Cap City Law - Attorneys for the Business of Life

Attorneys for the Business of Life

E-2 Non-Immigrant Visas: A Guide to Eligibility, Applying, and Key Requirements for Treaty Investor Visas

a house made out of money on a white background

Written by Susan Pai, Immigration Attorney, Cap City Law, PS

What is an E-2 visa?

The E-2 investor visa is a non-immigrant visa that allows citizens of certain countries to live and work in the United States temporarily if they invest a substantial amount of capital in a U.S. business. The E-2 visa is available to citizens of countries that have a treaty of commerce and navigation with the United States.

To qualify for an E-2 visa, the investor must:

  • Be a citizen of a treaty country
  • Have invested, or be actively in the process of investing, a substantial amount of capital in a bona fide enterprise in the United States
  • Be actively involved in the management of the business
  • Intend to stay in the United States temporarily

The amount of capital that is considered “substantial” varies depending on the type of business and the cost of living in the area where the business is located. However, as a general rule, the investment must be enough to ensure that the business is viable and that the investor will not become a public charge.

E-2 visa holders are allowed to bring their spouse and unmarried children under the age of 21 to the United States. Spouses and children are eligible to work in the United States while the E-2 visa holder is in the country.

E-2 visas are typically valid for two years and can be renewed indefinitely as long as the business remains viable. E-2 visa holders are not eligible to apply for permanent residency (a green card) through this visa category. However, they may be able to qualify for a green card through other means, such as employment-based sponsorship or family-based sponsorship.

Here are some of the benefits of an E-2 investor visa:

  • Allows citizens of certain countries to live and work in the United States temporarily
  • Available to businesses of all sizes
  • Allows investors to bring their spouse and unmarried children to the United States
  • Visas are typically valid for two years and can be renewed indefinitely
  • Does not require investors to have a college degree or work experience in the United States

Here are some of the drawbacks of an E-2 investor visa:

  • Investors must invest a substantial amount of capital in a U.S. business
  • Investors must be actively involved in the management of the business
  • Investors are not eligible to apply for permanent residency through this visa category

If you are a citizen of a country with a treaty of commerce and navigation with the United States and you are interested in investing in a U.S. business, you may want to consider applying for an E-2 investor visa. This visa can be a great way to live and work in the United States temporarily while you build your business.

What countries qualify for E-2 status?

More than 60 countries qualify for either E-2 status. For the most recent list of E-2 countries, go to: https://travel.state.gov/content/travel/en/us-visas/visa-information-resources/
fees/treaty.html

Determining nationality

The first step in every E visa case is determining whether the enterprise and foreign national that is in need of the visa have the same nationality and whether that nationality is party to the relevant treaty. Nationality of the individual is determined by their citizenship. In cases of dual or multiple citizenships, a person may apply under any citizenship they hold (the one caveat is that a citizen of the United Kingdom must also establish that they have been domiciled in the United Kingdom for the previous year). The general rule to determine the nationality of the company is to determine whether nationals of the treaty country own at least 50% of the company. If the company is owned by another company, then the analysis must continue up the holding structure to establish that the parent company meets the “Fifty Percent Rule.” If the company is owned 50/50 by nationals of two treaty countries, then the company must pick one nationality and use that for E-visa purposes. A company cannot act as a dual citizen, petitioning employees from both countries. If the company is publicly traded on one country’s exchange, then that nationality is presumed, but evidence should still be submitted to explain the nationality.

What types and amounts of investments work for an E-2 visa?

E-2s can invest their own funds or the funds of other investors as long as at least 50% of the business is owned by nationals of the treaty country. The E-2 applicant must demonstrate that the funds come from a lawful source, such as through savings from work or sale of a property. Note that cash is not the only acceptable form of investment. Equipment, inventory, and intellectual property can also be used.

The investment must be “at risk” with funds that are “irrevocably committed” so that if the business fails, the E-2 could lose his or her money. To get around the issue of investing a substantial amount of money and then having the visa denied, the State Department will permit escrow arrangements where the funds are irrevocably committed to the investment if the visa is approved. So, for example, it would be permissible to sign a purchase contract that allows the funds to be placed in escrow with the escrow agent instructed to release the funds to the seller as soon as the visa is approved.
Funds from a personal loan may count toward demonstrating a substantial investment as long as the loan is secured by personal assets.

As for the investment amount and the “substantial investment” requirement, there is no bright line test. The State Department uses a proportionality test stating that the smaller the business, the higher the percent of the investment needs to be in the business. In other words, if the business is smaller, the investor needs to pay 100% of the cost of the business rather than financing the investment. Although some lawyers advise clients that a $100,000 investment is sufficient, that is only because the State Department’s Foreign Affairs Manual uses $100,000 as an example investment to show the proportionality test. That is not an actual minimum; smaller investments may be approved and larger ones denied depending on other factors. One factor is how much of an investment is needed for a particular type of business. A manufacturing business with expensive equipment costs might require a larger investment than a consulting business, for example.

Investing just enough to provide self-employment for the investor is also not enough. Ideally, the business will have prospects to grow and create jobs for others. Finally, the investment should be viable enough so that it is not likely to fail because it is depending on making money quickly. Having enough invested to operate the business for a while—perhaps at least a year—without depending on cash flow is a helpful fact to demonstrate to a consular officer.

Qualified Investments for E-2 Petitions

The Foreign Affairs Manual (FAM) instructs E visa officers as follows: “You must assess the nature of the investment transaction to determine whether a particular financial arrangement maybe considered an “investment” within the meaning of INA §101(a)(15)(E)(ii).” The textbook example of an E-2 investment involves the E-2 investor transferring their personal funds from their personal, foreign bank account to the new U.S. enterprise’s bank account and thereby documenting the transfer of funds—the investment. However, the language in the FAM allows the officer to determine whether other “arrangements may be considered an ‘investment.’”

