By Jason Susser
The Immigration and Nationality Act provides E-2 treaty investor nonimmigrant status for a national of any of the countries with which an appropriate treaty of commerce and navigation exists. Someone who is going to the United States to develop and direct the operations of an enterprise in which he/she has invested, or is actively in the process of investing, a substantial amount of capital may apply for a treaty investor visa (E2). As of May 1, 2019 this visa will be available for citizens of Israel.
The first step in every E visa case, is determining whether the foreign national in need of the visa and the enterprise have the same nationality – and then whether that nationality is party to the relevant treaty. Nationality of the individual is determined by his or her citizenship. In cases of dual or multiple citizenships, a person may apply under any citizenship he or she holds (the one caveat is a citizen of the UK must also establish that they have been domiciled in the UK for the previous year). The general rule to determine the nationality of the company is to see whether nationals of the treaty country own at least 50% of the company. If the company is owned by another company then the analysis must continue up the holding structure, to establish that the parent company meets the “Fifty Percent Rule.” If the company is owned 50/50 by nationals of two treaty countries, then the company must pick one nationality and use that for E visa purposes. A company cannot act as a dual citizen petitioning employees from both countries. If the company is publicly traded on one country’s exchange, then that nationality is presumed but evidence should still be submitted to explain the nationality
If a startup’s founders are from a treaty country that allows for E-2s, it can be a great option, even in very early stage ventures. As mentioned, E-2s are for entrepreneurs coming to the United States to develop and direct the operations of an enterprise in which he/she has invested, or is actively in the process of investing, a substantial amount of capital.
To qualify for an E-2 visa, you must establish the following:
(1) Requisite treaty exists;
(2) Individual and/or business possess the nationality of the treaty country;
(3) Applicant has invested or is actively in the process of investing;
(4) Enterprise is a real and operating commercial enterprise;
(5) Applicant's investment is substantial;
(6) Investment is more than a marginal one solely for earning a living;
(7) Applicant is in a position to "develop and direct" the enterprise;
(8) Applicant, if an employee, is destined to an executive/supervisory position or possesses skills essential to the firm's operations in the United States; and
(9) Applicant intends to depart the United States when the E-2 status terminates
The Foreign Affairs Manual (FAM) instructs E visa officers: “You must assess the nature of the investment transaction to determine whether a particular financial arrangement may be considered an “investment” within the meaning of INA 101(a)(15)(E)(ii). The textbook example of an E-2 investment involves the E-2 investor transferring his or her personal funds from his or her personal, foreign bank account to the new US enterprise’s bank account and thereby documenting the transfer of funds, the investment. However, the language in the FAM allows the officer to determine whether other “arrangement may be considered an ‘investment”.” This leave space for maneuvering for startups where the founders are often not personally the ones fully funding the enterprise. This is to say that many different investment strategies can work in the E-2 context.
For those not planning to fund the E-2 enterprise with their own capital in total, or in part, analysis needs to be done on whether the investment can still qualify. If you will be partially funding the company with personal wealth and assets from other individuals, funds, or corporations, then the analysis hinges around whether at least half of the equity owners will hold the same E-2 nationality. However, those going through more traditional venture capital-based fund raising are not excluded from this broad definition of investment.
For example, a startup using an investment vehicle such as a convertible note in its seed round may still be making an E-2 qualifying investment. In that scenario, the founder is from an E-2 country, and is exchanging equity (at a certain time) for capital to fund the E-2 enterprise. The E-2 applicant is essentially making his or her qualifying investment through the exchange of his or her equity for the value of the note. Sometimes these investments require further explanation of the investment but can still be approvable for E-2 purposes. This is not to say that this exact arrangement will always work, as results ten to vary by Consulate and adjudicator.
A major focus of every E-2 is the “source of funds.” The E-2 applicant must demonstrate the lawful source of his or her funds and how he or she has obtained possession and is in control of those funds. Classic examples include savings over time in a person’s home country then invested into an E-2 enterprise; or sale of a property owned in a person’s home country and then invested into an E-2 enterprise. Documenting the source of the funds, whether through savings account statements and tax returns, or proof of the ownership and sale of property are essential to the success of an application.
