E-2 TREATY INVESTOR:

Visas for Investors in America

By regulation, the E-2 visa is specifically for "individuals who will be in the United States solely to develop and direct the operations of an enterprise in which the applicant has invested a substantial amount of capital, or to work in the enterprise as an executive, supervisor, or essentially skilled employee."

Like the E-1 Treaty Trader visa, the E-2 Treaty Investor visa is only available to nationals of countries that have a bilateral treaty with the United States that enables such visas to be issued.  That's why it is called a Treaty Investor.

In the UK, the treaty that enables E visa eligibility is the United Kingdom Friendship, Commerce, and Navigation Treaty of 1948 governing trade between the United States and The United Kingdom. Notably (and unique among such agreements), the UK-US treaty specifically limits eligibility not just to UK nationals, but to UK nationals residing in the UK.  This can become cumbersome when dealing with complex corporate ownership issues or when individuals have spent significant periods of time outside the UK. 

Looking at the elements of the regulatory requirements, the essential elements are: 1. Nationality of the treaty investor or employee visa applicant; 2. Applicant has invested or is actively in the process of investing; 3. Enterprise is a real and operating commercial enterprise; 4. Applicant's investment is substantial; 5. Enterprise is more than a marginal one solely for earning a living; 6. Applicant is in a position to "develop and direct" the enterprise; 7. Applicant is destined to an executive/supervisory position or possesses skills essential to the firm's operations in the United States; and 8. Applicant intends to depart the United States when the E-2 status terminates.

Nationality of applicant

As noted above, the question of nationality is fairly straightforward for individuals, but can be complicated for businesses. Ultimately business ownership is determined by its shareholders. For E visa purposes, 50% ownership by the desired treaty nationality is all that is required. For employees, nationality is straightforward (a passport will establish nationality), but not all employees may be eligible for an E-2 visa.  First, the nationality of the employee must be the same as the treaty trader (e.g. if the treaty trader is a UK business, the employee must be a UK national). Second, the employee must perform either an executive or supervisory function, or must have special qualifications that make the services to be rendered essential to the efficient operation of the enterprise.

Investment

A threshold question is "What counts as an investment for E-2 purposes?"

State Department guidance provides as follow:

• The source of the investment may include capital assets or funds from savings, gifts, inheritance, contest winnings, loans collateralized by the applicant’s own personal assets (see paragraph c below) or other legitimate sources.  The source of the funds need not be outside the United States. The source of the investment must not, however, be the result of illicit activities. Documentation must prove the source of the funds and that the applicant had possession and control of the invested capital assets and funds.  Inheritance of a business itself does not constitute an investment.

• The concept of investment connotes the placing of funds or other capital assets at risk, in the commercial sense, in the hope of generating a financial return.  Non-profit organizations cannot be the basis for an E-2 visa. If the funds are not subject to partial or total loss if business fortunes reverse, then it is not an “investment.” Loans can be a source of fund for investment, but only in limited circumstances; loans secured by the assets of the enterprise cannot count toward the investment; loans collateralized by the applicant’s own personal assets, such as a second mortgage on a home or unsecured loan, such as a loan on the applicant’s personal signature may be included, since the applicant risks the funds in the event of business failure.

• Funds Must be Irrevocably Committed:  To be “in the process of investing” for E-2 purposes, the funds or assets to be invested must be committed to the investment, and the commitment must be real and irrevocable.  The purchase of a business that is conditioned upon the issuance of the E-2 visa may still qualify as an irrevocable investment.  Despite the condition, the purchase would constitute a solid commitment if the assets to be used are held in escrow for release or transfer once the condition is met.

• The applicant must be close to the start of actual business operations, not simply in the stage of signing contracts (which may be broken) or scouting for suitable locations and property.  Mere intent to invest, or possession of uncommitted funds in a bank account, or even prospective investment arrangements entailing no present commitment, will not suffice.

• Leases or rents for property or equipment may be calculated toward the investment in an amount limited to the funds devoted to that item in any one month.  However, the market value of the leased equipment is not representative of the investment, and neither is the annual rental cost (unless it has been paid in advance) as these rents are generally paid from the current earnings of the business.

• Value of Goods or Equipment as Investment:  The amount spent for purchase of equipment and for inventory on hand may be calculated in the investment total.  The value of goods or equipment transferred to the United States (such as factory machinery shipped to the United States to start or enlarge a plant) may be considered an investment.  However, the applicant must demonstrate that the goods or machinery will be or are currently being used in an ongoing commercial enterprise.  The applicant must establish that the purchased goods or equipment are for investment and not personal purposes.

• Rights to intangible or intellectual property may also be considered capital assets to the extent to which their value can reasonably be determined.  Where no market value is available for a copyright or patent, the value of current publishing or manufacturing contracts generated by the asset may be used.  If none exist, the applicant may submit opinions regarding market value from experts in the field in question for consideration.

Real and Active

The enterprise must be a real and active commercial or entrepreneurial undertaking, producing some service or commodity.  If the investment relates to a new enterprise, the adjudicator must be convinced that the business will be a real and active commercial or entrepreneurial undertaking that will produce some service or commodity if the visa is issued.  It cannot be a paper organization or an idle speculative investment held for potential appreciation in value, such as undeveloped land or stocks held by an investor without the intent to direct the enterprise.

Substantial Investment

"How much do I have to invest?"

It's not that simple. Some people suggest $100,000 or $500,000, but we've secured E-2s for much lower investments that are otherwise "substantial" for the business in which the investment is made. Ultimately, it is a matter of proportionality. State Department guidance provides: "No set dollar figure constitutes a minimum amount of investment to be considered "substantial" for E-2 visa purposes. Investment of a substantial amount of capital for E-2 visa purposes constitutes an amount that is:

1. Substantial in a proportional sense;

2. Sufficient to ensure the treaty investor's financial commitment to the successful operation of the enterprise; and

3. Of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise. 

Proportionality Test

The proportionality test determines whether an investment is substantial by weighing the amount of qualifying funds invested against the cost of the business.  If the two figures are the same, then the investor has invested 100 percent of the needed funds in the business; such an investment is substantial.  Most cases involve lesser percentages.  The proportionality test can best be understood as a sort of inverted sliding scale.  The lower the cost of the business the higher a percentage of investment is required.  On the other hand, a highly expensive business would require a lower percentage of qualifying investment.  There are no bright line percentages that exist for an investment to be considered substantial.  Thus, investments constituting 100 percent of the total cost would normally qualify for a business requiring a startup cost of $100,000, for example.  At the other extreme, an investment of $10 million in a $100 million business may be considered substantial, based on the sheer magnitude of the investment itself.

Marginality

A marginal enterprise is an enterprise that does not have the present or future capacity to generate enough income to provide more than a minimal living for the treaty investor and their family.  An enterprise that does not have the capacity to generate such income but that has a present or future capacity to make a significant economic contribution is not a marginal enterprise.  The projected future capacity should generally be realizable within five years from the date the applicant commences normal business activity of the enterprise. A business plan explaining the projected growth of the company, both in terms of hiring US workers and in generating income is essential.

Intention to depart the US

Finally, the E-2 visa applicant must affirm his/her intention to depart from the United States upon the termination of E-2 status.   This is done simply by providing a signed statement.

Need further assistance?

If you require assistance at any stage of the application process--or would like to discuss options before you start, please contact us to set up a consultation.The E-2 (Treaty Investor) visa allows an individual to work and reside temporarily in the United States based on investment in a US business. E-2 visas are typically issued for periods of up to 5 years and are renewable indefinitely, but cannot be converted to a Green Card.