Learn about the E-2 Investment VISA
A while ago we have posted an article about the E-2 VISA (E2 VISA for International Investors: what you need to know), explaining what it is and the main requirements to be eligible.
We work with many E-2 VISA candidates, and there are some common questions about this type of VISA that are frequently asked. In addition, we have noticed that there are common misconceptions about investing in a franchise linked to an E-2 VISA. Due to that, we have teamed up with the immigration attorney Bobby Chung, who is specialized in E-2 VISA, to help provide our investors with the accurate answer for the frequently asked questions (FAQs).
About Bobby Chung
Bobby Chung is a U.S. immigration attorney specializing in the E-2 Investor Visa and EB-5 Investment Green Card. Mr. Chung has extensive experience representing foreign entrepreneurs in investor visa matters involving newly established entities and acquiring qualifying existing businesses. Mr. Chung also helps clients obtain EB-5 green cards based on investments in Regional Centers. Before entering private practice, Mr. Chung served as an Attorney Advisor with the U.S. Department of Justice, Executive Office for Immigration Review, where he assisted federal immigration judges in adjudicating immigration cases. Based in the Los Angeles area, Mr. Chung represents clients in U.S. visa and immigration matters in all 50 States and worldwide. Mr. Chung is an active member of the California State Bar and the American Immigration Lawyers Association. You can contact him at: Tel: (626) 642-8066; e-mail: firstname.lastname@example.org. Websites: www.bccvisalaw.com & www.e2visalawyer.net
Here are Bobby’s answers to frequently asked questions about E-2 VISA:
1) How much do I need to invest to qualify for the E-2 visa?
BOBBY: The law does not specify a minimum amount, and simply requires the E-2 visa applicant to make a “substantial investment” for the type of business. What this means is that the amount must be sufficient to cover all start-up expenses necessary to fully set-up and develop the business to the point of being ready to open. The investment amount must also include sufficient working capital reserve held in the business account to cover day-to-day operation expenses until the business is able to generate sufficient income to sustain itself. The E-2 applicant needs to invest the appropriate amount needed to ensure the successful operation of the business. Because every business is different with unique capital requirement, the U.S. government intentionally did not quantify a specific dollar amount for E-2 investment. As a practical matter, I generally recommend investing at least $100,000 for a strong E-2 visa case. However, since the law does not place a minimum, it is possible to qualify for the E-2 visa with investment as little as $50,000 to establish a small and low cost business.
2) What type of business qualifies?
BOBBY: Any type of legitimate business could potentially qualify for the E-2 visa. The E-2 visa requires the foreign entrepreneur to invest in an active commercial enterprise. This means the business must offer products or services, has a physical business premise, and employ or will employ a staff of U.S. workers. Passive investments such as buying real estate for rental income does not qualify. When selecting a business for the E-2 visa, there are three key factors to consider. First, the business must have the financial ability to support the investor and any dependent family members with a comfortable living in the U.S. How much income is required depends on the cost of living of the area where the business is located, and the number of people in the applicant’s immediate family. Second, the business needs to create meaningful employment for U.S. workers. Hiring at least a few employees within a reasonable time of start-up generally satisfies the job creation requirement. Lastly, the foreign entrepreneur must demonstrate knowledge and skills necessary to successfully operate the business. There is no minimum education or experience requirement. Any combination of relevant business education, training, or work experience may be presented to demonstrate the E-2 applicant’s qualifications to manage the business.
3) Are franchise businesses suitable for E-2 Visa applications?
BOBBY: Franchise businesses are especially suitable for the E-2 visa and enjoy a number of advantages. One of the top concerns of immigration officers in deciding an E-2 application is what is the likelihood of success of the applicant’s business. Franchise business are generally viewed more favorably by immigration authorities, because they are successful business models with highly developed, tried and true systems. Investing in a franchise business also allows foreign entrepreneurs to present professionally prepared operations manuals, marketing, and training materials in their E-2 visa applications. Another key advantage of franchise investment applies to people who lack significant business education or experience. Most immigration officers consider franchise training and on-going support to be highly relevant and valuable preparation, and are often satisfied with the applicant’s readiness for entrepreneurship, even if the person has little to no business background. For these reasons, franchise investment is very well suited for E-2 visa investment.
4) There is a common misconception out there that franchises would not be suitable for E-2 Visa applications. Can you elaborate on that and why this is wrong?
BOBBY: This is an unfortunate misconception and is often caused by a lack of understanding. My law firm has been very successful in obtaining E-2 visa approvals for franchise businesses. The key to success is knowing the government’s underlying concern and developing the proper strategy to satisfy the immigration officer. Specifically, the E-2 visa law requires the applicant to have full managerial control of the business. Sometimes, immigration authorities object to some of the restrictive terms in the franchise agreements, because restrictions may seem to take too much business control away from the entrepreneur. Therefore, it is important to review the franchise agreement before purchase to clearly understand the restrictions imposed on the franchisee, and analyze how they affect the E-2 investor’s ability to independently manage the business. Generally speaking, if the franchise conditions are intended to maintain uniform quality and standard for the franchise brand and are not designed to interfere with managerial control of the business, then immigration officers will typically approve the E-2 visa. It is essential to distinguish between ordinary and unusual restrictions to immigration officials. Ordinary conditions related to brand protection do not interfere with the franchisee’s autonomy in day-to-day operations. By addressing the underlying concern and avoiding overly restrictive franchisors, my law firm has not encountered any problem so far with qualifying franchise investments for the E-2 visa.
5) Do I have to invest first before applying for the E-2 visa?
BOBBY: Before applying for the E-2 visa, the applicant is required to invest in the U.S. business first by either purchasing the business, or establishing a new business at least to the point of being ready to start operations. The U.S. government requires the E-2 investor to irrevocably commit to the financial investment by actually buying the business or spending the funds necessary to start-up the business prior to applying for the E-2 visa.
