E2 Visa Lawyer – Not only cash, Other Financial Transactions as Investments

Since my last Blog article on E2 visas, I have been getting numerous emails about this hot topic from across the globe. Investors are anxious to come, but need the most up to date information about the E2 visa as a way to relocate and start a business in America.

In this article I will discuss alternative financial transactions as investments. In addition to cash, payments in the form of leases or rents for property or equipment may be calculated toward the investment in an amount limited to the funds devoted to that item in any one month, since the remaining payments will presumably be paid out of earnings from the treaty business. However, more than one month of payments may be counted if they are made in advance. For example, if the treaty investor prepays his or her equipment lease for one year, the entire year’s worth of payments may be counted as part of the qualifying investment.

The amount spent for the purchase of equipment and for inventory already in the possession of the treaty investor may be counted as part of the qualifying investment. The value of goods or equipment transferred to the United States may be considered part of the qualifying investment, if it can be demonstrated that the goods or machinery will be put to use in an ongoing commercial enterprise. The treaty investor must establish that the purchased goods or equipment are for business, not personal purposes. While a company car may not meet this burden because it may also be used for personal purposes, inventory or industrial equipment certainly will.

Established Business Purchase

Where applicant is seeking E-2 status based on an established business that he or she has operated for an extended period of time (perhaps under a different nonimmigrant status), it is sometimes difficult to document the investment. In the author’s opinion, it is not enough to simply show the current market value of the business as evidence that an investment has been made. Practitioners should first document the initial capital contribution made to the treaty business and then document that the proportionality of the investment is still sufficient at the time of the application.

Where the applicant has operated an established business for a period of time, much of the investment will be in the form of retained earnings. In such cases, the investment may not be considered substantial unless retained earnings are also counted. DOS has expressed a willingness to consider retained earnings as part of the qualifying investment. Further, in my experience retained earnings will be considered part of the qualifying investment.

In the EB-5 immigrant investor context, USCIS often takes the position that retained earnings are not part of the investment because the capital is not personal to the investor (even if the corporate entity is 100 percent owned and controlled by the investor). It instead requires that investor to personally receive the retained earnings (i.e., as a dividend), pay income tax on the income, and then reinvest the funds into the corporation. However, the negative tax implications often make this very undesirable. Fortunately, DOS appears to take a more relaxed position in E-2 context.

More on this topic in future posts.