For those not planning to fund the E-2 enterprise with their own capital, either in total or only in part, one needs to take into consideration the nationalities of those investors to make sure that at least 50% of the shares in the company are still held by nationals of the E-2 treaty country. For example, one co-founder is American and one co-founder is German, and each owns 50% of the company and put $30,000 in personal wealth as capital contributions to start the company. Then, in order to raise more capital, they each exchange 5% of their equity (10% in total) with an angel investor for $100,000. If the angel investor is also German, then 55% of the company is now German; but if the angel isa U.S. citizen, now only 45% of the company is German, and it no longer qualifies as a German company for E-2purposes, and the founders will need to transition to another visa type before the exchange of equity since their E-2 will no longer be valid at the time the company loses it treaty nationality.

Demonstrating the “Source of Funds” for an E-2 Business

A major focus of every E-2 application is the “source of funds.” The E-2 applicant must demonstrate the lawful source of their funds and how they have obtained possession and how they are in control of those funds. Common examples include savings over time in a person’s home country, which are then invested into an E-2 enterprise, or sale of a property owned in a person’s home country. Those funds are then invested into an E-2 enterprise. Documenting the source of the funds, whether through savings account statements and tax returns or proof of the ownership and sale of a property, are essential to the success of an application.

To qualify as an E-2 investment, the funds or assets must be “at risk.” In other words, if the business were to fail, the investment would be proportionately lost. Investment capital can be based on a loan, but the loan cannot be secured by the assets of the E-2 enterprise. Only personal loans may be used. Personal loans, though, may be secured by personal assets, such as a second mortgage, or they may be unsecured loans, which are commonly from family, friends, or business partners. In those cases, a promissory note documenting the personal loan is generally included. Low-interest loans with future balloon payments are acceptable. The funds must also be “irrevocably committed” to the E-2 enterprise. This term-of-art means that the business is either already using the investment or the company is at least very close to the start of business operations, at which point the investment will be used. If purchasing a business, the deal can be structured so that the assets are held in escrow, conditioned on the issuance of the E-2 visa, but the agreement should make clear that the investor cannot receive the visa and then pull out of the investment.

It is also important to note that the investment does not have to be a cash investment. While this is a typical E-2 arrangement, the investment can be in the form of equipment, inventory, or even intellectual property. Proof of the value of the equipment or inventory should be submitted as well as evidence of the “investment” of the inventory, such as proof of inventory shipping to the U.S. company.

If using intellectual property (IP) as the means of investment, the value of the IP will still have to be documented so that the E-visa unit, which adjudicates the visa application, can determine that the investment is substantial. If a market value cannot be easily determined, evidence of its value should be submitted.

E-2s are not for passive investments or non-profits. They cannot be “paper organizations” or the purchase of land or other assets simply to be held. The E-2 enterprise needs to be a real and active commercial undertaking that is going to produce a service or a commodity. That is not to say that the company must have revenues at the time of filing—a nearly-stage startup can qualify. However, the company should be able to document what real service or product it will be actively developing and selling for a profit. That is why merely investing in land and just holding onto the asset would not be enough in many cases for an E-2 visa.

Requirements for the E-2 Treaty Investor Status

The E-2 category is for people coming to the United States to develop and direct the operations of an enterprise in which an investor has already invested, or is actively in the process of investing, a substantial amount of capital. To qualify for an E-2 visa, one must establish the following:

  • Requisite treaty exists
  • Individual and/or business possess the nationality of the treaty country
  • Applicant has invested or is actively in the process of investing
  • Enterprise is a real and operating commercial enterprise
  • Applicant’s investment is substantial
  • Investment is more than a marginal one solely for earning a living
  • Applicant is in a position to “develop and direct” the enterprise
  • Applicant, if an employee, is destined to an executive/supervisory position or possesses skills essential to the company’s operations in the United States; an
  • Applicant intends to depart the United States when the E-2 status terminates.

How long are E-2 visas valid?

It depends on the country. Some are limited to only a few months while others are valid for up to five
years. Note that there is no overall limit on the number of years one can remain in E-2 status as long as the visa or status is renewed periodically.

Are spouses and children permitted to enter with the E-2 visa holder?

Yes, spouses and children under 21 can enter as E-2 dependents. They may enter with the
primary applicant or separately. Spouses and children can enroll in school. are also authorized to work in the U.S., but if they do not have an I-94 that specifically identifies them as an E-2 spouse (i.e., showing admission class as E2S), then they need to obtain additional documentation, such as a special notice from USCIS or a Work Authorization Card, in order to meet the documentation requirement for showing employer work authorization.

Are E-2 visas “dual intent”?

No. However, a foreign residence is not required to demonstrate eligibility for E status. As long as the applicant expresses an intent to depart after the period of authorized stay expires or is terminated, the applicant can meet the visa’s requirements. Applying for a green card, however, can mean that the E-2 status or visa may not be renewed, so careful planning with an immigration lawyer is advisable before beginning permanent residency processing.

How does one request E-2 status?

Unlike several other work visa categories, an E-2 application may be filed directly at a consulate. A person in the United States in another non-immigrant category can seek to change to E-2 status in the United States, but this comes with the risk that a person will be approved by USCIS and then be denied by a consulate on the first trip outside the United States. This would, of course, put the business in jeopardy if the E-2 is unable to return to the United States.

Posted in