
You have done your research and found a business that is perfect for an E-2 visa. The owner of the business is willing to sell you a majority stake in the business for $100,000. Since he plans to put these funds back into the business, he asks that you transfer the funds directly to the business bank account, rather than to his personal account. Can you do that, or would doing so create risk that the E-2 visa application will be denied?
In this post, we will consider this question, which requires that we take a close look at the E-2 substantial investment requirement.
A Review of the E-2 Substantial Investment Requirement
One of the fundamental requirements for an E-2 visa is that the applicant must invest their funds into the business. The funds must actually be “at risk,” meaning that they are subject to loss if the business does not do well (as described in our earlier post here). The funds must also be “irrevocably committed,” which is the reason why it is not sufficient for the funds to simply be transferred to the business bank account as working capital (as described in an earlier post here).
The Substantial Investment Requirement in the Context of a Business Purchase
It is easy to imagine how this requirement applies in practice when the E-2 applicant is starting a new company: they must actually spend their personal funds on the various items that the business needs to become operational.
However, it is less clear how the requirement applies when the E-2 visa applicant is purchasing an ownership share of an existing business, and the seller will remain a co-owner. Returning to our example at the start of this post, would the E-2 visa applicant satisfy the substantial investment requirement by transferring his $100,000 into the business bank account and submitting the E-2 visa application with the funds remaining in that account as working capital? Would the application be stronger if those funds have been spent by the business before the E-2 visa application is submitted? Or is the only option for the E-2 visa application to transfer his funds to the seller’s personal account (even if the seller immediately transfers those funds into the business bank account)?
Let’s take a look at each option, below.
Option 1 (Highest Risk of Denial): E-2 Applicant Transfers Funds to the Business Bank Account as Working Capital
The option with the highest risk of denial would be for the E-2 applicant to transfer the $100,000 purchase amount directly to the E-2 company’s business bank account, and not to spend the funds before the E-2 visa application is submitted.
This is risky because the funds are arguably not “at risk” nor “irrevocably committed.” After all, the E-2 applicant, as majority owner of the company, arguably has the power to simply transfer the funds from the business bank account back to his personal account. It would likely be difficult for the E-2 applicant to convince the consular officer that the existence of a minority owner alone would cause the funds to be at risk and irrevocably committed – additional action showing that the funds are truly at risk and irrevocably committed is recommended.
Option 2 (Less Risk of Denial): E-2 Applicant Transfers Funds to the Business Bank Account, and the Business Then Spends the Funds on Business Expenses
One way that the risk of Option 1 can be mitigated is if the business were to spend the $100,000 on business expenses before the E-2 visa application is submitted. Perhaps the business will expand its marketing campaign, hire an additional employee, or secure larger office space. By showing the consular officer that the $100,000 was spent on these or other business expenses before the E-2 visa application is submitted, the E-2 applicant can show that the funds were irrevocably committed and are at risk should the business not succeed.
Option 3 (Less Risk of Denial): E-2 Applicant Transfers Funds to the Seller Rather Than to the Business Bank Account
Another option that would reduce the risk of denial is for the E-2 applicant to transfer the $100,000 purchase price directly to the seller, rather than to the company’s business bank account. By doing so, and providing documentation showing the movement of funds from the applicant’s personal account to the seller’s personal account, the applicant can demonstrate that the funds have been irrevocably committed and put at risk.
Would the seller then be able to transfer the funds to the company’s business bank account? Yes – as long as the applicant can demonstrate with documentation that the funds were transferred to the seller, what the seller chooses to do with those funds is usually not scrutinized by the consular officer.
This being said, it is important to note that this is one area in which the relationship between the seller and the E-2 applicant can be relevant. For example, if the seller and E-2 applicant are siblings or related in some other way, the consular officer could be skeptical about whether the funds that were transferred to the seller were actually irrevocably committed and placed at risk. The applicant would want to be prepared to show that the transaction was legitimate and fully documented, and that the nature of the transaction was no different from what would have occurred if two unrelated, neutral parties had engaged in the purchase and sale.
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