To qualify as an E-2 investment, the funds or assets must be “at risk.” In other words, if the business were to fail the investment would be proportionately lost. Investment capital can be based on a loan, but the loan cannot be secured by assets of the E-2 enterprise. Only personal loans may be used. Personal loans, though, may be secured by personal assets such as a second mortgage; or they may be unsecured loans which are commonly from family, friends, or business partners. In those cases, a promissory note documenting the personal loan is generally included. Low interest loans with future balloon payments are acceptable.
The funds must also be “irrevocably committed” to the E-2 enterprise. This term-of-art means that the business is either already using the investment or the company is at least very close to the start of business operations, at which point they will be used. If purchasing a business, the deal can be structured in a way that the assets are held in escrow conditioned on the issuance of the E-2 visa, but the agreement should make clear that the investor cannot receive the visa and then pull out of the investment.
It is also important to note that the investment does not have to be a cash investment. While this is a typical E-2 arrangement, the investment can be in the form of equipment, inventory, or even intellectual property. Proof of the value of the equipment or inventory should be submitted, as well as evidence of the “investment” or the inventory, such as proof of shipping the inventory to the US company. If using intellectual property as the means of investment, you will still have to document the value of the IP so the E visa unit can determine that the investment is substantial. If a market value cannot be easily determined, you should submit evidence of its value.
E-2s are not for passive investments or non-profits. They cannot be “paper organizations” or the purchase of land or other assets to simply be held. The E-2 enterprise needs to be a real and active commercial undertaking that is going to produce a service or commodity. That is not to say that the company must have revenues at the time of filing, an early stage startup can qualify. The company should be able to document though what real service or product it will be actively developing and selling for a profit.
The most common E-2 question: “How much do I have to invest?” There is no bright line rule. Instead the Department of State uses a proportionality test to determine whether the investment is substantial enough to reasonably expect the company to be successful. Substantial for E-2 purposes is:
(1) Substantial in a proportional sense, as determined through the application of the proportionality test outlined below;
(2) Sufficient to ensure the treaty investor's financial commitment to the successful operation of the enterprise; and
(3) Of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise.
The proportionality test weighs the investment amount versus the cost of the business. DOS explains that if the investment amount and the cost of the business are the same, i.e. the investment pays for 100% of the business, then investment is substantial. Since this is often not the case, “The proportionality test can best be understood as a sort of inverted sliding scale. The lower the cost of the business the higher a percentage of investment is required. On the other hand, a highly expensive business would require a lower percentage of qualifying investment.” The FAM explains that a $100,000 investment into a company that costs $100,000 would qualify, but so would a $10 million investment into a $100 million company based on the size of the investment. However, the FAM makes clear that there is no bright line rule. Many people like to refer to the $100,000 figure in the FAM, but companies with lower startup costs should be able to determine that a lower investment amount is still substantial if proportionate. To determine the cost of the business, the E visa unit will look to the sale price of an existing business. With a startup, they will look to the actual costs needed to fund the company to the point that it is operational.
The enterprise must be more than marginal. This means that is should be capable of generating enough income to provide the E-2 applicant and his or her family with more than minimal means of living. Having said that, a startup can demonstrate that it has the potential to reach such income, even though it may not have any immediate revenue. The potential should be realizable within five years. A business plan with financials projections showing more than marginal revenues within five years can demonstrate marginality.
An initial E-2 application for a start-up should have a formal business plan laying out details such as the business model, business plan, market analysis, marketing plan, operations details, hiring projections, job descriptions for key employees, and five year financial projections including sales, first year operating budget, and allocation of the invested capital. In many cases, companies already have business plans that they’ve developed for internal purposes or a pitch deck for fundraising, which can serve as a great starting point. Many E-2 applicants contract business plan writers that work specifically with immigration-related business plans since they are familiar with what the Consular Officers are looking for.
An E-2 investor must be in a position to develop and direct the E-2 enterprise. If the If the person applying for the E-2 is also the investor, then he or she can use a formal job description in the business plan to demonstrate how he or she will be developing and directing the business. For example, “As CEO, her duties include developing and implementing company policies, setting goals and procedures, and making all financial decisions for the company…” If the E-2 enterprise is owned by foreign nationals other than the applicant (covered in more detail below) or by a foreign company, then the application should explain how that foreign national or foreign corporation, the “investor” develops and directs the E-2 enterprise in the US.
