The best first step is for the potential investor to obtain input and develop a game plan.

This is Part 4 of a discussion concerning E-2 treaty investor visas. This installment focuses on specific considerations that should inform the application process. Part1: The U.S. Is Still an Attractive for Destination to Invest and Start a Small Business, Part2: What Is the Process to Becoming a Treaty Investor?, Part 3: The U.S. Attracts Foreign Investors, but What Are the Requirements?

In our last three segments on the treaty investor visa, we discussed the visa application process, and touched on documentary requirements. In this article, I want to address a number of considerations that frequently come up as potential investors develop their presentations.

1. Escrow Agreements

A treaty investor is not required to inject her investment into the treaty enterprise before an E-2 visa is granted.

The way to put funds “at risk” without committing funds to an enterprise, in advance of visa application approval, is to convey the funds to an escrow account subject to an agreement providing that upon visa approval, the funds shall be conveyed to the treaty enterprise.

In many circumstances, banks are used as escrow agents, obligated to hold the funds and only to release them when specific conditions are met.  However, where relatively smaller investments are being made, the writer has experienced success in having the treaty investor enter into an escrow agreement with the treaty enterprise itself.

What is required is an operating company, a partner who would be able to sign the agreement on behalf of the company and be responsible for safeguarding the funds, and the investment fund’s being segregated from operating funds into a separate, dedicated account.

2. Source of Funds

Detailed documentation needs to be submitted, tracking the source of investment funds.

If the funds are being drawn from the savings of the investor, wage statements, tax returns and bank statements should be produced to show where the funds came from, and how they have been held. If the funds have been derived from the sale of a property, documentation concerning the sale will need to be provided, including documents demonstrating that the investor owned the property that was liquidated.

If an investor is investing funds that have been loaned to her, the investor will need to provide all documents proving up the loan and how the loan was secured by the investor’s own assets. If investment funds were provided to the investor as a gift, documents establishing the source of funds that were gifted should be provided.

3. Investor’s Background

As explained in the last article, a critical part of the E-2 visa application process is for the investor to show that she has the background to direct and manage the prospective treaty enterprise.

The investor’s resume, diplomas, transcripts, documentation showing work experience in the relevant field, etc., should be provided. In instances where the investor may have a background in management, but not specific experience in the industry sector of the prospective treaty enterprise, information about the backgrounds of prospective partners and employees who may have the requisite academic background and experience should be provided.

4. “Substantial Investment’ Evidence

As explained in our initial article of this series, one of the pre-requisite qualifications for E-2 status is that the investor is making a “substantial” investment in a treaty enterprise. What is a “substantial” investment will depend on the type of enterprise at issue.

If the treaty investor has a background in the type of enterprise being developed, the investor should provide documentation relevant to previous, similar projects to show that the investment funds to be committed would be enough to jump start the treaty enterprise. Input from persons, other than the treaty investor, with experience in the relevant field should also weigh in on the issue of substantiality.

Such persons could be other businesspersons as well as academics. The point is that the investor has the burden of showing that an investment constitutes a “substantial investment” so should carefully reflect on the evidence that can be presented to prove this up.

5. Business Plan Projections

E-2 guidelines require that investors submit 5-year financial projections to prove up the potential viability of the prospective enterprise.

It is important that these projections are based in reality, such as the financials of an existing enterprise that could serve as a financial model. If the investor does not have a background in the prospective business, an economist should be retained to help develop the projections. The point is that financial projections should not be speculative.

The assumptions underlying the projections need to have some reasonable factual basis.

6. The Takeaway

The E-2 visa is potentially an excellent nonimmigrant visa to consider if one’s objective is to establish, manage, and direct a U.S. based enterprise, but the visa application process has its complexities, and an E-2 visa application can take several months to prepare.

The best first step is for the potential investor to obtain input from qualified immigration counsel about E-2 standards and the best approach to developing the evidence required to meet them.

Related articles:

Part1: The U.S. Is Still an Attractive for Destination to Invest and Start a Small Business

Part2: What Is the Process to Becoming a Treaty Investor?

Part 3: The U.S. Attracts Foreign Investors, but What Are the Requirements?