As a foreign investor, before filing a petition to establish a new business venture, or purchase a pre-existing business in the U.S., you must first consider your E-2 visa investment amount along with other requirements. E-2 treaty investor visas are nonimmigrant visas reserved for foreign entrepreneurs of countries that have a Treaty of Trade and Commerce with the U.S. This visa enables the foreign investor to be self-employed and develop or carry out the investment/ trade activities of the business. The only question is, how much should one invest for an E-2 visa?
In this article, we’ll explore specific E-2 visa investment amounts as well as other fundamental elements in the visa process. If you have additional questions, it’s best to consult a qualified immigration attorney who can examine the details of your individual case and then help direct you as to the most appropriate course of action.
How Much to Invest in an E-2 Enterprise?
Your E-2 visa investment amount is required to be substantial and irrevocably committed to the enterprise. “Irrevocably committed” means you’d be at risk for loss if your business venture was unsuccessful. Many E-2 holders have their capital tied to the physical premises of the enterprise or in an escrow in order to prove that they and their funds are committed to the endeavor.
The U.S. government regulations do not quantify what is considered substantial for an E-2 visa investment amount, so there is neither an official minimum nor a maximum. However, the E-2 visa minimum investment is unofficially recognized as $100,000 or more. Anything below $100,000 is difficult to get approved, and you must show that your making progress towards operational readiness at the time of the application. Moreover, the percentage of investment for a low-cost business enterprise must be higher than the percentage of investment in a high-cost enterprise.
Even though an E-2 visa investment amount isn’t quantified, USCIS does define both an investment and a substantial amount of capital.
According to the USCIS, an investment is “the treaty investor’s placing of capital, including funds and/or other assets, at risk in the commercial sense with the objective of generating a profit. The capital must be subject to partial or total loss if the investment fails. The treaty investor must show that the funds have not been obtained, directly or indirectly, from criminal activity”.
The term substantial capital can be defined as an investment that is:
- Significant as it relates to the entire purchasing price of a business that has already been established or the price of establishing a new business.
- Enough to ensure that the investor is irrevocably committed to the success of the business.
- Enough to substantiate the idea that the investor will be able to enhance and operate the business so that it will be a positive impact on the U.S. economy. The amount of investment should correlate to the cost of the endeavor. This means that the higher the price of the business, the more capital must be invested in order to qualify.
Some of the evidence you may submit to demonstrate that your investment is substantial and irrevocably committed to the enterprise includes:
- Canceled money orders and/or checks
- Corresponding personal and/or business bank statements
- Itemized list of goods and materials purchased for the startup
- Corresponding financial accounting documentation
- Lease agreement
- Term Sheet, Letter of Intent, or Memorandum of Understanding
- Bill of sale
- Escrow documents
- Loan and/or mortgage agreements
- Capitalization table
- Valuation analysis of business assets
- The purchase agreement for business assets
- Valuation analysis of stock
- The stock purchase agreement, accompanied by:
- Meeting minutes
- Stock ledger
- Stock certificate
- Corresponding forms of payment for stock
To qualify as an E-2 investor, you must show that you will develop and direct the investment enterprise by demonstrating ownership of at least 50 percent of the enterprise. Also, the E-2 visa investment amount cannot be marginal and must be projected to make an economic impact. The return on your investment can’t simply provide for yourself and family, it must make a meaningful contribution to the American economy. The economic impact usually measures changes in business revenue, business profits, personal wages, and/or jobs.
Financing Your Investment
Many E-2 visa applicants choose to invest in a business that has already been established by purchasing the business. Generally, in these cases, the required investment amount would be the price of purchasing the business. However, because many businesses are worth a considerable amount, a certain amount of financing may be allowed.
When it comes to financing your investment, it usually comes down to the Consular Officer’s discretion. There aren’t official guidelines to how much of your investment can be financed, but it tends to scale with the size of the investment.
Under normal circumstances, if you are purchasing a multi-million dollar business, you may be permitted to finance up to 50% of the investment purchasing price. However, in most cases where investors are purchasing smaller businesses, 30% may be considered too much financing.
Here is a hypothetical example. Harold is interested in buying a successful chain of local restaurants worth $1.5 million, but only has an E-2 investment amount of $500,000. He chooses to purchase the business by obtaining a financed loan of $1 million. In this case, the Consular Officer will likely choose to reject Harold’s E-2 application because his investment amount was too small, and the financing amount was 66%.
Active vs Passive Investment
It is also important that you present an active investment plan to the Consular Officer. This means that you must be actively managing and working within the business soon after you enter the U.S. in order for your application to be accepted.
Here is another illustrative example. Hector wants to buy a gas station that has two attendants and a janitor with no real room or potential for growth. Hector’s application has a high probability of being denied because he will not be actively involved with the activity of the gas station.
The enterprise should also be almost operational when you file your application. Many applicants buy land in hopes of developing it under E-2 status. Unfortunately, many of these are denied because the enterprise is not close to being operational. Therefore the investment may be considered passive.
E-2 Treaty Investor Conditions of Status
It’s noteworthy to point out that as part of the terms and conditions of E-2 status, a treaty investor can only work in the activity that they were approved to at the time of classification. On the other hand, an E-2 employee has the added benefit of being able to work for the treaty organization’s parent company or subsidiary. For this to occur, there must be:
- A formal relationship established between the organizations
- The subsidiary employment must require executive, supervisory or other essential skills
- The conditions of employment must remain the same (unchanged)
What If I Don’t Have $100,000, Can I Still Qualify?
