When applying for an E-2 visa, investors must demonstrate that they have made a substantial investment in a U.S. business and that the funds are placed at risk for the purpose of business operations. However, many investors face a significant challenge when purchasing an existing business: what happens to their money if the E-2 visa is denied?
To address this risk, many investors use escrow agreements as part of their E-2 visa process. Escrow agreements allow investors to securely hold funds until their visa is approved and to have those funds returned to them if their visa is denied, thus ensuring they meet E-2 investment requirements without taking unnecessary financial risks.
How Escrow Works in an E-2 Visa Case
When an investor wants to purchase an existing business but does not yet have their E-2 visa approved, they can place the purchase funds in an escrow account instead of transferring them directly to the seller. This creates a conditional investment agreement that protects both the buyer and seller.
The typical escrow process works as follows:
- Investor, Seller, and Escrow Agent Agreement
- The investor, business seller, and an independent escrow agent (often an attorney or financial institution) sign an escrow agreement.
- The agreement states that the purchase funds will remain in escrow until a specific condition is met. For an E-2 visa application, the only permissible condition is issuance of the E-2 visa.
- Funds Are Deposited in Escrow
- The investor deposits the agreed business purchase amount into the escrow account.
- The seller is assured that the funds exist and are ready for transfer once the conditions are met.
- Outcome Based on Visa Approval or Denial
- If the E-2 visa is approved, the funds are immediately released from escrow to the seller, and the business ownership transfers to the investor.
- If the E-2 visa is denied, the escrow agreement allows the funds to be returned to the investor, minimizing their financial risk.
Why Escrow Agreements Are Beneficial for E-2 Visa Applicants
Escrow agreements provide multiple benefits in the E-2 visa process, including:
- Reducing Investor Risk – Investors avoid losing money if their E-2 visa is denied.
- Meeting E-2 Visa “At-Risk” Investment Requirement – The use of escrow satisfies the requirement that E-2 funds must be committed and at risk. Again, the sole condition allowed in the escrow agreement is that the visa be issued.
- Providing Assurance to the Seller – The seller knows that funds are secured and ready for transfer upon visa approval.
- Demonstrating a Legitimate Investment – U.S. immigration officials recognize escrow as a valid mechanism to prove commitment to the investment.
Key Considerations for Using Escrow in an E-2 Visa Application
- The Escrow Agreement Should Be Well-Drafted
- The agreement must clearly state the sole condition under which funds will be released is that the visa be issued, and what happens in case of visa denial.
- An experienced immigration attorney should review the escrow agreement to ensure compliance with E-2 visa regulations.
- Funds Must Be Fully Committed
- Immigration officers want to see that funds are truly committed to the business, even if they are held in escrow.
- The agreement should not allow the investor to withdraw funds for reasons other than E-2 denial, or it may fail to meet the E-2 at-risk requirement.
Escrow agreements are a common and effective tool for E-2 visa investors looking to purchase an existing U.S. business while minimizing financial risk. When structured properly, escrow agreements ensure compliance with the E-2 visa “at-risk” investment requirement, providing both investors and sellers with financial security.
If you are considering an E-2 visa application and plan to use an escrow agreement, it is essential to consult with an experienced immigration attorney to ensure your investment structure aligns with U.S. immigration regulations.
