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

investment

U.S. consulates are instructing applicants to file these five documents.

 

Editor’s note: This is part 3 of this multi-part series. Note Part 1: The U.S. Is Still an Attractive for Destination to Invest and Start a Small Business  and Part 2: What Is the Process to Becoming a Treaty Investor?

Among the E-visa’s unique features, is that it is, generally, issued by a U.S. Consulate abroad. An E-visa applicant must file a visa application with the U.S. Consulate in their residential district.

The application involves a standard (DS-160) visa application plus a treaty investor (DS-156E) supplement which asks more specifically about the enterprise the applicant is planning on establishing in the U.S., the amount of the investment, the source of the investment funds, the type of enterprise, and the number of prospective employees it will have.

Depending on the specific procedures outlined by the consulate, usually found on its website, the applicant may be required to file, along with the application, or soon, thereafter, a highly prescribed set of documents. Increasingly, consulates are instructing applicants to file their documentation through a web portal.

Again, procedures among consulates can vary, so applicants need to be prepared to navigate page and/or email file limitations that are often imposed.

The five documents required are:

1. Corporate documentation showing where the prospective treaty enterprise would be doing business, and shareholder and operating agreements explaining how the treaty enterprise will be governed and by whom.

2. Information on the source of the investment, which could involve presenting bank statements, loan and mortgage agreements,  purchase and sale agreements, and other agreements showing the transfer of investment funds to the applicant

3.  Information on the background of the treaty investor, other investors in the enterprise, and essential and supervisory employees

4. Evidence that upon visa issuance the enterprise will be in the position to commence operations, such as leases, invoices showing purchases of equipment and software, employment agreements, and agreements concluded with suppliers and vendors

5. A business plan, with financial projections over a five-year time horizon.

Although all categories of documents are important to the evaluation of the bonafides of a prospective treaty enterprise, in the author’s experience, the driving categories are the business plan and projections, and documents concerning the background and experience of the treaty investor.

The point is that it is not enough that an investor demonstrate sufficient funds at risk, but that the enterprise, itself, has a good chance of  becoming  viable, which brings to mind yet another important point:  foreign nationals who are best positioned to be granted a treaty  investor visa have demonstrated experience in the industry that would be the focus of the investor enterprise.

Persons who have little experience or training in the industry sector in question are more likely to confront higher levels of skepticism that they will have the wherewithal to run the treaty enterprise successfully. In this respect, where the prospective investor’s background in the business of the treaty enterprise is thin, the investor should consider bringing in a partner who has the requisite experience.

Along with an examiner’s evaluating the credibility of the prospective treaty investor, the business plan will also be critically important to showing the business purpose of the enterprise and how it intends on achieving its goals.

There are no prescribed guidelines about what an E-2 business plan should look like, but the business plan prescribed in the Immigrant Investor (EB-5) space is an instructive model.  EB-5 business plans are quite comprehensive and address issues that should also be considered by E-2 investors.

For the benefit of the reader, I attach an EB-5 business plan checklist. The most important items that an E-2 business plan should include are:

1. The description of the business’s product and/or service

2.  An analysis of the business’s competition, including direct competitors and those who produce products or services that could be reasonable substitutes for the products and/or services of the proposed treaty enterprise.

3.  A description of how the proposed business will produce its products or services in terms of its source of supply of materials or talent.

4.  A description of the business’s target market.

5.  Financial projections over a 5 year time horizon including cost and revenue projections.

EB-5 BUSINESS PLAN CHECKLIST

Item #1

Description of the proposed business, including description of products, services, and objectives

Item #2

Market analysis, including names of competing businesses, strengths and weaknesses of those businesses and how the prospective business is expected to measure up

Item #3

Comparison of competitor products, strengths and weaknesses of those products vis a vis prospective business’s products and services, including discussion of price structures, branding, supply chains, etc.

Item #4

Description of target market and prospective customers

Item #5

Description of required, permits, and licenses

Item #6

Describe manufacturing and production processes

Item #7

Describe materials sourcing, i.e. supply, costs of materials, etc.

Item #8

Describe any contracts entered into relevant to the production and distribution of products and services

Item #9

Description of marketing strategy, including pricing of product or service, advertising, customer service support, etc.

Item #10

Description of business’s organizational structure

Item #11

Description of staffing requirements, hiring time table, description of positions, training programs, etc.

Item #12

Background of investor in connection with the type of prospective EB-5 Investment and EB-5 sponsor (history and experience in the business)

Item #13

Financial projections for business including projections of sales, costs and profits and detailed explanation for why these numbers are reasonable

Generally, each U.S. consulate provides comprehensive information (which can be found on its website) concerning E-2 requirements, what the E-2 presentation should look like, and processing procedures.

While processing times can vary considerably, once all E-2 materials have been filed, including the visa application, E-2 Investor Supplement, and business documentation, an interview is, on average, scheduled within 90 days.

Consulates can vary materially about procedures regarding renewals of E-2 visas and the issuance E-2 visas to essential employees and managers.

Some consulates register treaty enterprises upon E-2 visa application approval with the idea that registered enterprises would not have to resubmit information concerning the bonafides of the treaty enterprise every time an employee seeks E-2 status, or a new investor comes on board.

Consulates that have a registration procedure usually require the enterprise’s registration to be renewed every two years. Consulates that do not have a registration procedure (which oftentimes are consulates, which, historically, have more minimal E-2 traffic), can request complete corporate documentation as to the bonafides of the enterprise in connection with every E visa application filed in connection with that enterprise.

The Takeaway:

As the discussion above highlights, the E-2 process can be involved, and is not for the faint of heart, but can provide investors from treaty nations a significant opportunity to establish and manage  businesses in the United States in a time frame considerably shorter, and at a cost materially less, than working through the immigrant investor process.

In our next article, we will discuss in more detail issues regarding E-2 processing, including how to hold the investment capital pending E-2 approval, source of funds documentation, and when expert opinion should be presented.

Related articles:

Part 1: The U.S. Is Still an Attractive for Destination to Invest and Start a Small Business -The E-2 Treaty Investor Visa enables  international  investment in U.S. small businesses- Part I For foreign business persons

Part 2: What Is the Process to Becoming a Treaty Investor? E-2 Visas for Foreign Investors Part 2 Editor’s note: This is part 2 of a multi-part series. Part 1 covered The E-2 Treaty Investor Visa enables  international  investment in U.S. small businesses.