E-2 Visa For Entrepreneurs:

Meeting Investment Requirements & Qualifications

Introduction

  • The E-2 visa is a valuable tool for international entrepreneurs, contingent upon the existence of a treaty with the country of citizenship.
  • This can be achieved by either investing in an existing U.S. company, or by direct investment in a new company.
Ready to explore the E-2 visa option? Contact our immigration lawyers for a personalized assessment today!

1. E-2 Visas: Basic Requirements

To be eligible for an E-2 visa, certain fundamental criteria must be met:

a.Citizenship of A Treaty Country:

  • The applicant, whether an individual or a business entity, must hold the nationality of a treaty country.
  • In cases of businesses, the nationality is determined by the citizenship of the individual owners.

b.Control And At-Risk Investment:

  • Source, Possession, And Control of Funds: The investment source can encompass capital assets, funds from various legitimate sources like savings, inheritance, loans secured by personal assets, and more. The funds need not necessarily originate from outside the United States.
  • Investment Involves Risk: Investment implies placing capital or assets at risk in the commercial realm, with the expectation of yielding a financial return.
    • Exclusion of Certain Indebtedness: Debts like mortgage debt or loans backed by enterprise assets cannot be considered part of the investment, as they lack an essential element of risk. For instance, if the applicant’s business is used as collateral, funds from the resulting loan aren’t considered at risk, even if personal assets are also utilized as collateral.
    • Inclusion of Indebtedness Collateralized by Personal Assets: Only debts secured by the applicant’s personal assets, like a second mortgage on a home or an unsecured loan based on the applicant’s personal assurance, can be included. Debts cannot be secured against the business subject of the E-2 application. This is because, in the event of business failure, the applicant assumes the risk of the funds.

c.Real And Operating Enterprise:

  • The enterprise must be a genuine and actively operational commercial or entrepreneurial venture, involved in producing a service or commodity.
  • In the case of a new enterprise, there must be a strong conviction that it will become a legitimate and active commercial or entrepreneurial endeavor, producing a service or commodity once the visa is granted. It cannot merely exist on paper or be an idle speculative investment held with hopes of future value appreciation (e.g., undeveloped land or stocks held without intent to direct the enterprise). The investment must be in a for-profit commercial enterprise, thereby excluding non-profit organizations.

d. Substantial Investment Based on Market Value or Capital Assessment:

  • This requirement aims to ensure, to a reasonable extent, that the invested business is not speculative but will be or soon become a thriving enterprise. The regulations concerning the amount of funds committed and the nature of those funds, primarily personal funds or loans secured by personal collateral, serve to filter out risky endeavors and affirm the investor’s unequivocal commitment to the business’s success.
    • Established Business: The cost of an established business is typically its purchase price, which aligns with its fair market value.
    • Newly Created Business: The cost of a newly established business encompasses the actual expenses needed to set up and launch it until it reaches operational status.
  • Proportionality Test: This evaluation gauges the substantiality of an investment by comparing the amount of qualifying funds invested against the total cost of the business. For instance, investments covering 100 percent of the total cost would typically qualify for a business with a startup cost of $100,000. Conversely, an investment of $10 million in a $100 million business may be deemed substantial, given the sheer magnitude of the investment itself.

e. Control of The Enterprise:

  • The investor must hold a controlling interest of 50% or more in the investment and have the intention to actively develop and manage the enterprise. However, in cases where ownership is less than 50 percent, de facto managerial control can still establish the required level of control.
  • Ownership by Nationals: In all treaty investor cases, it is imperative to demonstrate that individuals from a treaty country own at least half of the enterprise. Additionally, it must be shown that a national (or nationals) of the treaty country, through ownership or other means, plays a pivotal role in directing the activities of the enterprise. The nature of the enterprise sought will determine how this requirement is applied.
  • Defining Controlling Interest: In cases of a joint venture or partnership where both parties have an equal share of the investment and retain full management rights, it generally confers controlling interest.
  • Owner’s Role in Development and Direction: If a sole proprietor or a majority owner is seeking entry to the U.S. as an “investor,” or is sending an employee to the U.S. as a personal employee or as an employee of the U.S. enterprise, they must demonstrate their direct involvement in developing and directing the enterprise. Similarly, if a foreign corporation owns at least half of a U.S. enterprise and intends for its employee(s) to enter the U.S. as an employee of either the parent corporation or the U.S. business, the foreign corporation must show that it is the entity overseeing the development and direction of the U.S. enterprise.

f. Non-Marginality of The Enterprise:

  • A marginal enterprise is one that lacks the present or future capability to generate sufficient income to support more than minimal living expenses for the treaty investor and their family. However, an enterprise that may not currently possess this income-generating capacity but has the potential to make a substantial economic contribution is not considered marginal. The anticipated future capacity should generally be achievable within five years from the commencement of normal business operations for the enterprise.
Have questions about the E-2 visa requirements? Our immigration team is ready to help you navigate the process. Schedule your assessment today!

