steps
Starting a business in the U.S. requires careful planning, and foreign-born entrepreneurs must complete some additional requirements. Here are the steps to start a business as an immigrant in the U.S.
1. Ensure you have the correct documentation
First, ensure you have permission to live and work in the U.S. from the proper government authority. You can obtain a few types of work visas as a foreign-born nonnational that will give you the right to pursue entrepreneurship in the country.
You can become a U.S. citizen through naturalization if you:
- Have been a lawful permanent resident for three of the last five years
- Are at least 18 years old
- Have a continuous residence and physical presence in the U.S.
You also need to meet criteria like basic English fluency, and you must pass a test on U.S. history and government. Becoming a naturalized citizen is a rigorous process that can take years. Discover more details about the criteria and learn how to apply.
A green card is a type of permanent residence status that provides many civil rights, including the right to work and operate a business in the U.S. You can get a green card through family or employment. There are also special category green cards, like for refugees or human trafficking victims. Obtaining a green card is complicated and can take years. Learn more about green card eligibility and the application process.
L-1A and L-1B visa
Getting an L-1A or L-1B visa is generally simpler than becoming a naturalized citizen or securing a green card. The L-1A visa is for intracompany transfers for people in executive or managerial roles. The L-1B visa is for intracompany transfers with specialized knowledge. Learn more about the visa eligibility and application process.
E-1 and E-2 visa
E-visas are also simpler to obtain than naturalization or a green card. An E-1 treaty traders visa is for people who conduct substantial trade between the U.S. and their countries of origin. The E-2 treaty investors visa is for people who invest a significant amount of money in the U.S. and direct (and invest in) an enterprise in the U.S. Learn about the eligibility requirements and application process for these visa programs.
EB-1 and EB-5 visa
The EB-1 visa is for skilled workers demonstrating extraordinary ability or for multinational managers or executives. You need to demonstrate above-average success to be eligible as a skilled immigrant. Find out more. The EB-5 visa is for immigrant investors. You can apply if you commit financially to a commercial enterprise in the U.S. and create or maintain at least 10 permanent full-time jobs through those entrepreneurial activities. Read the details.
2. Choose a company structure
Formally registering your company offers various benefits. For example, running your business through a separate legal entity can help protect your personal liability in case of legal issues. Plus, it can simplify tax filing. Immigrants may opt to start an LLC or a C-corporation structure.
A limited liability company (LLC) is a relatively simple and straightforward business structure. An LLC is a “pass-through” entity, meaning profits and losses pass through it and directly impact your personal income. You don’t have to pay corporate taxes as a result. However, you’ll have to pay self-employment taxes for things like Social Security and Medicare.
A C-corporation or C-corp is a separate entity taxed separately from you, the owner. It’s not a pass-through entity like an LLC, so it offers better personal liability protection. However, corporate profits may be double taxed — for example, once on profits and a second time on dividends paid out to shareholders personally. That said, a C-corp can more easily raise capital than an LLC because it can sell shares.
3. Register your business
Once you decide on a business structure, you must formally register your new firm as that entity with your state. Registration requires a few key steps, including:
- Picking your business location
- Choosing a business name
- Getting your federal and state tax ID numbers
- Applying for licenses and permits
- Opening a business bank account
- Getting required business insurance
The U.S. Small Business Administration (SBA) has a comprehensive guide taking you through every step.
In which state should you register your business?
Do your research when deciding where to register your business. Some states have more welcoming conditions for entrepreneurs than others. For example, Wyoming, South Dakota, and Nevada have no individual or corporate income tax. Also, consider the state’s friendliness toward immigrant-owned businesses.
According to the most recent New American Economy Entrepreneurship Report, immigrants are most entrepreneurial in California, New Jersey, Florida, New York, and Texas. The map below shows the states with the most immigrant-founded Fortune 500 U.S. companies in 2022.
4. Secure funding
Starting a business requires covering costs like commercial rent, technology and tools, and staffing. You can get the money you need from various sources, like crowdfunding, bank loans, angel investors, venture capital firms, and government grants. The section below covers some funding sources that are beneficial for immigrants.
5. Complete any ongoing compliance tasks
Starting a business is only half the battle. You also need to maintain it. Depending on your business type, this could require obtaining and keeping licenses and permits valid. For example, restaurant businesses must be in line with local health codes. You must also complete general administrative tasks, like filing an annual report and your LLC or C-corp taxes.
Grants and loans available to immigrants
Starting a business doesn’t just require you to do paperwork. It also requires money! You’ll need startup capital to cover commercial property and technology costs, tools, salaries, and more. Grants and loans from the government, nonprofits, and traditional lenders can help.
