E-2 Visas: The Gateway to US Expansion for SMEs

Are you a SME (small and medium-sized enterprise) looking to expand in the US market? For investors and entrepreneurs seeking opportunities in the US, the E-2 visa is one of the most ideal options to live and work in the US while running their business, whether a startup company or an established business.

Keshav Masani, Attorney at Law at Samartin and Friends, explains why...

What is the E-2 treaty investor visa, and why is it ideal for SMEs?

The E-2 Treaty Investor visa is only available to individuals from countries that have treaties with the United States which encourage economic cooperation between their countries. Fortunately, the UK and the US have entered into a treaty that provides for the basis of the E-2 visa for UK nationals.

E-2 visas are available to individuals to direct and develop a US enterprise that they have invested a substantial amount of capital in. However, E-2 visas aren’t limited to individual investors, as it also works for companies that have set up a US subsidiary. If the ‘investor’ is a company rather than a person, employees of that company can apply for visas to work in the US as an executive, manager, or essential employee of the US company.

The E-2 visa is a great option for SMEs as a result of its flexibility. Fortunately, there is no specified amount that is required to be invested (as the investment is relative to the type of business), which makes it an ideal visa for a range of industries. Further, the investment can be utilized to set up a US business or can be done by investing into an existing business (such as purchasing a US company that’s already operating), which means that this visa can be tailored to an investor’s individual requirements and objectives.

Requirements, benefits, and common challenges:

Requirements

Compared to other visa categories, the E-2 visa is unique in that it is entirely processed at a consular post abroad, which results in less bureaucratic ‘red tape’ involved. Typically, the investor should apply at a consular post where they are based, so in this case UK investors (both individuals and companies) would apply at the US Embassy in London, the post in the UK that processes E-2s.

The Embassy in London requires that anyone who applies for an E-2 visa is registered with the Embassy first, which involves submitting an application to show that the company meets all the requirements outlined below. Once the company is registered, the process is much more streamlined for subsequent applicants (such as employees), making it a great vehicle to move multiple employes to the US.

To qualify for the E-2, the investor needs to meet a number of requirements. The first is demonstrating that the US business is at least 50 per cent owned by nationals of the treaty country. For an individual investor, this is usually straightforward. If the business is a subsidiary of a UK business, the ownership of the UK business needs to be at least 50 per cent UK owned. If the business is in turn owned by another entity, the ownership needs to be traced back to the ultimate owners of the business.

The investor also needs to demonstrate that they have invested a substantial amount of capital into the US business. There’s no specified amount of money that needs to be invested, but rather the investment is relative to the type of business in question. To qualify for the E-2, the investment needs to be ‘at risk’ which means that funds have been irrevocably committed (i.e. spent) towards the US business.

The US business needs to be ‘real and operating’, which means that the US business is actively doing business in the US or that will imminently become operational.  Typically, this means that the business is more than a shell company and actually produces a product or provides a service. Further, the investor also needs to show that the US business will be more than a marginal business. What this means is that the US company has the present or future capacity to make a significant economic contribution, which is usually shown by the ability to create jobs for US workers or generate significant revenue over the course of several years.

Benefits

Unlike other options for individuals looking to invest in a US business (such as the EB-5 immigrant investor program), the E-2 has no minimum amount that the investor needs to spend. Rather, the investment is relative to the type of business in question, and the amount of qualifying funds invested are weighed against the cost of the business. In other words, applicants need to show how much it costs to set up the type of business that they operate, and they need to show that the amount they have invested is substantial given the nature of the business.

For a tech-startup, or a services-based business where the cost to set up a business may be low, the E-2 is an excellent option. The business may meet the requirement simply by spending the amount it would typically cost to set up a business of similar nature. For businesses that have very high setup costs (for instance, businesses that require several million dollars’ worth of costs), the E-2 is still a suitable option, because spending a substantial amount of money (even if not the full setup costs) could still be a qualifying investment.