6) What happens if I invest, and my visa is denied? Can I make the business purchase contingent on E-2 visa approval?
BOBBY: There are remedies available to the foreign investor, if the E-2 visa is not approved.
If starting a new business, the E-2 investor is required to fully set-up the business and spend a portion of the investment funds to bring the new business to the point of opening before applying for the E-2 visa. What happens if the E-2 visa is not approved. Don’t worry, your investment is not lost. U.S. law does not limit the number of times you may re-apply for the E-2 visa based on the same business. If the E-2 visa is denied, the immigration officer is required to explain the problem, such as insufficient investment amount or spending, or need to hire employees, etc. The investor will have an opportunity to fix the problem and then re-apply for the E-2 visa. My law firm enjoys very high E-2 visa approval rate for clients who follow our guidance on making a qualifying business investment. Even in the worst case scenario, where the visa is not approved, the investor will be able to make adjustments or improvements to the business to overturn the decision and obtain visa approval. The business may also operate before the investor obtains his or her E-2 visa, as long as the business has U.S. employees or U.S. partner to help with running the business. The foreign investor may not personally work in the business until receiving E-2 visa approval.
When buying an existing business, the E-2 investor may condition the closing of sale on E-2 visa approval. The investor is required to sign a purchase agreement and deposit the full purchase money into an escrow account. An escrow company is a neutral third party that holds your funds in trust until certain contract condition is satisfied. Once the condition is satisfied, the escrow company would then transfer the money to the seller. For E-2 visa investment, buyer and the seller may agree to make the purchase contingent on the approval of the buyer’s E-2 visa. If the visa is not granted, then the escrow company is required to return the buyer’s money for failure of contract condition and cancel the purchase agreement.
7) How long does the process take?
BOBBY: The U.S. government usually takes approximately 1 to 3 months to make decision on E-2 visa applications, depending on how busy they are at the time of application, and whether the immigration officer requests additional documents. Before applying for the E-2 visa, how much time the investor needs to complete business purchase or start-up varies for different people, depending on factors such as the ease or complexity of setting-up the type of business, and decision making process of choosing and buying a franchise business. Some people finish their investment within a few months; while others take longer time.
8) Do I have to hire employees right away for a new business?
BOBBY: For most start-up businesses, the E-2 investor is not required to hire employees right away. The investor only needs to convince the immigration officer that he or she intends to hire U.S. workers within a reasonable time, and the business has a credible need for employees. To demonstrate a genuine intention to hire U.S. workers, the E-2 investor may show evidence of job advertisements, recruitment efforts, and/or a projected employee hiring timeline. However, if the investment is in an existing business, then the E-2 applicant has to prove that the business already creates meaningful jobs for American workers. The law does not specify the number of employees required or define what constitutes meaningful jobs. Immigration authorities considers a variety of factors in determining the economic impact of the business, including the number of employees, positions, wages, work hours for part-time employees.
9) Can a home-based business qualify for the E-2 visa? Can I start from home and then open a physical location?
BOBBY: The law does not specifically prohibit a home-based business from qualifying for the E-2 visa. However, small start-up businesses operated from the E-2 investor’s residence faces high risk of visa denial. The reason is that E-2 visa prohibits marginal businesses from qualifying. The “marginal business” concept means a commercial enterprise that is too small to make meaningful contributions to the economy. Although the E-2 visa allows a small start-up to qualify, the immigration officer has to believe that the foreign entrepreneur has genuine intentions of growing the business to a sufficient size and performance within 3 to 5 years. The immigration officer will closely scrutinize the entrepreneur’s start-up efforts, business development progress, and actual investment spending to create a credible commercial enterprise. If the business is a brand new start-up with no employee and will operate from the owner’s home, then the E-2 visa will likely be rejected as a marginal enterprise. On the other hand, if a home-based business already employs a staff of U.S. workers and generates substantial revenues, then it stands a good chances of obtaining visa approval. Whether a business is considered marginal depends on its current and future economic impact on the U.S. economy. For a start-up business with no track record or job creation, the investor has to establish more than a minimal home-based operation in order to qualify for the E-2 visa.
10) Can I have a business partner?
BOBBY: Yes, you may have business partner. The E-2 visa allows a maximum of two foreign investors as 50/50 equal partners in the same business. Each partner must own at least 50% of the business. Both partners may apply for the E-2 visa as joint investors, and both investors’ spouses and unmarried children under age 21 may apply for E-2 visa as dependents.
If there are two foreign investors, then each person would contribute 50% to the investment. For example, if the total investment is $100K, then each person has to contribute $50K. The investment does not need to increase with second investor. Both investors simply split the investment amount equally.
The investor may also have U.S. business partner, as long as the E-2 investor possess 50% or more controlling ownership interest in the enterprise, and the financial contributions primarily and substantially originate from the E-2 investor.
For more information about the franchising industry, and assistance with business selection for your E2 VISA application, contact us at:
Phone: +1-760-607-6584 / +1-760-607-6585
Visit our corporate website: www.franchisewizards.com
About Franchise Wizards
We are a full service franchise consulting and development firm with extensive experience in the franchise industry. We represent over 400 different franchise brands, across the entire USA, and serve both local as well as international investors.
With so many different franchise concepts available in the United States alone, searching for the right franchise can be a daunting task. Our process takes a close look at your goals, experience, strengths, weaknesses, desired lifestyle and more to help you find the opportunities that present a realistic opportunity for long term success and happiness.
We have extensive experience helping international investors achieve their dream of immigration to the United States coupled with investment in a business, for E2 VISA or EB-5 greencard.