One of the most frequent questions we get from potential clients is “how much do I have to spend to qualify for an E-2 visa?” The substantial investment requirement can be difficult to understand, especially in today’s economy, where the costs of starting up certain businesses may be relatively low. This post will answer this question by discussing the substantial investment requirement of the E-2 visa, how the US Government determines whether an Investment is “substantial,” and how to prove your E-2 Investment satisfies this requirement.
For more information on the requirements of an E-2 Visa, click here.
What does “Substantial” Mean for an E-2 Visa?
According to the Immigration and Nationality Act, the term “substantial” means “such an amount of trade or capital as is established by the Secretary of State, after consultation with appropriate agencies of Government.” The Department of State’s position is that there is no set minimum dollar amount that will be considered “substantial” for E-2 purposes. The Foreign Affairs Manual defines substantial investment as an amount that is (1) substantial in a proportional sense (known as the “proportionality test”), (2) sufficient to ensure the treaty investor’s financial commitment to the successful operation of the enterprise, and (3) of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise.
How Does the Government Determine Substantiality?
The substantial investment requirement is satisfied if an investor can meet the proportionality test. The test compares the amount of qualifying funds invested to the cost of an established business at fair market value, or if the E-2 enterprise is a start-up, an estimate of the cost associated with establishing such a business. If the Investor has invested sufficient funds to ensure the successful operation of the enterprise (i.e. purchased all the necessary equipment, inventory, office space, and any other assets needed to open and run the business), then the investment is substantial according to the law.
However, in practice, many consulates still apply informal investment thresholds on top of the proportionality test. These amounts vary among different consular posts, and it is difficult to accurately determine how much will be considered a substantial amount. For example, some E-2 petitions have been denied where the investment amount was reported to be over $200,000, while some petitions with an investment amount of $50,000 have been approved. While we have obtained approvals with a $50,000 investment amount for service businesses (past results do not predict future outcome) $50,000 should be considered a low investment amount for E-2 purposes, and a more realistic minimum investment should be $100,000 or more. Furthermore, for start-up businesses with lower start-up costs, such as a consulting firm or law firm, you are expected to have spent 100% of the startup costs for the investment to be considered substantial. If your investment requirement is larger (eg. $500,000) you would have to spend 80-90% of that amount for the amount to be considered substantial.
How do I Prove My Investment Is Substantial?
In order to demonstrate that an E-2 investment is substantial, you must present documents that show you have invested 100% (or close to 100%) of the costs to establish or set up the business. For an established business, the cost is determined by its fair market purchase price and if the transaction is an arm’s length transaction, the purchase price will represent the amount required to invest. To document the investment expenditure, you would typically submit a copy of the purchase sale agreement and proof of payment to demonstrate the substantial investment. If the business is a start-up, you can provide a description of the costs associated with starting that type of business. This can include articles from trade publications that describe the cost to start up a business, a letter from a CPA describing that the entity has spent all of the funds required for this type of business, market research reports that show costs associated to start a similar business or other related proof.
To find out more about the new rules or other investor visas, contact Scott Legal, P.C.
Jose Rivera is an associate of Scott Legal, P.C. He can be reached at 212-223-2964 or by email at firstname.lastname@example.org.
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