One of the major benefits to the E-2 is that some employees of the company who share the same nationality as the investor (and enterprise) can also obtain E-2 visas. For example, an E-2 enterprise with Israeli nationality can obtain E-2 visas for its Israeli employees, so long as a few conditions are met. First, the FAM explains:
(1) Prospective employer must meet the nationality requirement, i.e., if an individual, the nationality of the treaty country or, if a corporation or other business organization, at least 50 percent of the ownership must have the nationality of the treaty country;
(2) Employer and the employee must have the same nationality; and
(3) Employer, if not residing outside the United States, must be maintaining “E” status in the United States.
Second, it must be determined whether the employee fits within one of the acceptable categories which include: Executives, Supervisory Employees (supervisors and managers), and Essential Employees. In some cases, a position obviously qualifies as a company executive or supervisor. In other cases, the Consular Officer will use the following criteria to make a determination:
(1) The title of the position for which the applicant is destined, its place in the firm’s organizational structure, the duties of the position, the degree to which the applicant will have ultimate control and responsibility for the firm’s overall operations or a major component thereof, the number and skill levels of the employees the applicant will supervise, the level of pay, and whether the applicant possesses qualifying executive or supervisory experience;
(2) Whether the executive or supervisory element of the position is a principal and primary function and not an incidental or collateral function. For example, if the position principally requires management skills or entails key supervisory responsibility for a large portion of a firm’s operations and only incidentally involves routine substantive staff work, an E classification would generally be appropriate. Conversely, if the position chiefly involves routine work and secondarily entails supervision of low-level employees, the position would not be termed executive or supervisory; and
(3) The weight to be accorded a given factor, which may vary from case to case. For example, the position title of “vice president” or “manager” might be of use in assessing the supervisory nature of a position if the applicant were coming to a major operation having numerous employees. However, if the applicant were coming to a small two-person office, such a title in and of itself would be of little significance.
Essential employees, on the other hand, are usually those employees that have specialized skills that company operations depend upon. Applicants should include job descriptions that detail how the skills are specialized and details on how the individual obtained the skills and is therefore qualified for the position. Understanding a foreign language or culture alone does not generally qualify a person as an essential employee, but it can be a factor in the position’s essential functions. In cases involving essential employees, the Consular Officer will consider:
(1) The experience and training necessary to achieve such skill(s)
(2) The uniqueness of such skills;
(3) The availability of U.S. workers with such skills;
(4) The salary such special expertise can command;
(5) The degree of proven expertise of the alien in the area of specialization; and
(6) The function of the job to which the alien is destined.
Essential employees do not have to prove that they have previously worked for the company or an affiliate, merely that he or she will be filling a position that is important to the success of the company. Beyond that, the person’s skillset does not have to be unavailable in the US; the analysis is based on the significance to the company. Significance to the company, though, can change as well. An early stage start-up may have essential employees tasked with fundraising, training on new technology, or launching a new initiative that may not continue to be in an essential role at a later date. Thus, an essential employee may not continue to be eligible for an E-2 once their position significantly changes.
The process of applying for an E visa has many variables. An investor or employee may apply for an E at a US Consulate or Embassy, or, if they are in the US in another lawful status, they may file a Change of Status to E-2 with USCIS. While certain situations may call for a Change of Status in the US, most people opt to file at a US Consulate, because only the Department of State can issue a visa. USCIS can only change and extend the person’s status while in the US. It is the physical E visa stamped in an individual’s passport, though, that allows him or her to travel in and out of the US, entering in E status upon each entry on the visa. If granted a Change of Status to E-2 by USCIS, the individual will still need to process a visa at a Consulate or Embassy once they leave the US in order to obtain an E visa upon which they can re-enter the US.
The process of applying for an E visa with the Department of State also varies by Consulate. Many US Consulates list on their website instructions on how to apply for an E at their post. In some cases, there are separate processes in place for Initial Company Registrations (the first time a company applies for an E), subsequent applications for employees, and dependent family members.
Some Consulates have formal procedures in place for company registration. For example, the Consulate may have one investor complete an online DS-160 visa application, pay the MRV (Machine Readable Visa) fee, and submit all the documentation to prove eligibility. Then once the E visa unit gives permission or requests any additional documents needed, the investor is notified to schedule an interview at the Consulate. The investor then attends the interview at the Consulate. Once the investor and company are approved, some Consulates register the company’s approval and issue a Notice of E-Visa Company Registration. Future employees can then apply under a more streamlined process using the registration.
