E-2 Treaty Investor Visas: What exactly is a substantial investment?
The E-2 Treaty Investor is a great visa to use for a broad range of clients. From individual investors opening up a new business or creating one from scratch or the entrepreneur who only wants to be self-employed up to large corporations that need to transfer staff to the US.
All of these types of E-2 investors must demonstrate that they have made a substantial investment in the start-up of a business in the US. The definition what a substantial investment is in US regulations and Department of State guidance, is particular to US visa law and looks at the proportion the investor has put towards the start up expenses in comparison to the starting up costs normally associated with that particular business. In short, the proportionality test requires that the lower the start-up cost or purchase price of the business (e.g. $100,000 or less), the higher the percentage the investor must put towards the business. On the opposite end of the spectrum, for example a business that would require start-up costs of several millions of dollars may only require the investor to show a 10% investment of their own funds into the business.
In addition, the investor must show they have invested enough to convince the E Visa Officer that he or she has put themselves at risk enough to show they will be dedicated to the success of the enterprise.
The three most common examples I use to illustrate is a consulting business, a coffee shop and a car manufacturing company. When a business wouldn’t require too much to get up and running, like a consulting business the investor must to contribute 100% of the costs required to get the business close to the point of being operational. In contrast, a car manufacturing company may for example require $10 million to get up and running and the investor could qualify as an E-2 investor with a 10% investment of his or her funds into this business. Finally, the coffee shop may fall somewhere in between and most like would require an investment of 50% or more depending on the costs relating to getting the shop up and running.
The start-up costs that the E Visa Officer will consider to be part of the E-2 visa investment must be the costs relating getting the business up and running or, if an investor is purchasing an existing business, the purchase price. When creating a business from scratch, the investment costs are limited to the start up costs and not day-to-day running costs. Many businesses may be in various phases so it is best to speak to an expert on what can be considered as expenses that would be sufficient in the E-2 Treaty Investor application. In addition, each E Visa Office around the globe may have different interpretations of what is sufficient for an E-2 visa company approval.
This information is not advice and cannot be considered formal advice. If you would like to meet with a US lawyer to discuss whether you or your business would qualify for an E-2 Treaty Investor business, please call +44 (0)20 7092 6830.