E2 Visa: Importance of Invested Funds

E2 Visa – Making The Investment

One of our specialties is the E2 Investment visa, and whilst nearly half of our clients are currently pursuing this type of visa, one of the biggest questions we face is: Can I just deposit the money into a US bank account? The answer is no, and it is important to understand that an often overlooked but vital element of the E2 statute requires the applicant to have already invested monies into the enterprise or be in the active process of investing into the enterprise when the application for E2 status is made.

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The funds must be invested, or spent, to qualify for the E2 Visa

“[E2] solely to develop and direct the operations of an enterprise in which he has invested, or of an enterprise in which he is actively in the process of investing, a substantial amount of capital”

In other words, it is insufficient to merely have formed the intent to purchase or start a business. Under the wording of the statute it appears to be a fundamental pre-requisite that the applicants have committed themselves in some material way almost to the point of no return. According to the State Department: –

“[The] alien 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. “

As you can see this is a very hard threshold to satisfy and in truth the consular officer reviewing your case may take a less strict approach, but this should not be relied upon.

Andy and Adri deposited the investment funds into an escrow account for a business purchase

The State Department concluded that any contracts entered into by the applicant could be made conditional upon the issuance of the applicant’s visa provided that any assets used for the purchase of the business were held in escrow for release on the visa condition being met.

Some applicants may not be buying a going concern but rather they will be starting a business and building that up from scratch. Here, the applicant will be required to demonstrate that they have committed themselves as far as possible to satisfy the ‘actively in the process of investment’ requirement.

As you can imagine most people find this requirement goes against every grain of common sense; to be required to commit so much time, money and energy into a venture that could come to naught if the visa application is denied is very hard to come to terms with.

The only rationale I can consider as to why the statute was drafted in this way was perhaps to ensure that only the most serious or committed applicants would apply and that having been granted the visa for that purpose the likelihood of the applicant not following through would be very slim.

The only advice that any attorney can reasonably give is for their client to go as far as they can, making sure that all contracts are conditional and that the funding monies should be held in escrow where possible.

How Much of the Overall Investment Needs to be Committed?

Not all of the investment need be committed. The rules provide that: –

“…a reasonable amount of cash, held in a business bank account or similar fund to be used for routine business operations may be counted as investment funds.”

In reality as a good rule of thumb you should have committed (paid monies into an escrow account) 75-85% of the total investment to buy and set up the business in most cases. If the purchase price is marginally up to $100,000 then the full amount must be committed.  I will certainly offer specific guidance on a case-by-case basis.

What Cannot Be Counted In The Investment Monies?

If you are setting up a business, keep track of all of your spending

Perhaps the most common area of confusion is establishing what can be counted in the total amount invested. Many clients try to include expenses such as flights and travel expenses to the US to either set up or buy the business. Accommodation, car rentals, hotel bills and so forth, cannot be taken into consideration for E2 investment purposes although they may be taken into account for accounting purposes in terms of Tax records.

The best way to approach this area is to use this analogy.  If a house is for sale at $300k and the closing costs are $10k. The total cost of the house is $310k. It’s $310k to the person who lives in the town where the property is for sale just the same as it is $310k for the person who had to fly in from Australia.

A good way to look at it is to consider only those funds a US citizen would need to spend. These can be included, but immigration legal fees and costs of travel would not be incurred, so these cannot be counted. If these additional costs were added, the total investment amount would be called into question by the E2 Embassy officials and it could result in a denial of the overall E2 application.

It is very important that you are clear on this point as it will save you a great deal of argument and frustration when your immigration attorney has to strike these non-qualifying investments from your statement of costs.

Investing in a Commercial Enterprise

The E2 treaty rules require that the nature of the investment must be a real and active commercial business of some sort. The business must produce a product or service and require the investor’s active control, direction and day-to-day management. For example, simply investing into the US stock market would clearly not be within the spirit of buying one’s own commercial business.

Can the Investor Use Cash and Borrowings?

Cash can be used to start or to purchase a business. Borrowed monies can be used if the assets of the enterprise were not used as collateral as this removes element of risk. If the business fails, the bank will take the business assets. However, if the monies are to be borrowed against the applicant’s personal assets or even given on the applicant’s personal signature. In other words the applicant will be personally liable then the amount borrowed can be treated as part of the overall investment.

Conclusion

The E2 visa is a great option for many individuals who are in a position to invest significant funds, but it is important to remember that these funds must be invested in order to properly satisfy the requirement. If you have additional questions about a potential investment, or would like to work with us toward an E2 visa, give us a call today.

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Immigration Law Offices of Chris M. Ingram

US Immigration Law Offices of Chris M. Ingram
Chris M. Ingram LL.M., ESQ – Immigration Attorney
Admitted in New York.
Practice Specializing in US Immigration Law
401 Wilshire Boulevard, 12th Floor,
Santa Monica,
California 90401
Tel: 310 496 4292

Specializing in the E2 Visa, EB1 Green Card, L-1A Visa and O1 Visa and K1 Visa Marriage-Based Immigration. Attorney Chris M. Ingram is dedicated to providing the very best in US Immigration legal representation. Enjoy our website.

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