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For some foreign nationals hoping to live and work in the U.S. E-2 can be either exactly what they need or serve as a bridge to a Green Card via another visa, like EB-5.
E-2 does not offer long-term certainly but it can get an investor and his or her family into the U.S. within months. Find out what rules are less restrictive than those with other visas, like EB-5. Discover some notable differences — like the amount of active involvement in an investment business. And get an expert’s inside scoop on why you should file an E-2 petition with an embassy and not USCIS.
Learn from immigration attorney Greg Berk, who has over 20 years experience, on E-2 best practices. And why he declares, “it is a great visa to get somebody here quickly.”
Rupy Cheema: Greg, you said that an E-2 visa can be renewed forever. Does the renewal require an additional investment every time you ask me for a renewal?
Greg Berk: It wouldn’t require new money, but the U.S. Embassy or Consulate is going to look to see if the U.S. operation is still running. They’re really going to look at job creation.
If an investor invested $250,000 five years ago, and now it’s up for renewal, they want to see that there’s a company still operating, that the money is still there and wasn’t pulled out, and then they’re going to look at jobs.
Five years ago when the person applied, they’re going to give them the benefit of the doubt.
The business plan says we have zero or one employee and we’re going to have four. Five years have passed and they have four or five or six employees — it’s going to get renewed. If there’s only one or two U.S. workers after five years, depending upon the situation, the console officer could deny it.
They might say this looks more like self-employment. You’re not really interested in hiring U.S. workers. Or the applicant could say, look, it was 2008. The economy was horrible. Now it’s 2013 so I did the best I could. Okay, we’re going to give you a pass. Or now it’s COVID-19. So probably the consulate might be a little more generous on first time applicants and renewals.
Kurt Reuss: And how long does a renewal usually last?
Greg Berk: The State Department focuses on reciprocity. If Mexico gives U.S. citizens one year on visas for investing in Mexico, then that’s what the American government is going to do. If Canada agrees to five years for Americans, then the U.S. Government is going to give Canadian investors five years.
And that’s on what we’d call a travel visa, which is the visa in the passport. But every time an E-2 visa holder arrives at the port of entry in the U.S., the U.S. Customs and Border Protection, (CBP) admits them for two years. That is the rule. So the travel visa needs to be current and valid to enter the U.S., but even if you only have six months left on your travel visa they’re going to admit you for two years, and you can stay, but if you are Mexican, the minute you leave, you’re going to need a new travel visa.
So it depends on the country, and you have to look online to the State Department reciprocity table, and it will tell you.
Kurt Reuss: Let’s talk about E-2 general requirements.
Greg Berk: General requirements for the E-2.
Number one, of course, you need a treaty. The largest countries that don’t have one unfortunately, are India and China. So if you have an investor in India or China, E-2 visa is off the table immediately. So now you’re talking L-1, maybe H-1B lottery.
Kurt Reuss: What percentage of countries in the world does the U.S. have E-2 treaties with?
Greg Berk: If I had to guess… two-thirds.
Kurt Reuss: So it’s somewhat unusual that both India and China are not included.
Greg Berk: It is, and it’s very unfortunate. Maybe there’s a concern that there would be too many applicants. It seems unfortunate, or maybe the Chinese and Indian government just haven’t made it easy for Americans to invest there and so the U.S. government just doesn’t respond.
Kurt Reuss: Right. That issue of reciprocity, again.
Greg Berk: So number one is, do you have a treaty? If you don’t have a treaty, game over. Next is nationality. The investor must have the same nationality as the treaty. So if you have a French national and they’re going to set up a U.S. entity and they’re going to invest, the rule is that the U.S. entity must be at least 50% owned by the investor.
Kurt Reuss: So the petitioner who applies for an E-2 must be a citizen of the country that has the treaty. They don’t have to be born there, unlike EB-5. They just need to be a citizen of that treaty country.