The Microenterprise Development Program helps people through the Office of Refugee Resettlement (ORR). It provides loans and training to help refugees start and grow small businesses to support themselves and their loved ones. It’s available to refugees who aren’t yet citizens and can provide funds of up to $15,000. Find out more.
SBA-backed loans reduce lender risk and help small businesses get funding by setting strict guidelines. The smallest loan program, the microloan program, provides loans of up to $50,000. Other loans, such as 7(a) and 504, can offer larger sums. SBA loans are available to legally registered, for-profit businesses that operate in the U.S. The business owner must have invested equity into the business to be eligible. Learn about the different types of SBA loans.
The Wilson-Fish program helps refugees become self-sufficient through loans and other initiatives. Eligible individuals include people applying for special immigrant status (SIVs), awaiting the final grant of asylum, or victims of human trafficking. Discover eligibility details and how you can benefit.
A term loan is usually for small businesses with a history of sound financial reporting. You can get a set amount of cash in exchange for agreeing to a set repayment schedule. The interest rate may be floating or fixed. Beware that most term loans require hefty down payments. The lending institution, like a bank, will determine your eligibility. Learn more.
Business lines of credit
A business line of credit is an alternative option if you don’t have the funds to make a large down payment for a term loan. A lender, like a bank, extends a line of credit (a predefined amount of money you can borrow) to pay back later. You can use these funds if and when you need them and usually pay back the credit line at any time (whereas a term line will generally require fixed monthly payments). Discover the details.
Mentorships and helpful organizations for immigrant entrepreneurs
Starting your own business can be intimidating — especially if you’re a first-time entrepreneur — but you don’t have to go it alone. A mentor can guide the way and provide additional support when you hit hurdles in your entrepreneurial journey. These resources can help.
Upwardly Global helps refugees and immigrants with international credentials get their careers back on track in the U.S. They offer services like career coaching, employer networking, and professional licensing guides. Their frequently asked questions are a good starting point for finding out how they can help you.
IRCO Africa House
Immigrant and Refugee Community Organization (IRCO) Africa House helps the growing number of African refugees and immigrants living in Oregon. Their multicultural team speaks 10 languages and represents 17 ethnicities. Their programs include an employment and training initiative.
Femigrants is an online community specifically for female immigrants. The global community focuses on women in high-tech (like Silicon Valley tech sector jobs or other STEM areas) and business fields. Follow the Femigrants Facebook page for inspirational success story anecdotes and supportive events.
SCORE provides free advice from business experts and handy workshops for entrepreneurs. SCORE locations are all over the U.S. and host in-person and online mentorship events. Visit this list for more details.
Challenges facing immigrant entrepreneurs
Despite increasing recognition of the value of immigrant entrepreneurs, foreign-born individuals still face hurdles to business ownership. Barriers cited range from difficulty obtaining credit in their new host country to cultural barriers. Use these tips to tackle common hurdles.
Applying for and securing a visa can be the most difficult task when trying to start a business in the U.S. Educate yourself about the types of visa permits available — the above guide can get you started. U.S. Citizenship and Immigration Service (USCIS) has detailed information about types of visas, like the International Entrepreneur Parole, which grants foreign-born nationals a stay in the U.S. if they can show that their business venture would provide public benefit.
Language and cultural barriers
Language and cultural barriers can make it difficult for foreign-born entrepreneurs to navigate the startup process and ensure their business thrives. On the language side, free courses can help, such as this massive open online course (MOOC) from the University of Pennsylvania: English for Business and Entrepreneurship. You can also find courses on business leadership and culture via EdX.
Difficulty navigating the system
Starting a business already involves plenty of complexities. When starting a business in a new country, however, additional unknowns can complicate the matter. It can be tough knowing what requirements to fulfill or where to start. In addition to using the resources listed above, look to local organizations for help navigating such issues. To get started, you can look up your local U.S. Small Business Administration office or local Chamber of Commerce.
Being too self-reliant
Self-reliance and a proactive attitude have been proven important determinants for successful entrepreneurship. However, foreign-born entrepreneurs risk being overly self-reliant and hesitating to seek help. Don’t be afraid to leverage resources like the ones described above. Finding a mentor can also be useful. The previous section has some resources, like SCORE. The SBA also has a mentor-protégé program.
We’re here to support a diverse business ecosystem
Trust Inc and Go for more support during your entrepreneurial journey. We’re on a mission to support immigrant entrepreneurs by providing information and resources addressing the various components of the startup journey, from raising funding to obtaining licenses. Find out how Inc and Go can help you today.