Applying for an E-2 visa? Beware of marginal investments

The investment amount is not the only factor for E-2 approval. More applications are refused because the investment is considered marginal than based on the amount of the investment. In evaluating whether the business meets this requirement, the Embassy consular officer reviews both the owner's income from the business, and the impact of the business on the local economy, usually through the creation of jobs.

How profitable does the business have to be?

To qualify, the business must generate more than enough income to support investor and family. Average family incomes in Florida, for example, are currently well over $50,000, so a business income figure significantly higher than this is advisable.

For an existing business you would be expected to provide recent business tax returns, which will show the annual profit generated. If the business has not been particularly profitable one year, the Embassy is usually willing to consider other pertinent factors, e.g. a one time legal bill that year, or the fact that the owners also drew salaries in addition to the profits shown.

It is very important that you ask to see the business tax return, and recent accounts. Your visa application will be assessed to a large extent on this information. Sellers do not always declare all their income and skillful accountants can find ways to limit the seller's tax liability, by reducing profits shown. This can present a problem for an E-2 visa application. A business tax return, therefore, showing good owner income from the business, is an excellent starting point.

Be particularly vigilant when it comes to assessing financial information, particularly if you are not experienced in running a business. Talk to the company accountant, and do not hesitate to engage your own independent US accountant to perform "due diligence" on the business, i.e. to carry out a detailed review of the financial records. Opting not to do so may prove a false economy in the long run.

If you are starting a new business, you will need to prepare a convincing business plan and financial projection with plenty of supporting documentation.

How many employees?

The E-2 investor is supposed to develop and direct the business through its employees, and should not be the sole provider of the services offered by the business. Contributing to the local economy, for example by generating employment for American workers, is therefore very important.

Certain businesses, because of their seasonal nature or other factors, e.g. property management or construction companies, use subcontractors, which can usually be considered legitimate employment for E-2 purposes. The general rule is the more workers, the better. While there are no hard and fast rules, at least 2-3 employees is recommended. Check whether the employee wages are fully documented, as you will need to provide official paperwork.

Profitability and the capacity of the business to create employment for US workers are therefore both evaluated to assess whether the marginality requirements are met. Particular strengths in one area can offset adverse factors in another. For example, if the business has many employees, that can be helpful if profits are low.

Before you sign a purchase contract, always discuss the financial details with a US immigration lawyer to ensure your business will meet the marginality requirements.