The E-2 visa is an amazing opportunity for a foreign national to enter the United States to start a new business. However the type of investments that qualify for an E-2 visa is highly regulated. There needs to be a substantial investment in an active job creating business operation where the E-2 investor will have a key role in its development.
What is an active investment?
The E-2 investment must be into an active business operation. Passive investments like stocks, purchasing property for appreciation, and rental property would probably be rejected. Passive investments are investments held for speculative purposes for potential appreciation in value. In addition, businesses that require little to do on in the daily operation will generally be considered passive.
An active business requires the investor to be actively involved the managing and development of the operation. The business operation must be a commercial operation that produces a service or commodity for sale to the public. The enterprise cannot be a paper organization without any physical assets.
The investor can also be actively in the process of investing at the time when business operation is not active yet. Investments which are no yet operational but in the construction process has started is allowed. In addition, the active business requirement can be met if the funds for a business purchase is placed in an escrow account to protect the investor in the event the E-2 visa is not approved. The contracts must be signed and the release of the escrow funds must be contingent only on the approval of the E-2 Visa. The point is that the investment must be irrevocably committed to the business operation.
How much money constitutes a substantial investment?
There is no absolute test to determine whether or not an investment is substantial. There have been cases of E-2 visas that have been approved for investments of less than $50,000. The determination of whether an investment is substantial is the investments proportion of the total value of the enterprise and the amount normally considered necessary to establish a viable business operation.
The minimum investment is directly proportionate to the value of the business. The lower the cost of the business, the higher percentage of investment is required. Generally, a 100% or higher investment would qualify for a small business of $100,000 or less. The higher the value of the business, the percentage of investment can be lower. However, the investor must always have controlling interest in the business operation. This means that nationals of the treaty country must own at least 50% of the enterprise.
The investment must also place the foreign national personally at risk in the event of a business failure. Amounts that are not personally at risk is not counted as part of the investment amount.
Examples of qualifying investments include loans secured by personal assets, unsecured loans secured by the investor, and cash investments placed in the business account. In case of business failure, the investor will lost his investment.
Non-qualifying investments include loans secured by the enterprise assets, loans secured by a non-investing guarantor, cash held in personal accounts, and amounts used for recurring costs of the business beyond the start-up expenses such as rental payments or inventory. These is no risk of personal monetary loss to the investor for non-qualifying investments.
What should the investor expect from the business investment?
The business enterprise must not be marginal. A marginal enterprise does not have the present or future capacity to generate more than enough income to provide for a minimal living for the treaty investor and his family. The projected future capacity should be realizable within five years from the start of business.
A non-marginal business enterprise must be able to contribute the U.S. economy by creating jobs for U.S. workers. USCIS will look at whether the business will require the hiring beyond the investor and his family to operate. Will the business be conducted on a scale that will assure that there will be future U.S. workers employed in the business? Will the business plan and income projections show that there will be sufficient funds generated beyond the living expenses of the investor to pay the salaries of U.S. workers?
What does it mean that the Principle Investor must have an “essential role” in the enterprise?
The E-2 Investor must be responsible for the development and direction of the investment. This is easier when there is only one investor but this may not be as clear when there are multiple investors. When there are multiple investors, the investor that has operational control of the enterprise may enter under the E-2 visa. If there are no individual investor that has operational control, then no individual investors can enter the U.S. as the principle investor under the E-2 visa.
For more information on how you can start your E-2 investment visa application, please follow this link.