When making an initial application, you must review the specific documents required by that Consulate and the guidelines for submission. Many Consulates even have directions on how they want the application tabbed. For example, the US Consulate in Tel Aviv requires E-2 applications to be as follows:
Tab A Cover Letter on company letterhead outlining eligibility
Tab B Table of Contents
Tab C Completed Form DS-156E
Tab D Evidence that the company meets the ownership requirements
Tab E Evidence of nationality of the treaty country
Tab F Evidence of Investment
Tab G Evidence that the commercial enterprise is real and operating
Tab H Evidence that the investment is substantial
Tab I Evidence that the investment is marginal
Tab J Employee’s visa application
Tab K Dependents’ visa applications
These instructions are subject to change, and applicants should always check the Consulate’s website for updates to their guidelines to ensure acceptance and adjudication of the application. Some Consulates also have restrictions on the size of the initial application. For example: Toronto – 70-pages max, Dublin – 80-pages max, and Frankfurt – 90-pages max. Each Consulate also has separate rules on what types of documents are exempt from the page count such as Tabs, forms, and biographic documents in some cases. Some Consulates will also accept e-mailed versions of the applications (usually capped at 5MB), while others require mailed applications; others request both. In the cases of electronic applications, most Consulates will accept multiple e-mails with the attachments broken into acceptable sizes.
Employees can often benefit from a more streamlined process which requires less documentation on the company, once registered. This usually reduces processing times significantly because the applicant can submit the online DS-160 visa application, pay the MRV (Machine Readable Visa) fee, and schedule an interview. Then at the interview, the employee may present (depending on the Consulate) documents such as: the DS-160 confirmation page, MRV receipt, completed form DS-156E E visa application, passport, detailed CV or resume, and signed letter from the company explaining the beneficiary’s qualifications and role with the company in the US. All E visa applicants must bring a 2x2 inch passport style photo for the printing of the E visa in his or her passport.
Dependent spouse and children are eligible for a more simplified process since they are generally just showing relationship to the primary E visa applicant or holder, and eligibility for the visa. Dependents may apply at the same time as the primary applicant, or they may apply at another date and bring proof of the primary’s E visa with them. Dependents still must complete the online DS-160 visa application, pay the MRV fee, and attend an interview. At some Consulates, children under a certain age may be exempt from the interview. At an interview, dependents usually need to present documents such as: the primary’s E visa, the DS-160 confirmation page, MRV receipt, passport, and proof of the familial relationship (i.e. marriage or birth certificates) with certified translations. They also must bring a passport style photo.
The Department of State’s visa reciprocity schedule will determine how long the visa is issued for. Five years (60 months) is usually the max. However, unlike other visa categories, Es are not restricted to a certain number of allowable years spent in the US in E status; as long as the eligibility remains, you can continue to renew an E visa. CBP will generally admit a person on an E visa for 2 years. So, a person with one year left on their E visa, for example, may be admitted for up to two years before needing to visit a US Consulate and process a visa renewal.
Applying for a Change of Status to E-2 in the US is quite different and does not vary by nationality since all changes of status are adjudicated by USCIS. For the reasons described earlier (i.e. issuance of a visa), the pros and cons of filing in the US should be seriously considered. In order to file a change of status to E-2 from the US, a person must already be in the US in a lawful status. Like other changes of status to employment-based categories, applicants submit the evidence of their eligibility for E status plus Form I-129 and the I-129 E supplement. When filing with USCIS, there are no specific instructions on tabs or page limits, but all requirements of the E must still be explained and documented (i.e. treaty nationality, substantial investment, marginality, etc.).
Changes of Status to E-2 can be premium processed with USCIS for an additional government fee – meaning the case will be adjudicated in 15 calendar days. Since the request is for a change of status, USCIS will issue a new I-94 showing the applicant is in E-2 status upon approval. USCIS will give an initial grant of up to 2 years of E-2 status. Afterwards, USCIS will continue to extend E status in 2-year increments. There is still no cap on time spent in E-2 status, so long as the person complies with his or her status and continues to be eligible for extensions.
Dependent family members that are also in the US in a lawful status may request a change of status. Form I-539 must be included for dependents. Dependents must similarly submit evidence of their eligibility and the familial relationship to the primary E holder (i.e. marriage or birth certificates) with certified translations.
