Visas for Business Investment in the United States

Donald C. SlowikSenior Counsel, Hahn Loeser & Parks LLP

By Donald C. Slowik, Attorney at Law 

When it comes to investing in the US, many people have heard about the EB-5 immigrant investor program leading to lawful permanent residence or a “green card”. But fewer people are aware of the E-2 visa option, which is a temporary or nonimmigrant visa. This so-called “treaty investor” visa can be very useful to foreign individuals or companies seeking to start a new business or purchase an existing one in the United States. Finally, there is a third, even less well-known option for investors – the L-1 temporary visa to transfer key personnel from a company abroad to operations in the US. Though not labeled as an “investor” visa, it can also be used for the start-up of a new US business or the purchase of an existing one. 

The EB-5 Immigrant Investor Program 

Under the EB-5 program, the foreign investor must make a minimum investment of US$1 million (slated to go to $1.8 million this November 21st) in a new commercial enterprise that will employ a minimum of 10 full-time US workers. But if the location of the enterprise is in a designated targeted employment area or TEA, the minimum amount drops to $500,000 (or to $900,000 effective November 21st). A TEA is either a rural area or an area that has experienced high unemployment (defined as at least 150% of the national average unemployment rate). 

Also, if the investment is made in a project in an approved regional center, indirect job creation can be counted towards the 10 full-time job threshold. A regional center is a public or private economic unit promoting economic growth in a defined geographic area and designated for participation in the EB-5 program by U.S. Citizenship and Immigration Services, or “USCIS”, which is the government agency in charge of the program. 

Although the EB-5 program can provide a green card to the investor and his or her family, this can only occur after the investor has first held a “conditional” green card for two years. At the end of that time the investor must prove that the capital investment was sustained throughout the two-year period and that 10 full-time jobs have been created or will be within a reasonable period.

Applying for the EB-5 program is a complex process that takes tremendous patience. A total of three successive governmental filings are required. 

First is the I-526 petition to qualify the investor and investment for EB-5 visa classification. After approval of this petition, the investor makes a second filing to obtain the conditional green card – by filing either a DS-260 immigrant visa application at a U.S. consulate abroad or filing an I-485 adjustment of status application if the investor is in the US. Finally, 90 days before the expiration of the two-year conditional green card, the investor submits the third and final filing: an I-829 petition to remove the condition on his or her green card.

That the investor obtains only a two-year conditional green card after making such a large up-front investment commitment can be a deal-breaker for some. But what everyone uniformly finds to be objectionable about the EB-5 visa program right now is that USCIS is taking two to three years simply to process and approve the initial I-526 petition! After that, the investor must still wait several more months before receiving the two-year conditional green card.

Add to this the fact that EB-5 visas are limited to a quota of just 10,000 per federal fiscal year and the demand for those visas has far outstripped supply for the last five years, resulting in big backlogs of I-526 petitions and long wait times for Chinese, Vietnamese, and Indian nationals in particular.

In fact, recently, at a May 6, 2019 IIUSA EB-5 Industry Forum in Washington D.C., the Visa Control and Reporting Chief of the US Department of State estimated potential wait times (including initial I-526 petition processing time) for new EB-5 cases filed as of that date to be 16.5 years for China, 7.6 years for Vietnam, and 8.4 years for India. Even then, after the petition has been approved, there is an additional wait time of several more months minimum to file the DS-260 visa application or the I-485 adjustment of status application and receive the two-year conditional green card.

It is hardly a surprise, therefore, that these long delays in EB-5 visa processing have sent investors looking for other, speedier options, including investing their capital in countries other than the United States.

The E-2 Treaty Investor Visa

This is where the E-2 treaty investor visa can be of great help to individuals or companies that want to invest in the United States. It allows a national of a country with which the US maintains a treaty of commerce and navigation to invest a substantial amount of capital in a new or existing business and be admitted to the US to develop and direct the investment. Certain employees of such a person or company may also be eligible for this classification.  

