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How can an E-2 investor applicant who does not plan to hire employees for at least one year satisfy the “develop and direct” requirement?

By December 1, 2020May 14th, 2021E-2 Visa, Immigration, Investor Visas

I filed an E-2 investor visa petition with USCIS and received a Request for Evidence asking that I demonstrate that I will “develop and direct” the business. I won’t be hiring employees for at least a year after starting the business. What does the develop and direct requirement entail, and how can I provide sufficient evidence to USCIS?

To qualify for an E-2 visa, the applicant must demonstrate that they are in a position to “solely direct and develop” the E-2 enterprise. USCIS takes the position that this means that you must not only own a controlling interest in the business, but that you must also actively participate in the day-to-day running and control of the E-2 company.

What does the law say?

For helpful background on the E-2 visa requirements, see here.

8 CFR 214.2(e)(16) states, in full:

“An alien seeking classification as a treaty investor (or, in the case of an employee of a treaty investor, the owner of the treaty enterprise) must demonstrate that he or she does or will develop and direct the investment enterprise. Such an applicant must establish that he or she controls the enterprise by demonstrating ownership of at least 50 percent of the enterprise, by possessing operational control through a managerial position or other corporate device, or by other means.”

The regulations therefore make clear that the applicant has several options to demonstrate that she will develop and direct the enterprise. She may: “demonstrat[e] ownership of at least 50 percent of the enterprise, possess[] operational control through a managerial position or other corporate device, or by other means.” By using “or,” the regulations mandate that the applicant need only satisfy one of the three options. In other words, whether the applicant exercises day-to-day operational control of the business should only be relevant if the applicant does not own a controlling share of the business.

The Request for Evidence suggests the requirement is broader than what the regulations say. Is USCIS’s interpretation consistent with the law?

Unfortunately, USCIS reads this provision extremely broadly. There is a compelling argument that the USCIS’s position is inconsistent with the law. We have seen Requests for Evidence (RFEs) in which USCIS conflates the “develop and direct” requirement with other requirements in order to raise questions – even after the applicant has shown that she owns a controlling interest in the business – about whether the investment is substantial, whether the enterprise is marginal, and whether the applicant’s role will be principally and primarily executive in nature.

It is important to note here that USCIS is uniquely broad in its application of this provision. Therefore, it may be advisable to apply for an E-2 visa through a consulate rather than through USCIS. USCIS, in particular, has been known to issue RFEs in cases where service-oriented businesses (for example, a consulting firm) list the investor as one of the primary service providers. This appears to be an increasing trend and requires careful consideration.

Unfortunately, I have already filed with USCIS and received an RFE. How can I show that I am in a position to “control” the E-2 enterprise?

The question of whether you are in a position to control the enterprise typically boils down to whether you have an ownership stake in it. Usually, you should be able to demonstrate that you own at least 50% of the company (through, for example, stock ownership certificates, articles of incorporation, or similar documentation), which would give you the authority to make decisions.

The applicant should also show that the purchase price for the business (again, at least 50% ownership) is sufficient to “support the likelihood that the treaty investor will successfully develop and direct the enterprise.” (8 CFR 212.2(14)(iii)). The amount invested should, as required per the substantiality requirement at 8 CFR 212.2(14), be “substantial in relationship to the total cost of … purchasing an established enterprise” and “sufficient to ensure the treaty investor’s financial commitment to the successful operation of the enterprise.”

Learn more about whether your investment amount is substantial here.

How can I show that my role will be primarily executive in nature, especially when I don’t plan to hire employees for at least the first year? Since I’ll be the only employee, can I perform menial tasks, in addition to activities that are executive in nature?

Activities that are clearly “executive” in nature include business management activities such as the daily management of personnel and business operations, the training and hiring of employees, the management of the company’s finances, and business development activities (such as directing marketing activities, pursuing and closing client leads, and meeting with prospective clients).

Especially in service-oriented or small businesses, it can be difficult to show that you are performing work that is “solely” focused on developing and directing the E-2 company. Managers at small businesses often perform various roles, where some of the activity may be focused on providing goods or services to customers (for example, working a cash register during a sale or consulting with a client during a meeting).

However, courts have held that an applicant may perform some non-executive tasks so long as she primarily performs executive activities. For example, in the Ninth Circuit case Lauvik v. INS, Mr. Lauvik, a treaty investor from Norway, purchased a motel in the state of Washington. He described his job duties as doing all work and repairs, renting the rooms, and doing yard work and plumbing. The government argued that by engaging in – and competing in the job market for – skilled and unskilled labor, Mr. Lauvik violated his treaty investor status. The court disagreed. The court recognized that a treaty investor must “compete[] with other entrepreneurs to sell goods and services” and not “compete directly in the market as a skilled or unskilled laborer.” But the court then held that Mr. Lauvik actually can “perform some menial tasks” without violating his treaty investor status as long as he “primarily acts to direct, manage, and protect his investment.” The court noted that there is a spectrum, and reasoned that Mr. Lauvik is more like a motel owner “who competes with other entrepreneurs for the sale of rooms” than he is like a chef “who takes jobs away from American citizens” or like a dry cleaner “who is paid for her labor.” 910 F.2d 658, 661-662.

Therefore, it is important that the activities of the E-2 investor be primarily focused on business management and development. Thus, an investor might not qualify for the E-2 visa if they plan to engage primarily in “hands-on” work, such as working the cash register, stocking shelves at a convenience store, or working primarily on consulting projects as the service provider. However, the applicant can perform such duties if they are incidental to their role in developing and directing the business.

One approach the applicant might take is to provide to the government a spreadsheet that breaks down each of the treaty investor’s tasks, with a “percent of total time” allocated to each task. This can be an effective tool to show the government that while the applicant might spend some time on menial tasks, the majority of her time is, in fact, spent on directing, managing, and protecting the business.

For more information on the “develop and direct” requirement, see here.

How can I satisfy this “marginality” requirement when I do not plan to hire employees for at least the first year of doing business?

First, note that the law establishing the E-2 visa actually does not require that the applicant hire individuals in the first year. Instead, the law states that the business must have “the present or future capacity to generate more than enough income to provide a minimal living for the treaty investor and his or her family” that should “generally be realizable within 5 years” from the date the applicant starts normal business activities. 8 CFR 214.2(e)(15).

Those applicants who do not plan to hire employees in the first year of business can strengthen their applications by providing a business plan that shows a 5-year growth trajectory that will, ideally, result in the hiring of employees within that 5-year timeframe. The business plan can also provide realistic projections of the future payroll – ideally reflecting that, over time, the company will generate revenues that will be channeled toward hiring and employing employees.

Are there other ways to address this RFE?

Yes, you can usually reapply through a consulate. USCIS tends to impose burdensome – and, as seen here, sometimes unsupported – requirements regarding the develop and direct requirement. Consulates tend to more closely stick to the law in this respect. As a result, if you do not plan to hire employees in the first year of doing business, you might consider applying through a consulate.

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