Treaty Investor E-2 visa criteria
In the context of a Treaty Investor visa, an investment is defined as the irrevocable placement of capital, liquid cash, assets, and/or other valuable commodities at risk in the commercial sense with the hope of creating additional revenues. US regulatory provisions require the showing of certain criteria in order for a foreign national to receive an E-2 Treaty Investor visa designation. These criteria are explained in greater detail below.
Possession and Control of the Investment Proceeds
An applicant for a Treaty Investor E-2 visa must show that prior to filing his application, he had control over the funds or valuable consideration being committed in the investment. Such capital funds must have been obtained through legal means. Examples of legitimate qualifying investment provisions for Treaty Investor visa purposes include gifts, savings, and in some instances, loans. In the absence of proving control over qualifying investment funds or provisions, a Treaty Investor visa application may not be approved. Foreign nationals wishing to use gifts or loans to form the basis of a treaty investment enterprise should consult with an experienced immigration counsel. The attorneys at The Law Firm of Shihab & Associates are versed in the area of Treaty Investment E-2 visa applications and can represent you to assure that your application meets the regulatory requirements. Contact us for a consultation.
Investment at Risk
In order to qualify for Treaty Investor visa status, a foreign national must demonstrate that she is placing the investment proceeds “at risk” in the market place irrevocably, or is in the process of doing so. Hence, the investment capital must be subject to total or partial loss should business fortunes dwindle. Loans secured by assets of the enterprise are not considered qualifying investment proceeds placed in the enterprise "at risk." However, loans secured by other assets of the investor or unsecured loans can be considered as qualifying investment capital.
In the Process of Investing
The commitment of funds to purchase a business or other assets such as furniture, fixtures, equipment, and inventory necessary to operate the enterprise is an example of placing an investment at risk irrevocably. Short of committing such actual funds, the irrevocable “at risk” requirement can be met by showing that the foreign national is “in the process of investing in an enterprise,” which can be accomplished through the creation of certain legal instruments such as escrow agreements. Such escrow agreements are set up wherein the investment proceeds are deposited with an escrow agent to be released upon the approval of the treaty investor application to facilitate the purchase of the business, other assets or inventory, etc. In other words, a foreign national is able show the irrevocable commitment of funds by using such legal tools without actually purchasing the business or assets. If the application for treaty investor is denied, the proceeds will return to the foreign national pursuant to the provisions of the escrow agreement. Such tools are routinely used in larger business investments requiring skilled drafting of such instruments in concert of the planning process for the Treaty Investor visa application.
“In Kind” Contribution of Assets
Other qualifying investment transactions may occur when the foreign national commits inventory, equipment, or other "in kind" assets he owns (not purchased) as initial capital into the enterprise. In such circumstances, the value of such assets must be established by verifiable means in order to be accepted by the USCIS or by the consular officer reviewing the application. For instance, the book value versus the market value or appraised value may be used to arrive at an amount most favorable to the foreign national’s application.
Where a foreign national is desirous to tender an existing business as capital in its entirety for investor visa application purposes, it may be somewhat complex to document the true value of such business. In such a situation, it is highly advisable to retain the services of an experienced business appraiser to conduct a financial evaluation of the business in terms of assets. The value of a business is also the mathematical sum of the furniture, fixtures, equipment, and inventory that make up the enterprise.
While the value of "goodwill" may not necessarily be accepted by the USCIS or by a consular officer as a valid qualifying business investment, such an asset may be embedded into another aspect of business in a verifiable and transparent manner. For instance, the value of goodwill may properly be attributed to the value of the real estate that underlies the business enterprise itself.
The Enterprise Must Be Real
The foreign national must prove that the enterprise is an active real commercial undertaking providing a product or a service. An enterprise existing on paper would not suffice. In addition, passive real estate investments that do not require substantial development or maintenance would not be favorably considered by the USCIS or the consular officer as a qualifying investment opportunity worthy of a Treaty Investor visa. However, a business enterprise which would purchase, develop, improve and/or manage real estate properties in large scale will qualify as an active and real commercial endeavor worthy of E-2 visa designation.
The Investment Must Be Substantial
The substantiality criterion is a ratio between the amount of qualifying investment proceeds and the cost of establishing the enterprise. The cost of establishing an enterprise is the purchase price, the appraised value of the business, or the summation of the assets assembled to properly operate the business.
The larger the cost of establishing the enterprise, the lower the substantiality ratio needs to be shown. For instance, if the cost of establishing a certain enterprise such as a dairy farm operation, is $6 million, then the required qualifying capital that must be placed at risk is at least $1.5 million or 25%. However, if the cost of establishing a franchise restaurant is $100,000, then the foreign national must show at least $75,000 of qualified capital invested or placed at risk or 75%.
Unfortunately, the substantiality requirement is misapplied by most US consular officers around the world. While the law does not require a minimum investment amount into a Treaty Investor (E-2) visa enterprise, most consular officers require at least a $50,000 investment. This requirement is not supported by regulations or by US Department of State directives.
The Investment Must Not Be Marginal
The treaty enterprise must not generate marginal revenues which would only be sufficient to provide minimal living for the foreign national and her family. In essence, this criterion would impose an indirect requirement that the treaty enterprise generate net revenues in excess of the foreign national’s living requirements. The “marginality” criterion must be examined in the context of the financial structure of the enterprise. For instance, if the foreign national is placed on the payroll along with other employees of the enterprise, then these wages will be taken into consideration in the marginality analysis of the application.
It must be noted that an enterprise that is not showing large net revenues but one that has a present or future ability to show a positive economic contribution can still be favorably received by a consular officer. Such capacity, however, must be realized within five years.
Ability to Develop and Direct the Enterprise
To qualify for the Treaty Investor visa, the foreign national must prove that she is coming to the US to develop and control the operation of the enterprise. This can be accomplished through ownership of at least 50% equity ownership of the company accompanied by executive or managerial powers. In the absence of 50% ownership, the “develop and control” criterion can be proved through corporate law mechanisms which would afford the foreign national the ability to control a significant division of aspect of the company.
Preparing a successful Treaty Investor visa application is an intricate process requiring counsel to be fully versed in the immigration, corporate, and business valuation fields to properly represent the investor’s objectives. The attorneys at The Law Firm of Shihab & Associates, Co., LPA have decades of combined experience in successfully navigating through such complex areas. Contact us by email or phone at 1-877-479-4USA (4872) for a consultation to discuss your planned investment and how we can represent your interests effectively.