While the E-2 visa is not available to mainland Chinese, Vietnamese, or Indian nationals, it is currently available to nationals of many other countries, including Albania, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belgium, Bolivia, Bosnia and Herzegovina, Bulgaria, Cameroon, Canada, Chile, China (Taiwan), Columbia, Congo, Costa Rica, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Grenada, Honduras, Israel, Ireland, Italy, Jamaica, Japan, Jordan, Kazakhstan, South Korea, Kosovo, Kyrgyzstan, Latvia, Liberia, Lithuania, Luxembourg, Macedonia, Mexico, Moldova, Mongolia, Montenegro, Morocco, Netherlands, New Zealand, Norway, Oman, Pakistan, Panama, Paraguay, Philippines, Poland, Romania, Senegal, Serbia, Singapore, Slovak Republic, Slovenia, Spain, Sri Lanka, Suriname, Sweden, Switzerland, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Ukraine, United Kingdom, and Yugoslavia.

To qualify for E-2 visa, the treaty investor must: (1) be a national of a country with which the US maintains a treaty of commerce and navigation; (2) have invested, or be actively in the process of investing, a substantial amount of capital in a bona fide enterprise; and (3) be seeking to enter the US solely to develop and direct the investment enterprise. 

The “develop and direct” requirement can be met by showing at least 50% ownership of the enterprise by the treaty investor or possession of operational control through a managerial position or other corporate device. A “substantial amount of capital” can be established by showing that the investment amount is substantial in relationship to the total cost of either purchasing an established enterprise or establishing a new one. The lower the cost of the enterprise, the higher, proportionately, the investment must be to be considered substantial.

As compared to EB-5 immigrant investor visa, the E-2 visa has several advantages: 

  • The visa may be applied for directly at a US consulate and does not require pre-approval of a petition by USCIS. Consular adjudications of E-2 visa applications overall are very fast, taking only a few weeks or months at most.
  • There is no annual quota on the number of E-2 visas that can be issued in any fiscal year and, therefore, no backlogs on that account.
  • There is no fixed investment amount for the visa, but the investment capital must be “at risk” and “substantial” as just explained.
  • There is no fixed job creation requirement, although the applicant must prove they have not invested in a marginal enterprise solely for the purposes of earning a living for themselves and their family. 

As well, there is no overall time limit on how long the investor can hold E-2 visa status in the US, unlike other nonimmigrant visa types such as the H-1B (six-year time limit) or the L-1 (seven years for L-1A and five for L-1B). Furthermore, the spouse of the E-2 Visa holder can apply for employment authorization to work at any company in the US. Lastly, with careful planning, an E-2 treaty investor may also pursue lawful permanent residence (a green card) in the US under the EB-5 immigrant investor program or another immigrant visa type for which they may qualify. 

Drawbacks to the E-2 visa, as compared to EB-5, include: 

  • It requires a qualifying treaty between the US and a country of which the investor is a national.
  • The U.S. enterprise must be at least 50% owned by a national or nationals of the treaty country.
  • The E-2 treaty investor must be coming to the US to “develop and direct” the investment. This connotes an active role in the business, not merely serving as a director or limited partner. The EB-5 visa similarly requires the investor to participate in the commercial enterprise. However, under current USCIS regulations, direct participation in the commercial enterprise may be either on a day-to-day basis or in a policy formulation role. The latter role is more lenient and allows, for instance, a limited partner investor to meet this requirement if he or she has rights specified under the Uniform Limited Partnership Act.
  • While there is no outer limit to how long the investor can hold E-2 status, in order to continue to hold E-2 status, he or she must continue to develop and direct the substantial investment and meet other requirements of the E-2 visa. With the EB-5 visa, on the other hand, once the conditions have been removed from the investor’s initial conditional green card, he or she has no further obligation to maintain the investment and is free to do something entirely different.

The L-1 Intracompany Transferee Visa

There is also a third option for business investment in the US: the L-1 temporary visa whereby certain employees of a foreign company can transfer to a related US enterprise in order to work in an executive, managerial, or specialized knowledge capacity.  This classification also enables a foreign company which does not yet have an affiliated US office to send an executive, manager, or specialized knowledge worker to the United States with the purpose of establishing one. 

