E-2 Visa Investment Requirements

Jun 2, 2020

E-2 Visa regulation requires that you invest a “substantial” amount of money in a US business enterprise. When you start your E-2 Visa application, you should already be in the process of investing money. Here, the experts at E-2VisaWorld outline the requirements for your E-2 Visa investment to help you stay informed and on track.
 

Investment Must Be Substantial

There is no minimum investment requirement for an E-2 Visa, but the investment should be “substantial.”

An investment is considered substantial when it is:

  • Proportioned to the total cost of either purchasing an existing business or creating a new one from scratch.
  • Appropriate to support the likelihood of success of the business within a few years following its establishment.

Some businesses, such as e-commerce and consulting or professional services, may qualify for E-2 Visa relying upon an investment as low as $30,000. However, it is to be said that obtaining an E-2 Visa application based on smaller investments can be more challenging. For this reason, on an average basis, it is safe to consider an investment of at least $80,000.
 

At-Risk Investment and Escrow Funds

To qualify for an E-2 Visa, funds have to be put “irrevocably at risk”, meaning the investment money should be used to finance the start-up business expenses and should be subject to economic loss in the event the enterprise fails. In other words, the invested funds should not be recoverable.

As noted above, at the time you file the E-2 Visa application, the start-up phase of your enterprise should be already in progress. That means that you must have already:

  • Created a US business entity (read here for the options in forming a US company).
  • Transferred the funds from your domestic account to the US entity bank account.
  • Utilized the majority of these funds (at least 70% to stay on the safe side) for business-related expenses, such as rent, equipment, lawyers, and accountants, or to purchase the business if you are acquiring an existing one.

In a few cases, however, your investment may be subject to a lesser degree of risk. When you are in the process of purchasing an existing US enterprise, you may want to place the funds in escrow with your attorney and at the same time provide for a contingency in the purchase agreement wherein if the E-2 Visa application gets rejected, the purchase will be of no effect and the funds will be returned to you.

E-2 Visa guidelines allow for E-2 Visa applications based on escrow funds as long as there is an escrow agreement in place pursuant to which if the E-2 Visa application gets approved, the escrow attorney shall be legally required to disburse the money to the seller. Such obligation ensures that the funds, although held in escrow, are considered irrevocably at risk.

E-2 Visa consular guidelines require that the only contingency provided for in the purchase agreement be the obtainment of the E-2 Visa. This means that if you obtain the E-2 Visa, the purchase price will be disbursed to the seller; otherwise, it will be returned to the buyer. The issue here is that a purchase agreement typically sets forth a variety of contingency, principally as a satisfactory due diligence on the target company. For this reason, it is crucial that the purchase agreement be drafted in the proper way to ensure protection for the buyer/applicant and compliance with the E-2 Visa guidelines at the same time. At E-2VisaWorld, our attorneys specialize in anything that relates to E-2 Visa applications and therefore also in drafting and reviewing asset purchase agreements. Please contact us for assistance.

The same type of contingency may be provided when you are negotiating a lease agreement, which typically occurs when you are forming your own business from scratch. Again, in this case, the lease agreement will not take effect unless and until the E-2 Visa application gets approved. Here, you will be able to place in escrow all the deposits and other payments generally required at the execution of the lease.
 

Active Business Investment

The US business enterprise in which you invest your funds should be an “active business”, meaning a business engaged in the trade of goods or services for a profit. Passive investments, such as the purchase of stock or real estate properties, is not sufficient to qualify for an E-2 Visa.
 

Marginality

Your enterprise should not be marginal. A marginal enterprise is one that provides a living solely for the E-2 Visa beneficiary and his family. A non-marginal enterprise, which is what is required for the E-2 Visa, is one that has a significant impact on, and is beneficial to, the American economy by creating new job opportunities, by paying taxes, and by ultimately providing a living not just for the E-2 Visa beneficiary.

However, a brand-new company at inception does not typically meet the marginality requirement. According to the E-2 Visa guidelines, a company may be marginal at the beginning but it needs to become non-marginal by the end of the fifth year from inception.

A well drafted 5-year business plan is generally sufficient to prove that the company will become non-marginal in the required time frame.

There is no minimum number of employees to be hired. Generally, even showing that a few employees will be hired is sufficient for the purpose.
 

Source of Funds

To qualify for an E-2 Visa, the funds should have a legitimate origin. Most of the time, funds to be invested in the US business originate from the E-2 Visa applicant’s salary, savings, or corporate funds if the US business is owned by a foreign business entity.

Needless to say, the funds should not be the proceeds of criminal activities. However, it is worth mentioning that the scrutiny on the source of the capital invested is a light one. It will be sufficient to show the bank account statement belonging to the beneficiary – or the beneficiary company – showing that a certain amount of money is present on the account and it has been transferred to the US account. The US consulate, in reviewing your application, shall not go further than that in the investigation. The degree of scrutiny used to verify the source of funds in EB-5 Green Card applications is much higher and more difficult to meet.
 

Gifts and Loans

Funds may also originate from a gift or a loan. A gift may come from a family member or from a friend, whereas a loan may come from family, friends, or a financial institution. The disclaimer with loans is that the loan should be a secured loan as opposed to an unsecured loan.

A secured loan is one where the borrower has provided a collateral to the lender. As a result, if the loan cannot be repaid, the lender shall use the collateral to satisfy his claim. If the loan is secured, the requirement of placing the funds irrevocably at risk is deemed to be met by the applicant. If the loan is unsecured, this requisite is not met.

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