PROFITABILITY AND EMPLOYEE CRITERIA FOR INVESTING IN A US BUSINESS
Profitability and Employee Criteria for Investing in a US Business
If you are intending investing in a business in the United States to gain an E-2 investment visa there are certain criteria which have to be met with regard to the degree of profitability of the business and the opportunities it will have for American workers. These criteria should be considered very carefully when making a choice about which businesses to invest in. Generally, most E-2 visa applicants purchase an existing business or buy a share in an existing business, but they are also able to start a new business from scratch if they have sufficient capital and proven business experience.
Necessity for a Business to be Substantial
One of the main requirements when selecting a business to invest in is whether it will provide sufficient return on the investment. The visa applicant has to demonstrate that the business they are buying will not be a ‘marginal’ enterprise. In fact, it must be proven that the investment is ‘substantial’ enough. If the business can only support the visa holder and their family for instance it would probably be regarded as marginal. A rule of thumb is to consider the average family income in the state you are intending investing in and see that as the lower limit for return on investment. For instance, the average family income in California, say, is $60,000. This means that for the business not to be considered marginal, it would have to provide a net return for the visa holder of at least that amount of money.
The problem with buying into an existing business is to get a sufficiently independent audit of the profitability of any business which you intend purchasing. Many existing businesses do not necessarily reveal the full extent of their cash flow and business profitability in order to minimize tax accountability. The best solution is to employ an independent accountant to audit the business records of the business in question. The accountant’s figures would then be an important ingredient when preparing a detailed business plan for the next 5 years which is required by consular officers when reviewing your visa application.
Necessity to Provide Employment for US citizens
While there is no number of employees actually specified, it is expected that the investor has a business substantial enough to provide employment for US citizens. In fact, this is one of the main purposes of the E-2 visa program – it is assumed that investment will lead to a growth in the economy through an injection of funds and the provision of new jobs. A rule of thumb here is that a business should be able to employ a minimum of 2 or 3 employees. The higher the number of employees who are given jobs, the more likely that the visa application will be looked on favorably.
The requirement to provide employment, as well as the requirement to provide sufficient return, can be seen as two sides of the same coin. While both factors are important, strength in one of them can help to balance a weakness in the other For instance, if 4 or 5 people can be employed by a business, then the fact that the return on investment to the visa holder is not particularly high might be considered as satisfactory.