Greg Berk: Yes. And they will trace ownership. You could have an investor say Canadian-German, and maybe they have some holding companies and some complicated corporate situation overseas. You have to trace the ownership all the way up, what we call “Top Co,” the top company. And Top Co must be, for example, at least 50% Canadian or 50% German. That’s another rule to ensure that the nationality is pure, if you will, in terms of the 50% rule.
Also, for purposes of our discussion, I’ll usually talk about the investor, but in some cases, the investor may want to bring over other people. If it’s a startup in the States, the State Department is not going to be too excited about bringing over E-2 managers and E-2 essential employees because the investor is basically saying, I am coming to manage and direct and set up this company and to create U.S. jobs.
So you can bring over other people, but it’s really going to be over time. It’s not like the investor got his E-2 and now he can apply for five or 10 foreigners for the same passport; that’s not going to work.
Rupy Cheema: If they were to request to bring over foreign workers, do they still have to meet the test that no American worker could fulfill that role?
Greg Berk: You don’t. Unlike some Green Cards, which are based on proving shortage of U.S. workers, what’s called “Perm Labor certification” with the U.S. Department of Labor. But with E-2 you don’t have to prove a shortage.
You just need to show that when you get past all the treaty rules and the nationality that there is enough money being invested, and you are going to create U.S. jobs. Or if it’s a renewal, did you create U.S. jobs? And there’s no precise number. A lot of mom and pop shops, if they show that over the next five years they’re going to hire five U.S. workers, that’s probably enough to get approved.
Kurt Reuss: So as far as hard lines, we’ve got nationality, you must be a citizen of a treaty country. You must own at least 50% of the firm. And you must make a substantial investment. And how do you define that?
Greg Berk: The State Department doesn’t give numerical limits. The Foreign Affairs Manual says that the investment must be commensurate with the needs of the U.S. business, so if you’re opening up a small restaurant, you might need $200,000 in South Dakota, but you might need $1 million in Beverly Hills.
If you’re opening up a very capital-intensive business, you may need much more money. So they’re going to really look at that.
Kurt Reuss: And as far as job creation, is there a number of jobs that you should be looking to create in an E-2?
Greg Berk: The business plan is really important. It is an essential part of the package of the E-2. So if a business plan is projecting at least five full-time jobs over a five-year period, you’re probably okay. Post-COVID-19, maybe you can get away with three or four.
It also depends on the reciprocity agreement. If you’re a Mexican investor, you’re only going to get one year anyway, even though the business plan needs to be five years out you’re going to come back to the embassy one year later. Unless you don’t travel, then you could theoretically stay in the U.S. for two years.
Kurt Reuss: So the challenge for the Mexican versus the Canadian is that the Mexican is going to get their business evaluated more frequently.
Greg Berk: Very true. For a Canadian, an Australian, a German, a British, they’re going to get five years, they’re not going to have to go back to the man for five years. That’s a lot of a relief.
Kurt Reuss: What about spouses and family members. Let’s say you’re applying from Canada and you’d like to bring your wife and maybe even your children. What do you need to consider?
Greg Berk: The rules are very generous. Not all US visas accommodate the spouse to work, but the E-2 visa does. The spouse of an E-2 holder, after arrival in the U.S., can apply for the plastic work permit known as the Employment Authorization Document (EAD). It used to take three months to get that but now it’s taking five. So spouses are not work authorized for a good five months after they arrive, but they can get it, and it will allow them to work anywhere, including for the E-2 business if need be. I should mention that the principal applicant can only work for the E-2 business.
The spouse is fairly easy because they apply for their work permit after they arrive, and their I-94 [Arrival Departure Record Card] is good for two years. The kids can go to public school, no problem.
Kids can’t work though. So if the kid is 16, 18, they’re not going to get a work permit. The kids are good on an E-2 until they turn 21. When they turn 21, if they’re going to University, they’re going to need to change to F-1 student status, but until 21, they’re good as an E-2 child.
Sometimes the principal investor not only wants to work for the business they set up, but they want to work somewhere else and really their E-2 only authorizes them to work for that company, unlike the spouse that could, with a plastic work permit, work anywhere.
