Setting up a business in USA can be quite exciting. But there are also many challenges. In-depth market research and planning can minimize the risks.
Foreign nationals starting a business in the U.S. face another daunting challenge - which visa should they obtain in order to legally enter the U.S. to run and operate the business once it has been established?
Let us consider the situations of Harry and Vijay detailed below:
Harry, a national of the UK, has been in the construction business with his father for several years. He has been watching the construction industry boom in the US and thinks it is a good time to get into business there. His father agrees and they start looking at various Cities. Atlanta, GA seems to be doing well and Harry takes a trip to check it out. His report back to his father is encouraging, and they begin work on setting up a company in the US. It is decided that Harry will come to the US to get the company up and running, and then direct the operations of the company.
What visa options are available to Harry?
Vijay owns a very successful hotel in Hyderabad, India. He wants to open a long-term residence hotel in San Jose, California catering to Indian nationals on short term project assignments in the US. He thinks that he can capitalize on the cultural aspect and run a successful business. Vijay is planning to invest $400,000 in the US to get the hotel started.
What visa options are available to Vijay?
The L1 visa can be used to start a new company in the US if it is a subsidiary, parent, branch, or affiliate of a foreign company. The E2 or E1 visa can be used to start a new business in the US if the foreign national applicant is from a country which shares certain treaties with the US.
Let us look at what these visa options are, and the situations under which each of these visa options can be used for starting a business in the United States.
A qualifying relationship such as parent-subsidiary, branch or affiliate must exist between the foreign and the U.S. business entities.
Investment activities can include the creation of a new business or purchase of an existing business.
The E1 and E2 visas can be used only by citizens of countries that maintain a "treaty of commerce and navigation" or a "bilateral investment treaty" with the United States.
Additionally, the "nationality" of the US company must be at least 50% of the relevant treaty country, i.e. at least 50% of the US company must be owned by the foreign company or individuals who have the same nationality of the relevant foreign treaty company.
Note: Citizens of the United Kingdom are additionally required to prove domicile to be eligible for E visas.
If a multinational foreign company with a large number of shareholders from all over the world owns the U.S. company, it is a little more challenging to prove the actual nationality of the foreign company.
The E1 visa can be used by foreign entities that have not made a substantial investment in the U.S. but have substantial trade with the U.S. The substantiality of trade is determined by the volume of trade, number of transactions and the recurrence of these transactions.
The E2 investor visa can be used to starting a business in the US as a foreign national if the investment involved is substantial.
The L1 visa does not have a requirement of substantial investment in the U.S. (although it needs to be shown that the US company has enough capital or access to capital to run initial operations).
The L1 visa can be used to transfer an employee of a foreign company to setup, manage or work for a related organization in the U.S. irrespective of the employee's nationality.
For E1 or E2 visa, the company or the individual engaging in trade or investment in the U.S. must have the same nationality as the treaty country.
E visa applications are generally filed with the embassy or consulate in the home country of the foreign national. Once the consulate registers the trading or investing enterprise for E visa purposes, the treaty national may apply for a visa to enter the U.S.
The L1 visa is generally a two-step process. A petition is first filed with the appropriate Service Center of the U.S. Citizenship and Immigration Services (USCIS). After the petition is approved, the applicant must apply for a visa at the consulate in the home country of the foreign national.
An applicant who is in the U.S. in lawful status may file a Change of Status petition with USCIS to E1 or E2 status. An applicant who does this, however, must still submit the entire application at the consulate if and when he or she departs the U.S. and need to re-enter in E status. The Consulate is not bound by the USCIS decision regarding the E1 or E2 application.
An applicant that changed status to L1 in the U.S. has already completed first step, and needs to obtain the visa if and when he/she travels outside the country. The Consulate is generally bound by the decision made by USCIS.
NOTE: Canadians can apply for L-1 directly at the Port of Entry with Customs and Border Protection (CBP). CBP will adjudicate the petition and forward the application to USCIS for processing of the Form I-797 while the Canadian applicant enters the US under L1 status.
Even though E1 and E2 visa USA applications are processed directly at the U.S. embassy or consulate, the adjudication is complex and time consuming. It may take as long as three months for some consulates to fully adjudicate an E visa application, with practically no provision to expedite the process.
An L1 visa petition generally takes 2 to 3 weeks under premium process at the USCIS Service Centers.
Learn everything you need to know about working in the U.S.
E1 and E2 visas are generally granted for an initial period of 2 years, and can be renewed in increments of up to 5 years. They are admitted for a period of 2 years each time they seek admission into the US on a valid E1 or E2 visa.
L1 visas are granted for an initial period of 3 years (only 1 year for a new office), and can be renewed in increments of 2 years if the company can show that it has been doing business during the past year, and continues to require the services of the applicant as a manager, executive or an employee with specialized knowledge.
Companies that anticipate a "slower start" to get established in the U.S. may lean towards the E1 or E2 visa option that gives them a two year window to establish the operations.
An E1 or E2 visa can be extended indefinitely five years at a time provided that the stay of the applicant remains temporary.
An applicant in L1 status cannot extend L1 stay beyond 5 years (for specialized knowledge employees) or 7 years (for managers or executives).
The L1 may be the better route in cases where the intention of the applicant is to ultimately apply for a green card during his/her stay in the U.S. An L1 visa holder may pursue permanent residency and still maintain L1 status.
This may not be generally possible for E1 or E2 visa holders. Though E1 and E2 visas can be extended for an indefinite period of time, the applicant must maintain non-immigrant intent. Certain E2 investors may qualify for a Green Card under the EB5 category if they satisfy the job-creation and investment criteria (even through re-investments into the E2 business).
The permanent residency process may affect the applicant's ability to maintain or extend E1 or E2 status. Applicants with long-term goals of remaining permanently in the U.S. should map out a strategy to achieve that goal.
An E1 visa or E2 visa application entails extensive evidence requirements since the applicant needs to prove the substantiality of trade between the U.S. and the treaty nation, or the substantiality of investment in the U.S. Moreover, E visa applications are generally adjudicated at the Consulates, and there is no formal appeal or recourse to administrative or judicial review in the U.S. If the E1 or E2 visa is denied, the only recourse is convincing the consulate to reconsider the decision or re-submit the application with new evidence.
L1 visa applications for a start-up enterprise require evidence related to the business and revenues of the foreign company; the qualifying relationship between the foreign and the U.S. company; and a detailed business plan explaining the potential of the new company and its capability to meet business expenses, including the staffing requirements. Additionally, an adverse decision made by a USCIS Service Center can be reconsidered at various stages by the administrative and judicial machinery within the United States.
Harry has 2 options available for him. He can use either the New Office L1A if the company is established as a branch, parent, subsidiary, or affiliate of the company in the UK. He has worked in management for over 1 year so he meets the basic requirements. The US and the UK have a qualifying treaty, so an E2 visa would be another option. To start the U.S. construction business, the UK company will invest a significant amount of capital, and they will hire a number of employees after winning the contracts. Harry and his father decided that the E2 investor visa is the best option for them - it gives them longer period to build the company to the level needed to support an executive.
Vijay has only L1 option available because the US does not have a qualifying treaty with India. He is not concerned because his business plan is solid and he expects to have his residence hotel established to the extent where it will need his full-time executive oversight within one year. He is now looking for a competent manager to take over the operations of the hotel in Hyderabad.
Individuals from treaty countries have an advantage of choosing between E visa and L1 visa categories for setting up a business in USA as a foreign national. When different options are available, it is even more important to make a strategic and well-reasoned selection.
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