In either case, the employee must have worked for the foreign entity in an executive, managerial, or specialized knowledge capacity for at least one continuous year within the preceding three years. However, if the employee will be coming to the US as an executive or manager (referred to as an “L-1A” transfer), the employee must have worked as an executive or manager for the one continuous year; having worked in a specialized knowledge capacity is not sufficient.

The phrase “executive capacity” refers to the employee’s ability to make decisions of wide latitude without much oversight. “Managerial capacity” is the ability of the employee to manage the organization, or a department, subdivision, function, or component of the organization, and to supervise and control the work of other supervisory, professional, or managerial employees. It may also refer to the employee’s ability to manage an essential function of the organization at a high level, without direct supervision of others. The phrase “specialized knowledge” means either special knowledge possessed by an individual of the petitioning organization’s product, service, research, equipment, techniques, management, or other interests and its application in international markets, or an advanced level of knowledge or expertise in the organization’s processes and procedures.

To obtain the L-1 visa, the employer must first file a petition with USCIS on behalf of the employee. With the petition, it must provide evidence that (1) there is a qualifying relationship of parent, subsidiary, affiliate or branch between the foreign company and the US entity, and (2) it currently does, or will do, business as an employer in the US and at least one other country directly or through a qualifying organization.

If the employee is coming as an executive or manager to establish a new office, the employer must also show that it has secured sufficient physical premises to house the new office, and that the intended U.S. office will support an executive or managerial position within one year of the approval of the petition. If the employee is coming as a specialized knowledge worker to be employed in a qualifying new office, the employer must show that it has secured sufficient physical premises to house the new office, and it has the financial ability to compensate the employee and begin doing business in the United States.

Advantages of the L-1 visa include: 

  • It is available to companies of any nationality, in contrast to the E-2 visa.
  • There is no annual quota on the number of L-1 visas that can be issued in any fiscal year and, therefore, no backlogs on that account.
  • The application process is much faster than for the EB-5 visa.
  • There is no fixed investment amount for the visa, although the petitioning company must be doing business as an employer in the US and, if applicable, meet the new office requirements.
  • There is no fixed job creation requirement, but the US office must have sufficient staffing to support transfer of an executive, managerial, or specialized knowledge employee, as applicable.
  • If the foreign worker transfers as an L-1A (executive or manager), they may then be able to apply for a green card in the EB-1C category. Wait times in this category are among the shortest. 

Disadvantages of the L-1 include: 

  • There must be a qualifying relationship between the foreign company and the US company of parent, subsidiary, affiliate, or branch.
  • The transferring employee must have worked for the foreign company in an executive, managerial, or specialized knowledge capacity for one year out of the past three years and be coming to work in the US in one of these capacities.
  • There is an overall limit of seven years of L-1A status for an executive or managerial employee and five years of L-1B status for a specialized knowledge employee.
  • If the foreign company is opening a new office in the US, the transferring employee is limited to a one-year period of L-1 authorization. After the year, the US company must show growth in both revenue and U.S. employment or else the extension of the L visa beyond the one year will be denied. 

Conclusion 

There are several different visas allowing business investment in the United States. In view of the current extremely long processing times for the EB-5 visa, would-be investors in new US businesses or purchasers of existing businesses should consider the E-2 visa option. Qualifying treaties exist between the US and dozens of countries. If the investor is willing to take an active role in the U.S. business and other requirements are met, the E-2 visa is a viable alternative to the EB-5. Moreover, holding an E-2 visa does not preclude the investor from also pursuing a carefully planned EB-5 or other immigrant visa strategy. 

In cases where the investor is a national of China, Vietnam, India, or another country where there is no E-2 qualifying treaty, he or she may wish to explore obtaining citizenship in a country that does have a qualifying treaty. A number of E-2 qualifying countries have programs to obtain citizenship, such as Austria, Grenada, Moldova, Montenegro, and Turkey. 

Alternatively, in some cases, the L-1 classification may offer a way for the investor to come to the US to open a new office or buy an existing US business and thereby create a qualifying relationship to support an L-1A or L-1B employee transfer. 

Of course, whatever course the investor is interested in pursuing, he or she should consult with competent legal counsel. This article is intended to provide general information only.