The only remedy for the principle applicant is that we’ll sometimes set up a holding company, and that entity becomes the E-2 investor. And then the entity has one company for its restaurant and another one setting up a consulting company. And so now you’ve got two or three businesses underneath the holding company.
And they actually don’t all need to be creating jobs, but at least you’ll need one of them to. But that’s kind of a backdoor way to accommodate an entrepreneur that maybe likes to have his hands in more than one project.
Kurt Reuss: And from the spouse’s point of view, their five-month delay for the EAD, that starts when they enter the country. So they need to be idle, except for working in their spouses E-2 business for the first five months.
Greg Berk: They really can’t even work for the spouse’s business, because they’re not work authorized. There’s some gray area when the family moves here. The principal applicant is busy with their business, the spouse is at home, but the spouse is working from their living room on their laptop for their former employer overseas and is still on the foreign payroll.
The spouse couldn’t get paid here. That’s not officially blessed and shouldn’t be done long term, but on a short de minimus basis, it seems to be happening, especially in this global era. But it’s not considered U.S. employment.
Kurt Reuss: Could the spouse work for that foreign entity the entire time while living in the U.S.?
Greg Berk: Probably not. There’s no super hard rules on this, but at some point it’s regular employment in the U.S. The foreign company is now de facto setting up a permanent establishment in the U.S. by having an employee here. So if it’s done short term de minimis, they may just slide, but not on a formal long-term basis.
Kurt Reuss: What about processing times? How long does it take?
Greg Berk: Most E-2s are filed with the U.S. Embassy. We highly discourage filing with the U.S. Citizenship and Immigration Service (USCIS), the immigration agency in the States. But in terms of processing times, at the U.S. Consulates, most of them now say, email us a copy of your petition and we’ll review it.
And most of them take about a month, and then if they have questions they’ll email back a request for evidence (RFE) or something, and then they’ll say come in for the interview. If they say “come on in for the interview,” that usually means it’s been green-lighted. And the State Department is getting more sophisticated.
Now that they can be emailed, E-2 visas may not have to be reviewed by the U.S. Consulate in Montreal [for Canadians]. They might just get forwarded to Washington D.C. where they’ve got 50 people, very possibly specialists, giving out E-2s. So you don’t really know where it’s being reviewed.
But you’ll come in for your interview, which are usually pretty short because these things are usually pre-vetted. Then the applicant’s passports will be returned by currier, usually about five days later.
It takes on average probably two months to prepare a good petition. It can be done faster, but with all the back and forth of documents and so on, it takes a couple of months, and then one month at the embassy for review, and then you make your appointment.
Suffice it to say you could get somebody here into the States on an E-2 in two to three months, maybe four months. Most clients have ambitious plans and then get busy and usually it takes a little longer. It’s a lot of paper production and some people are better at producing paper.
Not everybody has it all in PDF at their fingertips. Up until about a year ago it was a good 300 pieces of paper, not as big as an EB-5, which might be double that with all the project information. But it was pretty hefty. And then you would FedEx it to the consulate.
Now they’ve gone digital and they say, email it, and the guide even went one step further. Most now have a 70-page limit — seven, zero — which sounds nice, but when you’re trying to prove source of funds and you’re trying to prove a business plan, 70 pages is like, wow, that’s tight.
Kurt Reuss: Of that 70 pages, how much of it do you typically see the business plan taking up.
Greg Berk: Well, that’s a good point. In the old days it would take up 40 pages. Now maybe we’ll truncate it to 10-pages, with the job creation being the most important. It’s really important to kind of a dumb everything down in a sentence. Like, really, really make sure your job creation page is very visible, and it’s in the table of exhibits and it says “Job Creation.” Some people come up with kind of obscure words. My reaction is, “no, no, no.” You want those magic words, “Job Creation.”
Kurt Reuss: Do you have some business plan writers that you tend to reach out to?
