E-2 Visa Tips

We get lots of requests from clients for help setting up their companies for E-2 investment purposes. Getting an E-2 visa can be difficult for an individual investor, but it's not as difficult as you might believe. Here are some useful tips we tell our clients that will make getting your visa as an E-2 treaty investor a snap!

If you can't apply for the visa, change to E-2 status
There are times when starting up a new business simply won't qualify you for an E-2 visa because you can't meet the threshold requirements for the visa. Generally, if you purchase an existing business and make a sufficient capital investment in your company to operate the business, you won't have a problem. But if you're starting from scratch, getting an E-2 visa can be especially difficult. When that happens, we often advise our clients to change status to the E-2 classification instead.

How do you do that? If you're planning to start a new business, you can enter the U.S. with a B-1 business visitor visa, set up your company, and then apply for a change of status to the E-2 classification. You can't change to E-2 status if you've entered the United States under the Visa Waiver Program, so it's necessary to obtain the B-1 visa.

Under U.S. immigration law, you can generally change status from one nonimmigrant visa category. Changing to E-2 status enables you to remain in the U.S. even if you don't have an E-2 visa. U.S. Citizenship and Immigration Services (USCIS) will approve your status for 2 years, and during that time you're allowed to operate your company as the treaty investor. The only caveat is that you can't leave the U.S. and re-enter without applying for an E-2 visa.

For clients intending to apply for the B-1 visa with the intent to change status to the E-2 classification, we help prepare a letter describing their proposed activities while in the U.S. in B-1 status, which might include looking for office space, negotiating a lease, purchasing equipment and supplies, and hiring an accountant, among other activities. We also encourage our clients to develop an executive summary for their proposed E-2 enterprise to submit with the application. Finally, we tell our clients to show evidence of their investment funds, such as a current bank statement.

Once the B-1 visa issues, you can then enter the U.S. to set up your company and make your investment. After the company has been established, but before it commences operations, you can file a change of status application with USCIS to change to E-2 status.

If you're already in the U.S. in some other status, you might consider changing to B-1 status before changing to E-2 status. Changing from some other status to E-2 status can be tricky. For example, if you're already in the U.S. in F-1 student status, changing to E-2 status can be done, but your situation needs to be carefully evaluated. F-1 students are restricted in the types of activities they can engage in while in the U.S. and must take extreme care not to violate their status while setting up their E-2 company. We've successfully changed the status of F-1 students to the E-2 category, but in some cases we advise our clients to change to B-1 status before changing to E-2 status.

After you've changed status to the E-2 classification, when can you apply for the E-2 visa? When your business is ready. If your initial investment was lost, or if your business gets off to a shaky start, you may have to operate the business for a few months, even a year or more, before your business passes muster in the eyes of a consular officer.

Determine how much to invest - how much is "substantial?"
The question we're most often asked is "How much investment is enough?" The law doesn't give a minimum requirement but says that the investment must be substantial. Consular officers have guidelines but these guidelines don't give an investor a practical idea of how much investment is substantial.

As a general rule of thumb, we've found that an investment is substantial when it's enough to operate the business and cover all expenses for a full year without any expectation of income. In other words, if you put $100,000 into your business and generate no income whatsoever for an entire year, you'd still be in business at the end of the year with all your debts paid and your living expenses covered. For this reason, your expense projections (talked about further below) are important, as they will give you a good idea of how much investment you'll need. If your income projections (also talked about below) for the first year are realistic, then an investment that covers all the expenses for the first 6 months of operations may be sufficient.

For example, let's say that you're starting a new business and you estimate that your start-up costs are $10,000 and your monthly expenses will be $5,000 per month excluding your salary, if any. Let's say you plan to pay yourself a salary of $3000 per month. You will need at least $106,000 as your initial investment. If you don't plan to take a salary but expect to participate in the profits of the company (e.g., in the form of dividends if your company's a corporation, or in net profits if your company's an LLC), you can have less investment, but you should demonstrate that you have sufficient assets outside the business that you can live off of.

Your Investment = start-up costs + (monthly expenses x 12) + your salary

You can download our easy-to-use investment calculator to determine what your initial investment should be.

One of the requirements for the E-2 is that you demonstrate that your investment is substantial enough to ensure the likelihood that you will successfully develop the enterprise. If your income projections are realistic, and you've invested sufficient funds in your business to guarantee its operations for an entire year, we feel that you've met the threshold for the "substantial investment" requirement. Of course it's always best to have an immigration attorney evaluate your situation, as each person's situation is different.

Develop a short business plan
If you're starting a new business, one of the key components of your E-2 visa application or E-2 change of status application will be your business plan.

We recommend a business plan of no more than 5-7 pages. Why? A consular or USCIS officer is not going to read a 35-page business plan, particularly if you have one of those business plans you've made from a template you can download off the Internet or copy from a book. In the real world, even venture capitalists and other investors don't waste time reading long business plans - regardless of what you may hear or have read the Internet. Business plans - at least long, convoluted ones - simply don't matter. (If you don't believe this, read "Investors Pay Business Plans Little Heed, Study Finds," NY Times, May 13, 2009.) If anything, a long business plan can hurt your application if it looks like you're just making stuff up or just plugging in arbitrary numbers into a computer program. (The exception to this is when you've carefully researched and painstakingly prepared the plan without the aid of a do-it-yourself business plan you've made from a computer program or copied from a book. In such a situation, a thoughtful, carefully prepared plan can help show your commitment to the enterprise.)

