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.  The U.S. Is Still An Attractive For Destination To Invest And Start A Small Business

The E-2 nonimmigrant visa allows foreign investors to come and live in the United States to invest in, direct, and manage their U.S. based businesses. Although the E-2 is not a gateway to permanent residency, it can provide qualified entrepreneurs an opportunity to stay in the U.S. for a potentially unlimited period to build their businesses. As discussed in Part 1 of our Treaty Investor series, not all foreign nationals qualify for this visa category. Those that do must be citizens of nations that have bilateral treaties with the U.S. that expressly provide for E-2 benefits. In the Latin American region, nationals from Mexico, Colombia, Panama, Paraguay, Costa Rica, and Honduras, currently, can qualify for E-2 status.

The essential criteria to qualify for the E-2 is that the applicant be a national of a treaty country, the prospective investment is a “substantial investment,” and the investment capital used to fund the investment is “at risk” of loss.

Now let us wade into the weeds by answering a few questions.     

1. What or who can be a treaty national and what are the conditions for treaty nationality?

Treaty nationals are usually individuals (called “Treaty Nationals”), who are citizens of a nation (called the “Treaty Nation,” or “Treaty Country”), which has entered into a bilateral agreement with the United States that provides for treaty national status.

The treaty enterprise is the prospective business in the United States that the treaty national wants to develop. Not only must the investor be a treaty national, but the prospective treaty enterprise must also have the nationality of the treaty investor.

But how does one determine that?

The answer is that one looks to the nationality of the owners of the prospective treaty enterprise.

Under E-2 regulations, a treaty enterprise must be at least 50% owned by qualified treaty nationals and be effectively controlled by treaty nationals.

At the beginning of an enterprise’s life cycle, maintaining treaty national control is manageable, even where minority partners, who are not treaty nationals, are involved, as long as those partners collectively control a minority of shares or membership interest, but the situation can become tricky as the enterprise grows and new investors are brought in, necessarily diluting the treaty investor’s ownership interest.

The treaty investor is encouraged not to wait for this situation to occur, but to work with immigration counsel from the beginning to plan out how the company may be restructured after a certain point in time to help the investor preserve his treaty national status. The upshot is that should a treaty national lose control of their enterprise, this could result in their falling out of status and, ultimately, becoming deportable.

Although many treaty investors are individuals, often investing through companies

Oftentimes structured as limited liability companies, treaty investors can also be other companies (“Treaty Investor Companies”) holding the treaty nationality of the treaty nation in question. As in the case of the treaty enterprise, the treaty investor company must be at least 50% owned, and controlled by treaty nationals.

In addition to individuals and companies’ qualifying for the E-2 visa, employees also holding treaty nationality may be eligible for E-2 visas as “essential” or “supervisory” employees.

Significantly, a treaty employee does not need to have been previously employed by the treaty investor company; nor would a treaty employee have to meet qualifying criteria, like a baccalaureate in a specialty occupation; nor is it required that treaty employees have been employed previously by the treaty investor company in a supervisory or essential capacity.

2. What is the process for becoming a treaty investor?

The treaty investor visa, and its counterpart, the treaty trader visa (which will be the subject of a separate article) are issued by the U.S. consulate located in the consular district of the prospective foreign national applicant.

It is not required that the Department of Homeland Security, in the United States, approve a petition as a precondition to applying for the E-2 visa. An E-visa is valid for a length of time that is determined by Reciprocity Tables published by the U.S. Department of State.

According to the current table, for qualifying Latin American treaty nations, the period of E-2 validity is 60 months, except Mexico, where the E-2 visa is valid for only 12-months. It is important to understand the relationship between the E-2 visa’s period of validity and the E-2 treaty investor’s period of valid status in the United States.

The Beneficiary

A beneficiary of an E-2 visa, valid for 60 months, does not have to obtain an extension of that visa for the 60-month term.

During the term, the E-2 investor will be able to enter the U.S. and exit the U.S. without limitation. Under Immigration Service regulations, E-2 beneficiaries shall be granted a two-year term of stay upon admission. Every time an E-2 leaves the U.S., and then re-enters, the E-2 beneficiary will be granted a new period of stay up to 2 years. To re-iterate:

While an E-2 visa, valid for 5 years, will allow the beneficiary leave to enter and leave the U.S. for a period of 5 years, upon every admission to the U.S., the I-94 Arrival/Departure Document, which governs how long a foreign national can stay in the U.S., will, generally, indicate a term of stay of 2 years.

It is important to note that if, at the end of a two-year term of stay, there is still time left on the E-2 visa, the beneficiary may be able to obtain a new two-year term of stay simply by leaving and re-entering the U.S.

If, however, at the time of the expiration of the two-year term of stay, the E-2 visa has expired, it would be necessary for the treaty investor to renew their visa at the relevant U.S. consulate abroad, or in advance of the expiration date seek an extension of E-2 status from the U.S. Department of Homeland Security.

What happens if a treaty investor is admitted to the U.S. for two years and the next day their visa expires, or otherwise the treaty investor obtains an extension of their E-2 status in the United States and subsequently their visa expires?

In both these cases, the treaty investor would be able to work and live in the U.S. for the balance of the time allowable under their Arrival/Departure document, but then upon leaving the U.S. would need to obtain an extension of the E-2 visa in order to be readmitted to the U.S. for another term of stay.

The bottom line is that managing E-2 status can become complicated so that treaty investors should be in continuous communication with their immigration counsel to ensure that there is not an inadvertent break in status.

In our next article we will discuss how to apply for an E-2 visa.

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The U.S. Is Still An Attractive For Destination To Invest And Start A Small Business

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