Greg Berk: Yeah. There’s a lot out there. We have referred some to clients. And some clients can write their own. It kind of depends on the size of the business. At the end of the day, I would say it’s not magical. It depends on the sophistication of the investor.
The Consulate is looking for something very similar to EB-5, kind of that “Matter of Ho” structure: What’s your revenue forecast for five years? What’s your cost forecast? What’s your job creation forecast? What market are you going to be in? Who are your competitors? So at the end of the day, that’s the business plan.
Kurt Reuss: Do you have a template for this.
Greg Berk: Yeah, we’ll get to that to you.
So you’ve got the 70-page limit. What we tend to do is we build the cake fully loaded and then we play butcher at the end and say, “okay, what are we going to cut out to meet the 70-page limit?” It’s easier that way. We want to include the background of the applicant, the investor, their resume, their educational documents, their passport. Then you’re looking at the U.S. company they’re creating and all the ownership documents and licenses and permits. Then you’re looking at the money. Where did the money come from? And an explanation and the bank statement overseas and the wire transfer, and then it hits the U.S. company.
Kurt Reuss: That’s pretty interesting. It reminds me of my 14-year old. He says, “dad, I gotta write an 800 word essay.” I say, “well, write 1200 words and then cut it down.”
Greg Berk: Exactly. Well you raise a good point because we tell clients, just give us everything and then let us decide if it’s relevant or not. Just give us the kitchen sink. We’ll deal with it. Sometimes an issue could become more predominant.
If you have an investor from Colombia or Mexico and it’s a big-cash business, well, maybe you’re going to have to spend a little more time showing where the money came from. If you have an investor from Denmark, and they’ve owned a company for 30-years and now they want to set up a U.S. operation, its probably going to be a little bit easier to explain where the money came from. It came from earnings from this business for 30 years in Denmark.
Rupy Cheema: What if you just cannot complete the file in 70 pages? What’s the remedy?
Greg Berk: Maybe you’re not going to have as many documents about the U.S. entity. You’re going to show your incorporation; you’re going to show your passport; here’s my business plan — it’s seven pages with the job creation. Here are some bank statements; here’s an explanation of how I earned my money. Thank you very much.
Rupy Cheema: Do they come back requesting more information?
Greg Berk: Sometimes, but not that often. A U.S. Consulate in Mexico recently came back and wanted an audited financial statement of the U.S. company. It was a renewal. Maybe it was just the financial statement, but that’s 25 pages that we didn’t include in the original 70 pages. But they asked for it. Fine. It didn’t delay things much.
Some countries have designated one consulate to be the E-2 central, like in Mexico. If you’re an investor in Mexico City you still have to fly all the way to Juarez, by the Texas border, Cuidad Juarez, for your E-2 interview. Go figure.
With Canadians the general rule is you don’t need a visa in the passport; Canadians apply at the airport. But E-2 is an exception. They do need the formal travel visa in the passport and they will need to go to the U.S. Consulate in Canada. The E-2 also has this strange, anachronistic, tradition that the applicant must sign on a piece of paper that when their E-2 is over, they intend to depart the U.S. It’s a silly document from an old regulation. There’s no form. It just says, I promise to leave the United States at the end of my E-2. And it doesn’t mean that you can’t renew; it just means that someday when you no longer want to renew, you promise to leave.
Kurt Reuss: In places like Mexico they’re only giving people a one-year E-2 eligibility, but you have a two-year travel permit.
Greg Berk: True. So you’re going to leave and then get a new travel visa at the U.S. Consulate in Juarez, come back in and get a new two years. Most of the Mexicans are traveling frequently, so what happens is they get a two-year I-94, but the minute they depart and the travel visa is no longer good after one year, and now they have no choice. They have to go back to the consulate.
It’s kind of a pain which reminds me from your earlier questions about filing, most E-2 applicants are outside the United States, and so we’re filing with the consulate, but even once they get here, if we want to file an extension, or they happen to be here, let’s say you have a wealthy F1 student who’s here, he graduates, parents gift him money, he’s going to buy a business.