In general, a treaty trader, investor, or employee may only work for the company that it he or she is approved to work with at the time the application is approved. However, he or she may also work for approved company’s parent or subsidiary so long as:
(1) Relationship between the organizations is established
(2) Subsidiary employment requires executive, supervisory, or essential skills
(3) Terms and conditions of employment have not otherwise changed.
Any substantive changes to the employment of a treaty trader, investor, or employee must be approved by USCIS. USCIS explains, “A ‘substantive change’ is defined as a fundamental change in the employer’s basic characteristics, such as, but not limited to, a merger, acquisition, or major event which affects the treaty investor or employee’s previously approved relationship with the organization.” In the case of a substantive change to the terms of employment, a new Form I-129, E supplement, and supporting documents must be filed with USCIS and approval must be granted. When amending an E for substantive changes, a request for an extension can be submitted at the same time.
As with all visa categories, careful analysis must be performed in anticipation of company mergers, acquisitions, or changes in corporate structuring. Substantive changes involving company ownership may require an amendment to an E visa. Most notably in the E context, any change in company ownership must still result in the company having at least 50% ownership by nationals of the treaty country. If, for example, an E-2 enterprise is acquired completely by an American owned company, then it no longer holds the treaty nationality – it is now a 100% US company. Therefore, any investors or employees holding E visas tied to that company are no longer eligible for E status. The eligibility ends at the time the company nationality no longer meets the requirements.
Whether applying at a US Consulate or Embassy or requesting a Change of Status with USCIS, any applicant for an E visa or E status must demonstrate an intent to depart the US when their status expires or is terminated. To do so, an applicant does not have to maintain a foreign residence or establish intent to end their E status in a specific duration of time. They must, however, express an intent to depart after the period of authorized stays. DOS states, “The alien’s expression of an unequivocal intent to depart the United States upon termination of E status is normally sufficient.” Therefore, a signed statement of intent to depart explaining your understanding of this requirement an intent to comply is normally sufficient.
The issue of intent most commonly comes up when people are trying to transition from E-2 status to permanent residence. Obtaining green cards will be covered much more in depth in the second half of the book, but some E visa holders can encounter some challenges worth noting. Many people in the US apply for their green cards through Adjustment of Status in the US (i.e., they apply to change from their nonimmigrant status to permanent resident status in the US). The FAM, however, states, “An applicant who is the beneficiary of an immigrant visa petition will need to satisfy you that his/her intent is to depart the United States at the end of his/her authorized stay, and not stay in the United States to adjust status or otherwise remain in the United States.” Thus, an immigrant visa petition can make a person ineligible for an extension of his or her E visa. This is not to say that a person cannot transition from an E visa to a green card. The green card process can also be completed at a US Consulate or Embassy through consular processing of the immigrant visa. So, this is only to note that in some cases the process should be completed abroad, and then the person may enter on the immigrant visa and become a lawful permanent resident.
Many E visa holders obtain lawful permanent residence through marriage or sponsorship by other family members. E visa holders may also obtain permanent residence through self-sponsored categories such as EB-1 Extraordinary Ability, EB-2 National Interest Waiver, and the EB-5 Immigrant Investor Program (all covered with individual chapters). An E visa holder may also be sponsor by another company in a prospective position which they will fill upon obtaining permanent residence. Transitioning from an E visa to a green card requires compliance with the E visa intent to depart and should therefore be discussed with an attorney who can help navigate that process.
As described, some dependent family members are also eligible for E-2 status. Spouses and unmarried children under 21 years old are eligible. Family members do not have to hold the same nationality as the primary E-2 to qualify. They can apply at the same time as the primary, or they may apply at a later time. In most cases, dependents will receive the same duration of status or visa validity period as the primary. E-2 spouses are eligible for work authorization, making it a much more conducive visa category compared to others. However, the primary E-2 holder obtains work authorization upon issuance of his or her E visa or change of status. Spouses, on the other hand, must enter the US and separately apply for work authorization using form I-765. While this slows down the spouses work authorization by a few months, it ultimately gives the spouse the ability to work for any employer in the US – unlike the primary E visa holder. Principals, spouses, and unmarried children under 21 may study at US schools and institutions while on E visas.