2. Raising Investment Funds For E-2 Visa: A Guide For Entrepreneurs

If you find yourself in the typical startup entrepreneur’s shoes, you might not have your own capital readily available for investment. Whether you’re a recent graduate eyeing an E-2 visa or simply new to entrepreneurship, don’t fret. There are multiple avenues to meet the investment requirement of the E-2 visa.

a.Family And Friends’ Financial Support:

  • Gifts: If you’re fortunate enough to have a benevolent family member or close friend, you may explore the possibility of receiving a financial gift to use for your business investment. It’s essential to transparently communicate your business plan, explaining how it will generate revenue. If successful, this gifted money can be used to invest in your U.S. business, and it’s typically viewed as a legitimate source of funds. A gift, in this context, implies there’s no expectation of repayment.
  • Loans: Borrowing from family and friends can be a great way to leverage your personal network for financial support. However, it’s essential to handle these arrangements with clear communication and professionalism.
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b. Traditional Financial Institution Loans:

If family and friends aren’t able to assist you, seeking a loan from a conventional financial institution that typically issues loans is a viable option. However, it’s crucial to be mindful of what the loan is secured against. The regulations stipulate that certain types of indebtedness, like mortgage debt or commercial loans backed by the business’s assets, can’t be counted towards the investment. Only loans collateralized by the applicant’s personal assets, such as a second mortgage on a home or unsecured loans based on personal signature, may be considered as part of the investment.

c. Personal Loans From Investors:

If investors are willing to lend you money personally, the process becomes somewhat more straightforward for the E-2 visa application. When you have direct control over the funds and can personally invest them, it’s easier to establish that the money is a personal loan intended for investment in the business.

d. Direct Investment by Investors Into The U.S. Tech Startup:

This scenario assumes that you, as the applicant, will also invest some money. It’s imperative to ensure that a significant portion of the investment (at least 50%) originates from investors who hold the same nationality as you. It’s important for each investor to be able to demonstrate the source of their funds.

Convertible Notes:
A convertible note is a financial instrument that initially functions as a loan (a “note”). However, upon a specified triggering event, it can transition into an equity investment. This form of financing often precedes equity financing and is common among “angel investors” who provide early-stage funding to startups. If the startup successfully secures equity financing at a later stage, the initial angel investor usually has the option to convert the note into ownership equity.

While convertible notes can be effective in securing funds, they can pose challenges for immigration proceedings if the conversion event isn’t anticipated. Since ownership undergoes a shift during this event, the company’s eligibility for E-1, E-2, or L-1 status may be jeopardized.

e. Investor Loans To Their Own Business:

An investor who holds a majority ownership in the business is permitted to extend loans to their own enterprise. Several considerations must be taken into account:

  • Source of Funds:
    • The funds allocated for the loan must be obtained through legal means. This encompasses sources like personal savings, legitimate business transactions, or inheritance.
  • Loan Agreement:
    • A formal loan agreement is imperative. It should outline crucial details such as the loan amount, interest rate (if applicable), repayment schedule, and any collateral involved.
  • Commercial Viability:
    • The loan should align with the business’s objectives. It must serve a genuine purpose, such as financing expansion, procuring equipment, or covering operational costs.
  • Documenting The Transaction:
    • Thorough documentation of the loan transaction is vital. This includes bank statements verifying the fund transfer, the signed loan agreement, and records of repayments.
  • Repayment Capacity:
    • The business must demonstrate the capability to repay the loan. This entails having a stable income and the ability to cover operational expenses in addition to loan repayments.
  • Risk Considerations:
    • U.S. Citizenship and Immigration Services (USCIS) or the Department of State (DOS) may scrutinize loans to ensure they don’t serve as a disguised form of capital injection. Therefore, ensuring that the loan terms are commercially reasonable is crucial.
  • Interest Rates:
    • If interest is applied to the loan, it should align with market norms and not be unreasonably high. This guarantees that the loan adheres to commercial practices.
  • Record-keeping:
    • Both the investor and the business should maintain accurate records of the loan transaction, encompassing details of disbursements and repayments.

NOTE:
Creative solutions: For instance, even though the United States does not currently have an E visa treaty with India, if an Indian entrepreneur is married to a citizen of a treaty country (such as Italy), the spouse can apply for an E-2 visa. Consequently, the Indian entrepreneur can obtain independent work authorization and assume an executive role within the startup.

Need help raising funds for your E-2 visa? Our team can guide you through the process and ensure your investment meets USCIS standards. Schedule A Call With Our Investment Network now!

3. Spouse & Children of E-2 Visa Holders:

  • The applicant’s spouse and children under 21 years old are eligible to apply for dependent E-2 visas.
  • The E-2 spouse and children have the opportunity to attend school, from primary school all the way through university education.
  • An E-2 visa holder’s spouse is entitled to independent work authorization.

Conclusion

Embarking on the U.S. entrepreneurial journey as a foreign-born founder is an exciting and transformative experience. Whether you’re abroad or already in the U.S., our team is here to help you leverage the E-2 visa to establish and grow your business in America.

We specialize in more than just guiding you through the startup process—we empower your entrepreneurial dreams. Our experienced immigration attorneys provide comprehensive support, from navigating complex visa procedures to ensuring your investment meets all the necessary qualifications. We take care of your immigration needs so you can concentrate on building your business.

Your entrepreneurial journey deserves the best legal guidance. Take the first step towards success today. Schedule A FREE Assessment with our experienced Immigration Law Firm today, and let’s build something extraordinary!

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