The E-2 Visa and Substantial Investment

Why Must the Investment be “Substantial”?

Under the regulations for a an E-2 Treaty Investor, the applicant's investment must be substantial. This is to ensure to a reasonable extent, that the business invested in is not speculative and that it either is, or soon will be a successful enterprise.

These regulations relating to the amount (and character) of invested funds are there to prevent risky undertakings and so that the investment is unquestionably committed to the success of the business.

What is a Substantial Investment?

There is no set dollar figure that constitutes a minimum amount of investment to be considered substantial for E-2 visa purposes. Many clients ask “how much is the minimum that I must invest?” but the answer is that there is no set monetary amount. An investor should contact an attorney that has knowledge in this area in order to determine whether they have a strong E-2 Treaty Investment visa case.

The regulations interpret “substantial” investment as follows:

  1. Application of the Proportionality Test – i.e. whether it is substantial in relation to the total cost of either purchasing an established enterprise, or creating the type of enterprise under consideration;

  2. The investment is sufficient to ensure the treaty investor's financial commitment to the successful operation of an enterprise; &

  3. The investment is of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise.

What is Meant by the Proportionality Test?

The amount invested must be weighed against either:

  • The cost of an established business (generally its purchase price); or

  • The cost of a newly created business i.e. the actual cost needed to establish such a business to the point of being operational.

We do this by assessing the percentage of investment in relation to the cost of the business. For instance, if the two figures are the same (investment and cost/value), the E-2 Treaty Investor has invested 100% of the needed funds for the business. This is “substantial.”

In general, the lower the cost of the business, the higher a percentage of investment is required. We can compare this to a highly expensive business, which would require a lower percentage. Unfortunately there are no bright line percentages that exist in order for the investment to be considered substantial. If for example we are dealing with a small business, with a value of $100,000 or less, generally we are looking to see an investment of 100% or higher.

How do you Determine the Value of a Business?

The value (cost) of a business is dependant on the nature of an enterprise. For example, a manufacturing business will likely cost a lot more to purchase or operate compared to a consulting business or an ongoing commercial enterprise.

This suggests that the cost of a business per se are not independently relevant or determinative of qualifying for E-2 Treaty Investor status, so long as the other E-2 visa requirements are met, the investor should still qualify for the E-2 visa. However, please consider that a relatively low monetary investment, despite potentially meeting the “proportionality” test, may not meet the other "substantial" elements, as well as the other requirements of an E-2 Treaty Investor under the regulations.

The E-2 Treaty Investor's Commitment to Successful Operation

The E-2 visa unit at the US embassy will be assessing the extent of the investor's commitment to the successful operation in view of the amount invested. It makes sense that if an investor invests more funds, they are more committed and have taken a higher risk. The capital, however, cannot be merely sitting there in the US business bank account. The embassy wants to see that as much of the funds have already been committed.

This is just a brief look at one of the requirements for an E-2 Treaty Investor per the regulations, 9 FAM 41.51. It is advised that you always consult a licensed US attorney regarding your particular investment and case.

Please call our office for an initial complimentary evaluation of your case on +44 (0)203 102 7966 or send an enquiry via our website.