In this video, attorney Jacob Sapochnick discusses a very important topic in immigration law: How can E2 treaty investors avoid application denials?
Many E2 investors looking to start their businesses in the United States frequently ask, what is the minimum amount of investment that is satisfactory to the immigration authorities for the E2 treaty investor program, and how can I maximize my chances of success?
If this topic interests you, please keep on watching our video.
Minimum Investment Amounts
One of the most common reasons for an E2 visa denial is where the applicant fails to demonstrate that they have made a “substantial” investment in their business venture.
A substantial investment is defined as one that is:
- Substantial in relationship to the total cost of either purchasing an established enterprise or establishing a new one
- Sufficient to ensure the treaty investor’s financial commitment to the successful operation of the enterprise
- Of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise. The lower the cost of the enterprise, the higher, proportionately, the investment must be to be considered substantial.
While the law does not set a minimum or maximum investment amount, applicants must show that their investment amount is “substantial” and proportional to their type of business. This means that applicants must determine what amount is needed to run their business and invest the appropriate amount of capital that is proportional to fully fund the businesses’ operations. If an investor makes a low investment in his business, an adjudicating officer could deny the application because the proportionality test has not been met.
What is the typical amount needed to meet the proportionality test?
The proportionality test compares the total amount of money that must be reasonably invested, with the cost of establishing a viable business operation. Essentially, if someone is buying a business, the question is, what is the reasonable amount of money must be invested, based on the value (total cost) of the business. Treaty investors may choose to either start their businesses from the ground up or purchase a business.
For most individuals looking to start their businesses from the ground up, the minimum threshold amount that is required to demonstrate a “substantial” investment is at least $100,000 USD. However, it is also important to consider several factors to understand what amount of money is considered proportional for the type of business that you will operate such as the size of your business, the type of business involved, geographic region (urban or rural), whether your will purchase the business outright, or build it from the ground up, etc. For businesses with low overhead and lower operational costs, it may be appropriate to invest a lower amount depending on your circumstances.
Those looking to purchase a business, must determine what amount of money must be invested investment, which is proportional to the total value (cost) of the business.
Let’s imagine that an investor wants to purchase a business for $500,000 USD or less. In this case, the amount of investment reasonably required will be about 75 percent of the total cost of the business. By example, if a business is worth $300,000 USD, in this case the investor will need to make an investment of at least $225,000, which is 75 percent of the cost of the business.
If it costs more than half a million dollars to purchase a business, but less than three million, then the investor is only required to invest 50 percent of the cost of the business. By example, if a business is valued at 1.5 million, the investor will need to make an investment of at least 50% of that amount to demonstrate a substantial investment.
Finally, if a business costs more than 3 million dollars, then the investor is only required to invest 30 percent of the total cost of the business to demonstrate his or her substantial investment.
A good rule of thumb to keep in mind is, the lower the cost of the business, the higher percentage of investment you must commit to the business.
Multiple Business Partners
Where there are multiple partners in the business, for E-2 purposes the immigration authorities are interested in the amount of investment committed by the foreign national applying for the visa and the original source of those funds. Immigration authorities will not consider investments of parties who are not applying for the visa, such as U.S. Citizen business partners. Additionally, the foreign national applying for the E2 visa must possess at least 50% ownership of the shares of the business to qualify.
To understand the appropriate investment amount for your type of business, please seek a consultation with a knowledgeable immigration attorney to evaluate your case.
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