An Introduction to E-2 Treaty Investors

by Megana D’Aleo

Megana, a rising second year law student at Fordham University School of Law, is one of our summer associates. A merit scholarship recipient, she will serve on the Intellectual Property Law Journal this coming year.

While not as well known as an H-1B or O-1, the E-2 Treaty Investor is at times a good option for certain individuals seeking to do business within the United States. The following Q&A will shed some light on the various conditions that must be met in order to qualify as well as general information for this type of visa.

What are the general qualifications for becoming an E-2 Treaty Investor?

The E-2 Treaty Investor classification is available to certain nationals of foreign countries with which the United States has a treaty of commerce and navigation. The Immigration and Nationality Act (INA) requires that these nationals must be traveling to the US “solely to develop and direct the operations of an enterprise in which he has invested, or of an enterprise in which he is actively in the process of investing, a substantial amount of capital.” In other words, in order to be granted this classification, E-2 investors must be coming to the US with the intention of significantly investing a large amount of capital into an American enterprise over which they will then exercise control. It is also very important that the investment into this enterprise will result in the creation of new jobs.

If the investor is an organization and not an individual, then that organization must show that at least 50% of the business entity is owned by nationals of the treaty country. E-2 investors may work only on the approved activity for which they were given the classification; otherwise, the E-2 status will be invalidated.

As with most nonimmigrant visa applications, foreign nationals will have to attend an interview with a consular officer at a US Embassy/Consulate abroad before the visa will be granted, but unlike many nonimmigrant petitions, investors don’t need prior approval from US Citizenship & Immigration Services (USCIS) in the US before their interview. During the consular interview, foreign nationals will have the opportunity to present evidence proving that they satisfy the E-2 criteria.

How large of an investment is required to qualify as a “substantial amount of capital?"

This depends on the enterprise itself. It must be “substantial” as compared to the total cost of purchasing an established enterprise or starting a comparable new enterprise, and large enough to ensure that E-2 investors are financially committed to the success of the enterprise and that the enterprise will have a strong likelihood to be successful. These two factors are in balance: if the cost of the enterprise is low, then the investment must be high, and vice versa. 

The investment, which must come from the E-2 investor’s own personal assets, also must be subject to partial or total loss if the enterprise fails; the investment cannot be revocable. This is a strong indication of the commitment to the enterprise. E-2 applicants must also be able to verify the source of their funding, and that they have obtained these funds through legitimate (non-criminal) means. Generally, buying stock in a company is not sufficient proof of investment, unless the investors show that they are doing so with the intent of eventually acquiring the company.

How can investors show they are seeking to “develop and direct” the investment enterprise?

In order to prove that foreign nationals are entering the US with the sole purpose of developing and directing the investment enterprise, E-2 applicants will have to demonstrate at least 50% ownership of that enterprise, or alternatively that they have operational control as either a manager or its equivalent. If they are applying as an executive or supervisor, they must show that their role will be principal and primary, and not incidental or collateral. 

How big or lucrative must the investment enterprise be?

The enterprise must be more than marginal to qualify. “Marginal” is defined as lacking the present or future capacity to generate more than enough income to provide for a minimal living for the E-2 investors and any family members. This is known as the “marginality test,” and is meant to prove that the enterprise can make a significant economic contribution. E-2 applicants can show that their business will meet this requirement by providing documents such as a detailed business plan, individual tax returns, financial statements, and payroll summaries.

There is an exception to this rule if the enterprise has been started relatively recently. In such a case, that enterprise might not be considered marginal as long as it will have the capacity to generate the requisite amount of income within five years from the beginning of the E-2 investor’s status.

There is an additional good faith requirement involved: the investment must be in a real and active enterprise, and additionally, this enterprise must sell goods or services for a profit. For this reason, non-profit organizations do not qualify as E-2 enterprises. E-2 applicants should prepare documents such as tax returns and financial statements, for example, to show that the business is genuine and active, and that it is engaged in making a profit.

What are the advantages of having the E-2 Treaty Investor classification?

There are several benefits to choosing the E-2 over other nonimmigrant visa categories, including:  

  • Direct filing with the US Embassy/Consulate abroad, meaning that applicants will not have to first receive approval from USCIS here in the US before applying for the E-2 abroad;
  • Ability to remain in the US indefinitely as long as E-2 investors continue to qualify for the classification, and request extensions of stay before the E-2 status expires;
  • No requirement for prior work experience or holding of academic degrees; and
  • No quota limitations, meaning that there is no “cap” on the amount of E-2 visas that can be granted on a yearly basis.

How long does the E-2 status last?

An E-2 visa can last for up to five years, with a maximum initial stay of two years.  This time period may be reduced, especially if the company is new;  however, E-2 applicants can request an extension of status in increments of up to two years.  There is no limit to the number of extensions applicants can request, but it is important to note that they must maintain the intention to depart from the United States when the E-2 status expires. If E-2 investors travel abroad during the E-2 classification period, they should receive an automatic two-year extension upon return to the US with an E-2 visa valid on the day of admission.

Can my employees qualify for E-2 classification?

Yes, but there are a few conditions that must be met. The first is that the employee must also be of the same nationality as the investment funds. The investment into the US treaty company also must have been already registered for E-2 status. Second, they must meet the relevant legal definition of “employee.”  The employee must also work in an executive or supervisory role, or otherwise have special qualifications. Special qualifications demonstrate how the employee’s services are essential to the business, and include factors such as the employee’s degree of expertise, whether others possess that employee’s specific skills, the period of training or other experience necessary to perform the employee’s duties, the salary that these skills can command, and whether the employee’s skills and qualifications can be found in the US.

Note that if any employees who qualify for the E-2 status decide to change their employment, they only may do so if they move to a parent or subsidiary company of the E-2 treaty organization. Moreover, employees who move to a subsidiary company must prove that they are still in a position that requires executive, supervisory, or essential skills, and the terms and conditions for the employee’s new position must be the same as they were in the former position.

What if the enterprise is owned by nationals of more than one treaty country?

Generally, the enterprise may only have one qualifying nationality, and if owners have different nationalities then they must decide which to use for their company’s E-2 status.  All employees for that company will then have to be of the chosen nationality. An exception exists where the enterprise is owned and controlled equally (50/50) by nationals of two treaty countries. Here, employees may be nationals of either treaty country and still obtain E-2 visas.

Can my spouse and children travel with me under the E-2 classification?

Yes, a spouse and any children under twenty-one years of age may accompany an E-2 investor or employee as E-2 dependents, regardless of their nationalities. They will be granted the same period of stay. Spouses may apply for work authorization by submitting Form I-765 and  relevant supporting documentation.  Children may not apply for employment authorization.

Please note that unless the spouse and children are returning to the US with the primary E-2 investor at the same time, they will not get the same automatic two-year extension of stay, and will have to apply for their own extension before their status expires. In addition to the DS-156-E application form for the primary E-2 investor, the spouse and children will need to submit a DS-160 for each family member.

There are many requirements that must be satisfied to obtain an E-2 Treaty Investor visa, and it is not generally applicable for all foreign nationals seeking to work in the United States. It is, however, a very strong choice for a foreign national of a treaty country who is looking to temporarily travel to the US to make a significant investment into and gain control over an American business enterprise.