The key is to get across your major points in a few short pages. Have an executive summary. Be able to describe your business in four or five bullet points. Describe your product or service and the markets you intend to aim for. Most importantly, include income and expense projections and your proposed organizational chart.

Income and expense projections.
Why are these so important? The law says that your business must have the "present or future capacity to generate more than enough income to provide a living" for you and your family. "The projected future income-generating capacity should generally be realizable within 5 years" from the date the business starts. You want to show in your projections that your business will be capable of generating sufficient income in 5 years to support workers other than your family.

Income projections should be realistic. However, income projections are often difficult to make, especially for a start-up business. A new business has no historical frame of reference. One way to develop realistic projections is to research trade association publications to see what other businesses similar to yours have done. If similar businesses typically have a gross margin of 30% - 35% of net sales, you can assume that your business will fall within that range. Often you can find this information on the Internet.

In our view, the key to realistic income projections are the underlying assumptions. You should explain that assumptions that you've made to arrive at your projections. For instance, if you assumed that your gross margin will be 30% of net sales, explain in your business plan that you arrived at that figure because the trade journals give a range of 30% - 35% of net sales and you figured that as a new business you would adopt a conservative estimate for your projections. If you believe your business will sustain annual growth of 10% each year over a 5-year period, descibe what assumptions you've made to arrive at that 10% figure. In a troubled economy, annual growth of 10% may seem unrealistic unless you can reasonably justify your assumptions.

Expense projections are more predictable. But again, you should explain any underlying assumptions you make to justify your expense projections. In your expense projections, be sure to include the salaries and wages of workers you expect to hire. Salaries and wages should be reasonable for the positions contemplated. Be sure to include your own salary in your expense projections. If you don't plan to draw a salary, you need to show enough profits to support yourself or assets outside of the enterprise that you can draw upon for your living expenses.

Your projections for the first year should be monthly. (If your business doesn't break even by the end of the first year, continue the monthly projections until it does.) After that, it's sufficient to make projections for each quarter over the remaining of the 5-year period. Keep in mind that as more time passes, the projections will be less reliable. That's why it's important that the first year projections be as realistic as possible.

Proposed organizational chart
If you're an E-2 investor just starting your business, you're not going to have much of an organizational chart. Basically, it'll just be you. You're not permitted to hire employees until you've actually been admitted to the U.S. in E-2 status. For this reason, we like to call the organizational chart your proposed organizational chart.

It's important to submit one with your application. Although an organizational chart is often included separately from the business plan, we recommend putting one in the business plan as well. In your chart, you want to show how many employees you expect to hire in the future, what their positions and duties will be, and any requirements for the job, particularly educational requirements, such as a bachelor's degree. The chart should be in a hierarchical format, so that the chain of command is easily comprehended. Indicate when you anticipate prospective hires to be employed. Part-time employees are acceptable. The point is that the business must be capable of supporting more than you and your family. You want to show that over time your business will be supporting U.S. workers.

Show commitment to your new business with your start-up costs
If you're starting a new business, it may not be possible to apply for an E-2 visa right away. A U.S. Embassy or Consulate will want to make sure that you and your investment are committed to the new business. The best way to demonstrate commitment is to have a lot of start-up expenses. If the bulk of your investment is just sitting in a company account, you won't qualify for the visa. You have to spend money to show that you're committed to your business.

Sometimes it's not possible to run up a lot of start-up expenses. If you're starting an Internet business and doing your own web design, your start-up costs might be negligible. Or if your start-up costs are nothing more than the cost of some office furniture, you probably won't spend very much. This doesn't show commitment to the enterprise.

Or you may think that you've spent a lot of money for start-up costs, but in relation to the total investment it's actually very little. For example, if you've invested $100,000 and have $10,000 start-up costs, your visa application will probably be denied. There are plenty of people who are willing to put $100,000 into a bank account and spend $10,000 just to get a visa without any intention of running the business.

In either case, it's better to change status in the U.S. to the E-2 classification and then operate your business until you have enough expenses to show commitment to the operation. USCIS has traditionally been more lenient with investors when it comes to start-up costs. What might not pass muster with a consular officer has a better chance with USCIS. After you've operated your business for awhile and you've accumulated sufficient expenses to show commitment to your enterprise, you're ready to apply for the E-2 visa, assuming all other factors are favorable.

How high should your expenses be? There's no rule. It has to be judged on a case-by-case basis, and quite often it's just a matter of getting a feel for it. But the bottom line is that the higher your expenses, the more likely it is that a consular officer will conclude that you're committed to the business.

Document Your Start-Up Costs
We can't overemphasize the importance of documenting your start-up costs. Save the receipt for each purchase you've made on behalf of your new business. If payment isn't made at time of purchase, e.g., if you're issued an invoice that's paid later, you should show document that the invoice has been paid, if possible. Obtain copies of all your cancelled checks showing payment. Create a list showing the date a purchase was made, the vendor's name, what the purchase was for, and the amount of the purchase. You can download our investment calculator and use the second worksheet for keeping tabs on purchases to make your job easier.

Present your case clearly
Believe it or not, presentation often plays just as important role as substance in E-2 cases, as it does in all immigration cases. A case that's well-documented and clearly presented will have a much better chance of success than a case that's well-documented but is a nightmare for a consular or USCIS officer to comprehend.

That's where we come in. We pay just as much attention to the form of your application as we do to its substance. Every application we submit is presented in a format that's clear and easy to understand. We take great pains to ensure that the consular or USCIS officer views your application in its most favorable light.