Again, $100,000 is not the official benchmark for the E-2 visa investment amount. The E-2 application guidelines from USCIS are somewhat vague and have no specific minimum amount. However, going by what we’ve seen in E-2 visa adjudication, investing anything less than $100,000 may reduce your chances of acquiring the visa, as that may be viewed as not enough to make a substantial impact on the U.S. economy.
However, you may still qualify with a lower amount provided the proposed capital can meet all the financial needs for starting and maintaining the business. For instance, while a manufacturing company may need hundreds of thousands of dollars, an I.T. startup firm may need substantially less capital. There have been some instances where applications have been approved with as little as $70,000.
The most important thing is to provide enough evidence to demonstrate that the proposed amount is sufficient for the enterprise. Working with an experienced E-2 visa lawyer can help you in this area.
Meeting E-2 Visa Eligibility Requirements: Beyond the Investment Amount
There has been an increased rate of E-2 visa denial recently. Apart from the increased scrutiny across various U.S. visas, lack of due diligence is another factor that may lead to the denial of your E-2 visa application. Besides having the investment amount and meeting the treaty country of origin requirements, many applicants don’t take account of other crucial eligibility factors regarding their applications. To avoid delays and denials, the following factors must be taken into consideration when preparing your E-2 visa application:
Source of Funds
The U.S. government will ask about the source of the money you want to invest in its economy. It is not enough to show you have the funds. You must be able to demonstrate that the funds are yours. These could be your savings, a gift from a relative, or even a commercial loan. The most important thing is being able to trace it to a legitimate source.
The enterprise you are investing in or purchasing needs to create employment for U.S. citizens. Although the E-2 business is not required to create a particular number of jobs like the requirement for the EB-5 green card, you will still need to show that the business is or will be viable enough to create jobs for Americans.
This is because every E-2 enterprise owner must demonstrate that their business is not “marginal.” In other words, the enterprise is not being operated solely to provide for the needs of the owner and his or her relatives.
One of the ways to prove this is job creation. Keep in mind that the E-2 visa does not have dual intent, meaning it doesn’t lead to a green card. To maintain your visa and continue running your business, you need to file for renewals as often as you want to continue living in the U.S. And one critical requirement for getting your status renewed is to demonstrate your business growth with evidence of job creation. From the onset, it is recommended, but not necessarily required, that your E-2 business idea fulfills the following:
- It can create and sustain a minimum of five jobs before within the space of five years.
- It will be viable enough to make an income that is enough to pay workers’ salaries and also meet your personal needs.
- It will grow within the next five years and be able to generate profits based on industry standards.
During your initial application, providing a comprehensive plan that demonstrates those projections should suffice. However, when it is time to renew your status in the future, you will need more than just projections, you will need concrete proof.
This is why all these questions must be solved at the outset. You can also improve your chances of initial visa approval by showing evidence of your intent to hire workers. A good way of demonstrating this is to have already hired an American worker or have verifiable job advertisements online for one or two important positions the business needs in the initial stage.
Having a comprehensive business plan is crucial to your E-2 visa approval. In fact, after your investment amount, this is the next most important thing to take seriously. The recommended business plan for the E-2 visa should be different from the generic ones. It must follow a particular format that will help prove your eligibility for the visa. So, the best thing is to work with a professional to help you with this. A well-prepared E-2 business plan will not only boost your chances of approval significantly, but it will also reduce the chances of being issued an RFE.
Want to Become a Permanent Resident?
If you’re going to be investing $900,000 or $1.8 million or more, you may want to consider becoming a permanent resident in order to better manage your investment in the long term. Fortunately, the E-2 visa is considered a “dual intent” visa, meaning that you can seek permanent residency while under E-2 status.
An EB-5 investor green card grants permanent residency to a foreign investor that invests either $1,000,000 in any U.S. enterprise or $500,000 in a U.S. enterprise in a rural or underemployed area and also grants residency to immediate family.
In order to qualify under the EB-5 category, foreign investors must:
- Invest $1 million in either a new or existing U.S. business or commercial enterprise that will create at least 10 full-time U.S. jobs, or
- Invest $500,000 in a new or existing U.S. business or commercial enterprise that is in either a rural area or an area with a high unemployment rate, or
- Invest in a U.S. government designated Regional Center, and
- Prove that the investment will somehow benefit the U.S. economy
E-2 Visa Taxes
As an E-2 investor, you will be required to file taxes after starting your business. It is important to know the required taxes for an E-2 business and how those taxes are determined. The U.S. government operates two categories for taxes: resident and nonresident. As an E-2 holder, you can fall under either of the two categories depending on how long or how often you are present in the United States within a calendar year.
A resident alien for tax purposes is a non-citizen who qualifies for either the “green card test” or the “substantial stay test.” If you meet the qualification for a substantial stay test, the same tax rule that applies to a citizen or green card holder will apply to you. This means you will have to report your worldwide income (all your income both in the U.S. and abroad) when filing your U.S. tax return.
A non-resident for tax purpose is a foreign national who meets neither the green card test nor the substantial stay test. In other words, they have not stayed in the U.S. long or frequent enough to accumulate the stipulated amount of time for either of the tests. So, until when you have stayed long enough on your E-2 nonimmigrant visa, you will be deemed a nonresident tax person. As a nonresident person for tax purposes, you will be required to file your tax return on only your U.S.-based income.
Recap: E-2 Visa Investment Amount
To summarize, there are some key requirements that must be met in order to qualify and apply for an E-2 Visa. One of the most significant of these requirements is that your investment must be for a bona fide enterprise and not marginal, meaning that it will create “more than enough income to provide a minimal living for you and your family” or “to make a significant economic contribution”. Review the aforementioned points once more, and if you have additional questions, please feel free to contact VisaNation Law Group’s E-2 Visa lawyers.