We’re still going to send him to the U.S. Consulate. The reason is several fold. One is they’re going to need the travel visa in their passport. So if we apply with USCIS here, first they’re pickier and they’re less knowledgeable about E-2 than the State Department. The E-2 has traditionally been the domain of the State Department anyway.
And then USCIS, not only is it picky but they can’t issue a travel visa. So you could be in a situation where you apply with USCIS here because the investor is here, it gets approved, and the minute they leave, you now have to apply with a consulate. And this is not like an H-1B where you just get your simple visa. This is a complete de novo review of the entire E-2 business. So it just makes more sense that it be done by the consulate.
The only exception would be if the person is from a country that’s got political turmoil and they don’t want to leave, they’re afraid.
We saw that with Iranians. They didn’t want to go back to Iran. They might get stuck there. It might take too long to get the visa travel ban. Unfortunately, that’s been resolved through other ways. The administration canceled the E-2 treaty with Iran a few months ago. So Iranians that already have their E-2 can ride it out, but will not be able to renew at this point.
Kurt Reuss: Do you have a sense of the denial rate on E-2?
Greg Berk: From my perspective, it’s low, at least because we vet carefully. I think it really would depend on the sophistication of the investor. Are they doing it on their own or do they have experienced immigration counsel? Because I think more often than not, when experienced immigration counsel is involved, it should be approved. Because they’re going to flag issues on the front end.
The typical red flags for reasons for denial would be they have criminal convictions or in rare instances where they’re on a watch list, which creates a problem. They had no convictions, but there is some security alert on the person that’s beyond everybody’s control.
Other issues are if they ever overstayed a visit in the States before. And if so, how many years ago? If it was a long time ago, fine. If it was in the last 10 years, maybe that could create a problem. So those are admissibility issues that need to be covered on the front end regardless. And that would be true for every visa applicant, A to Z, whatever the visa would be.
So once you go through the questions of whether they are admissible, I ask them to tell me about what they want to do. “Well, my wife and I are going to set up this donut shop in Idaho and we’re going to have one employee, but we think we can grow it to five.” Okay, fine.
Or, “I’m an accountant or I’m a consultant. I don’t need any employees. I’m just going to work from my living room. I don’t want a lease.” That’s not going to work. We’ll tell them no.
Speaking of leases, traditionally the State Department likes to see a brick and mortar lease. Now we’re in the global village where people are working from their living room. And they have a WeWork down the street or something. That’s fine, but we still want some lease. They like to see the lease, show me the lease.
Kurt Reuss: What about transitioning to a Green Card?
Greg Berk: It’s certainly available. All of the same rules apply. Somebody could be on an E-2 initially and then, over time, if they prove up to 10 direct jobs and they’ve invested $1.8 million over time for a metropolitan area or $900,000 in a rural or economically depressed area, they can apply for the Green Card.
Sometimes that question comes up were the investors says, “I want a Green Card through EB-5,” and then you talk it through and they say, “I want it through my own business. I don’t want to invest in a regional center.”
Okay, fine. But it’s going to take time to get the 10 jobs and so then, if there’s an E-2 treaty, we say, look, let’s do the E-2 as a bridge. Get you and your family over here and then after you get established, and over time you create the 10 jobs, full-time direct jobs, and you’ve invested $1.8 million over the period of a few years. Now you get your family Green Cards.
Kurt Reuss: So they can actually create the jobs and invest the money and then apply.
Greg Berk: Yeah, exactly. Which is nice.
Briefly on gifting. Gifting is fully allowed and we see it about a third of the time. We just need to show where the money is coming from. We get a formal gift letter. We need to do a show and tell about the donor and his or her money.
And the rule is, as long as it’s clean money, it’s not from a criminal enterprise, then it’s all fine. An E-2 investor needs to invest their personal funds. It’s similar to EB-5.
