E-2 Treaty Investor Visas
The E-2 visa allows foreign nationals who make a substantial investment in the United States to live and work in the United States while they manage the investment. The investor must actively manage the business, and passive investments like undeveloped land, or stocks do not qualify. 22 CFR 41.51 N8. The investor must be a national of a country that is a party to a treaty of friendship, commerce and navigation with the United States to be eligible for an E-2 visa. But under the Immigration Act of 1990, an investor may also be eligible if the investor's country of nationality extends reciprocal benefits to US investors seeking opportunities in that country.
Absent a treaty relationship or reciprocal treatment of US investors, E-2 treaty investor status is not possible. For a list of countries offering E-2 treaty investor status, click here. Where the treaty investor is a foreign corporation, that corporation's nationality is determined by the nationality of its owners. Where a company is the treaty investor, nationals of the treaty country must own at least 50% of the outstanding shares of stock or other ownership device. 9 FAM 41.51 N3.1 and N13.1.
The consulate issues an E-2 visa for five years, but Customs and Border protection should only admit the E-2 investor for two years at the port of entry and USCIS will only allow extensions of E-2 status in two year increments. For a discussion of the differences generally between a visa and status, please click here.
Starting a New Business in the United States
A foreign national investigating an investment opportunity in the United States that could qualify him or her as an E-2 treaty investor is eligible for B-1 business visitor status. 9 FAM 41.31 N6.7. A foreign national in visa waiver, or B-1 status may visit the United States to confer with a business planner, an attorney, or CPA, search for office space, conduct market research, and engage in other activities to prepare to open a US business. Before filing the E-2 application, it is best to establish a US business. To do this, the foreign investor must form a legal entity in a US state, secure commercial office space, obtain a federal employer ID number, open a US business bank account, and transfer the investment funds to the new US entity in exchange for an ownership interest. The investor must carefully execute each of these steps documenting each one. A failure at any point may require the investor to start over again. The investor will have to submit documentation of how each step was accomplished to a US Consular Officer and many steps like making the initial investment are time consuming to undo and redo.
Olender Pham can assist you in opening a US office and accomplishing these tasks. We regularly work with foreign investors and we can quickly and reliably execute all of these steps in only a few weeks. We use a corporate filing service to enusre fast turnaround for legal entity formation and we regularly obtain new federal employer ID numbers and US business bank accounts for foreign investors. There is currently a glut of commercial office space across the United States, so foreign investors are often pleasantly surprised at the wide range of choices and inexpensive rent available.
The investment must be: (1) substantial, and (2) not marginal. Substantiality is measured as a proportion of the total value of the business and the investment is considered marginal if it provides income only for the investor and her family. The State Department will consider the investment to be "nonmarginal" if (1) the investor has income from another source aside from the subject business, (2) the business expands job opportunities locally or (3) the business will have a positive significant impact on the local economy. 22 CFR 41.51 N10.1(1) and (2). Usually the marginal investment issue does not arise for new businesses that the State Department understands are unlikely to be immediately profitable. But it is wise to employ a few US workers after the business has been operating for 18 to 24 months.
Generally, for investments of less than US$100,000 the applicant must show that the investment is substantial. If the investment is greater than $100,000, the US State Department bears the burden of arguing that the investment is not substantial. Investments over $1 million are presumed substantial. The investment's substantiality is measured as a proportion of the total value of the business. So while a $10 million investment in a $100 million company is sufficient because of the sheer size of the investment, a $50,000 investment is acceptable for a business that has a fair market value of $50,000 or $60,000, but may not be sufficient for a business valued at $80,000, or $90,000. For a detailed discussion on the substantiality of an investment, see Matter of Walsh and Pollard, 20 I & N Dec. 60 ( BIA 1988); see also, US State Department responses to the Interrogatories from the Walsh & Pollard Case.
Applicants may not satisfy the investment requirements using creative financing. The State Department requires the applicant to show the origin of all investment funds and the investor's funds must be his own. Investment funds must be committed and "at risk" which means that the investor has to place them with the business in a way where he risks losing if the business does not do well. While the law does allow loan proceeds to constitute all or a portion of the investment, the loan must be with personal recourse against the investor. 22 CFR 41.51 N7.1-2(1), see also 62 Federal Register 48138
The investment is supposed to be directed toward aspects of the business that are not normally paid from the current earnings of a business. 22 CFR 41.51(f).
The investor must invest in an active enterprise and the enterprise must employ US workers, or plan to employ US workers. If the business does not create jobs for US workers, it conflicts with the "direct and develop" concept inherent in the investment treaty and will not merit E category status. However, a treaty investor with a strong business plan may be approved for an E-2 visa even though she will not initially employ US workers, so long as the plan shows a strong likelihood that the business will employ US workers within the first few years of business activity.
The State Department allows investors to use an escrow agent to make contingent their investment on the US Embassy granting the E-2 visa. 22 CFR 41.51 N7.1-3a. Whether this is necessary depends on the situation. For an investor opening a US office, it is probably not necessary because the investor controls the US entity's bank account and can simply transfer the funds back if the visa is denied. Where the treaty investor seeks to buy a share in an existing US company, there is a heightened risk of a dispute over return of the funds and this situation may benefit from escrow. Each situation is different and the risk preference of each investor is different. Contact us for an analysis of your specific case.
Bringing Executive, Managerial, and Essential Employees in E-2 Status
E-2 investors may bring executive, managerial, and essential employees who are nationals of the treaty country to the United States in E-2 status. Executive and managerial employees may remain in the United States indefinitely. To determine if an employee is executive, or managerial, the Consular Officer will look to factors including:
- The Job's title
- Pay level
- The number and skill level of employees the E-2 applicant will supervise
- The applicant's qualifying executive, or supervisory experience
- Whether the executive, or supervisory aspect of the job is a principal function and not incidental
Essential employees are those with knowledge and skills essential to the E-2 firm’s operation in the United States. Employees are deemed essential only if they possess these special skills and if the same skills are required by the E-2 enterprise. The primary difference between long-term and short-term need is whether the employer can find US employees with the necessary skills or whether the employer, with a reasonable effort, may train US employees to perform the same duties. 22 CFR §41.51 N13.3(a). The Foreign Affairs Manual notes generally that product development and quality control are skills requiring long-term essential employees, while training and supervision of technicians employed in manufacturing, maintenance and repair functions require short-term essential employees. 22 CFR §41.51 N13.3-1. Short term E-2 employees will have difficulty remaining in the United States for more than one to two years.
Spouses and Dependents of of E-1 and E-2 May Work
On January 16, 2002, President Bush signed a law allowing the spouses and dependents of E and L workers to work in the United States. Spouses and dependents of E-1 and E-2 workers may work in the United States, but require a work authorization card. Dependents of E-1 and E-2 workers may apply for work authorization using USCIS Form I-765. It is unlawful for the spouse, or dependent to work until USCIS issues the card and work is lawful only during the card's validity period. For more information on work authorization for spouses and children of E workers, please see the USCIS Memo from William R. Yates, Guidance on Employment Authorization for E and L Nonimmigrant Spouses, February 22, 2002.