Aside from the flexible nature of the investment, E-2 visas can be renewed indefinitely, provided all the requirements continue to be met. Further, there is no annual limit on the number of E-2 visas that can be issued (unlike other visa categories) and it can be issued for a maximum of five years, making it a longer visa than other options for startups, such as the L-1 intracompany transfer visa or the O-1 visa for individuals with extraordinary ability.

The E-2 is a great option for individuals with families as well. Spouses and children under 21 can apply as dependents, and spouses of E-2 visa holders can work in the US without needing to apply for any further work authorization in the US.

While the E-2 is a nonimmigrant visa (which means that the idea is that applicant doesn’t intend to live in the US permanently at the time of application), it may be possible to move to a green card later on if plans change. While this depends on a number of factors, it makes the E-2 a flexible option for those who may be interested in seeking permanent residency in the US.

Common Challenges

One of the long-term challenges of the E-2 visa is ensuring the business remains majority owned by treaty nationals. This isn’t typically a challenge for an individual investor or a company that is only owned by a few individuals. For some startups, multiple rounds of funding can sometimes have an impact on the company’s ownership, so it’s important to bear this in mind when constructing a long-term US immigration strategy.

As the E-2 visa has its roots in investment, the premise of the visa is that the money that has been spent will ultimately lead to long-term growth of the business, whether by generating revenue, working with US clients, and/or hiring US workers. For UK nationals, the E-2 registration and applicant’s visas need to be renewed every five years, at which point the investor needs to resubmit the application to show that business is growing in the US. As such, consular posts will look closely at US operations to determine whether the business continues to qualify as an E-2 investor company.

Case Studies of successful SMEs that leveraged the E-2 visa

The value of the E-2 visa lies in its flexibility to cater to a range of business across a variety of sectors. Here are several examples of businesses that have harnessed the E-2 visa to successfully expand into the US market.

Tech-startup:

The client was a software as a service (SaaS) company that provided specialist software for use in the insurance industry. In this case, the company’s Chief Operating Officer and family had applied for visas to relocate to the US to set up the company. The investment in this case was made up of legal fees, payroll for US employees and payments to US-based contractors, as well as marketing and tax advice. The company also had funds set aside to support the business for short-term operational costs. While cash can’t form the basis of the investment (as the funds need to be spent), this type of financial support is helpful to show that the business has support going forward and makes for an overall larger investment figure.

Specialist recruitment consultancy:

The company was a recruitment consultancy with a specialist focus on placing executives in the legal, technology, and finance sectors. The company wanted to send one of their specialist consultants to the US who was in charge of driving their US expansion. In this case, the company leased an office in Miami to demonstrate investment, as well as tax advice, incorporation, and professional services fees towards the company’s US setup.

Retailer of specialist equipment in the construction industry:

The company was a family-owned business that sold specialist equipment to clients in the construction industry and their CEO applied for a visa in order to direct the US business. Due to increased demand from US clients, the company set up a US entity. In this case, the company demonstrated investment by shipping inventory (such as machinery) to the US, as well as office equipment, and the cost of incorporation. The company also leased warehouses and had US employees on payroll, all of which contributed to the overall investment figure.

Insights into navigating political uncertainty

With the E-2 being a treaty-based visa, it is rooted in the US’s diplomatic relationships with other countries. Despite some political uncertainty, the E-2 will likely remain an attractive option for UK nationals seeking to expand their businesses to the US market. Regardless of the administration in office, the US and the UK have long enjoyed strong diplomatic relations. As a visa category that attracts foreign investment to the US with a view to creating jobs for US workers and generating revenue, it is also likely to remain a viable option for investors regardless of any political changes that may come into effect.

The E-2 visa is therefore a useful option for entrepreneurs and investors looking to expand into the US business. It caters to a wide range of businesses as well as individual investors and makes for a great way to transfer employees to the US, ranging from senior executives to essential employees. If you’re looking to learn more about the E-2 visa, or have any questions about immigration options for your business, reach out to us on info@samartinandfriends.com.