So you’ve got a German investor, he’s got a company in Germany, and now he wants to set up a U.S. company. The money must come from his personal German bank account. He can’t wire it from his German company unless the German company is the E-2 investor, which is unusual, like you pointed out.
Escrow is very rarely seen, but it’s in the Foreign Affairs Manual (FAM), and it’s always available in your back pocket if you need it. And that’s where you get an investor that says, “I want to do this, but what if the visa is not approved and I’ve spent all this money and time and my visa is denied and my money is now in the United States?”
So the remedy for that is the whole deal can go into escrow if the seller is willing. And the escrow instructions say If the visa is issued by the U.S. Consulate, the money is released to the seller. If not, here’s a deposit of $10,000 that the seller keeps and the rest of the money goes back to the buyer.
Kurt Reuss: Simple enough.
Greg Berk: The reality is most experienced counsel will know if an E-2 is going to be approved or not, and most sellers don’t want to tie up a business.
People love to buy vacant land. Buy a building, buy houses and they’ll say, “Hey, I’m going to buy a $3 million house in Newport Beach. I’m investing. Can I get an E-2?”
Unfortunately, no. Those are all passive businesses. It must have active jobs created directly on the payroll. They won’t count the independent contractor, plumber and the independent, construction workers on the roof and so on, even if it’s one hundred million dollar piece of land, it doesn’t matter because it’s not going to create jobs.
Kurt Reuss: Is there a sense of how they test the level of participation that an owner takes in the business they creates.
Greg Berk: It’s a loose test. Council needs to have a good prep session with the applicant before they go in to their consular interview. An applicant needs to present themselves as professional and able to run the business. They need to know about their business. They could be asked about their business brand. They need to know it. Even if the money was gifted to them, they need to know what’s in that plan.
Big picture summation on the E-2. It is a great visa to get somebody here quickly. It does require somebody have the money to kind of go the distance, which is another litmus test. So, even if somebody invested $200,000, and I would be nervous if somebody is investing less than $200,000. I think the consulate is going to look to see if the person has more money in their pocket to kind of fund the business.
Kurt Reuss: Do you include in the application bank records of how much money that they have available.
Greg Berk: It could come up at least for a consular interview.
If one Googles E-2 treaty countries, it pulls up the, state department list of who’s on the list and who isn’t. And so for example, Azerbaijan is on there. Now, you can have a very wealthy investor from Azerbaijan. You could have somebody that’s literally scraping their money together.
And I think the consular officer, based on the totality — looking at the person’s resume and where they live — can get a sense of whether this is going to be what the consulate calls 214-B, (a provision of the Immigration and Nationality Act addressing whether a person is either an intending immigrant or might be a public charge) and you know, it kind of depends on the console officer. Some might be a little easier and nicer than others but you could potentially have a situation where from a developing country, if somebody is literally scraping together their money, they still might not get approved.
Kurt Reuss: So that’s the statute or that’s the rule that you need to overcome, which is not being a charge to the country and not having an intention of staying here.
Greg Berk: True. Especially lately, the current administration made a big deal out of public charge. And you and I have talked about this before. There are some Chinese and Indian investors that have sought to invest in Grenada in order to get a Grenadian passport and then apply for an E-2.
Probably they will get approved, but it needs to be researched a little more. We’ve heard anecdotal things of consular officers making up some ad hoc rule on their own saying,” well, you don’t live in Grenada, Its not in the Regs but…”
And then the UK has an important footnote that sometimes bites people. I don’t like footnotes, but this one I remember. Basically, a British investor must live in the UK proper. So if they’re living in the South of France and they have a lot of money and they have a British passport, they’re not going to be able to do an E-2. So with Brits, you really have to make sure they live in the UK proper.
Kurt Reuss: And that’s enforced because that’s a country rule?
Greg Berk: It’s in the treaty. Maybe because the UK is spread out all over the world that the U.S. wanted to narrow it, and then maybe the UK didn’t want to encourage people that live in tax shelter countries that have British passports. Probably it was more of the American government because there’s British passports all over the world.
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