Overview of the Treaty Investor Category
By Davidson & Seseri, LLC
In order to be eligible for Treaty Investor (E-2) status, there must be a treaty between the U.S. and the country of nationality of the investor, which could be a business or an individual. Additionally, the business must possess the nationality of the treaty country which is established by ownership; the applicant must possess the nationality of the treaty country; the business must have invested or actively is in the process of investing; the investment must substantial and not marginal, which means capable of employing U.S. workers; and the applicant must be in a position to “develop and direct” the enterprise or an employee in an executive/supervisory position or possesses skills essential to the firm’s operations in the United States. Finally, the applicant for admission as a treaty investor must intend to depart the United States when the Treaty Investor E-2 status terminates.
The treaty trader or investor must, whether an individual or business, possess the nationality of the treaty country. The nationality of the individual is normally determined by his or her passports and individuals with dual nationality may qualify for treaty investor status based upon one or more countries with a treaty of investment with the United States. The nationality of a Business is determined by the nationality by the ownership of the business and where there is more than one owner, than it is determined by the nationality of the owners.
Nationals of the treaty country must own at least 50 percent of the business in question. In corporate structures one looks to the nationality of the owners of the stock. If a business in turn owns another business, then nationality of ownership must be traced to the point of reaching the 50 percent rule with respect to the parent organization.
To be considered for treaty investor status, the treaty investor must have invested or must be actively in the process of investing a substantial amount of capital in an enterprise in the United States. The concept of investment connotes the placing of funds or other capital at risk in the commercial sense in the hope of generating a return on the funds risked. If the funds’ availability arises from indebtedness, the following criteria must be followed:
(1) indebtedness such as mortgage debt or commercial loans secured by the assets of the U.S. enterprise cannot count toward the investment, as there is no requisite element of risk.
(2) loans secured by the alien’s own personal assets, such as a second mortgage on the alien’s home, or unsecured loans, such as a loan on the alien’s personal signature, may be included, since the alien risks the funds in the event of business failure.
The treaty investor must demonstrate possession and control of the funds invested. If the investor has received the funds by legitimate means, e.g., saving, gift, inheritance, contest, etc., and has control and possession over the funds, the proper use of the funds may constitute an E-2 investment. The funds for the investment must be committed to the enterprise and the applicant for treaty investor status bears the burden of proving irrevocable commitment. Other financial transactions, property or property rights may properly be considered as investments. In addition, for the alien to be “in the process of investing,” the alien must be close to the start of actual business operations, not simply in the stage of signing contracts or scouting for suitable locations and property.
Enterprise must be more than Marginal
The alien seeking treaty investor status must not be investing a relatively small amount of capital in a marginal enterprise solely for the purpose of earning a living. An alien is not entitled to treaty investor status if the investment, regardless of its substantiality, will return only enough income to provide a living for the applicant and the applicant’s family.
Several matters or criteria may help determine whether an investment is marginal, in the sense of providing only a livelihood for the applicant. If the income derived from the business exceeds that necessary to support the alien and the alien’s family, then this meets the test. If the first test is not met, and it becomes necessary to consider other factors, such as the economic impact of the business including the hiring of employees. The business must have the capacity, present or future, to make a significant economic contribution. The projected future capacity should generally be realizable within five years from the date the alien commences normal business activities.
Copies of Documents often used in Treaty Investor Cases:
The E-2 visa is normally adjudicated by the E2 Treaty Officer at the U.S. Consulate. The list below is a representative sample of documentation needed to be included in the application and was taken from a U.S. Consulate with a few modifications:
Tab A (Introduction Letter- This document is prepared by Davidson & Seseri. It summarizes the investment, the job duties proposed for the E2 investor (owner) and it summarizes the business plan regarding substantiality and marginality)
Cover letter describing the enterprise and the beneficiary. This letter should address all the requirements for E-2 visa eligibility. These, which are described in depth in U.S. Department of State Foreign Affairs Manual (9 FAM 41.51), require the applicant to show:
- that the individual and/or business possesses the nationality of the treaty country (see N3);
- the applicant has invested or is in the process of investing (see N8);
- the enterprise is a real and operating commercial enterprise (see N9);
- the applicant’s investment is substantial (see N10);
- the investment is more than a marginal one solely for earning a living (see N11);
- the applicant is in a position to develop and direct the enterprise (see N12);
- the applicant, if an employee, is destined to an executive/supervisory position or possess skills essential to the firm’s operations in the United States (see N14);
Tab B (Forms)
- If you will be represented in this matter by an attorney, you must submit form G-28 “Notice of Entry of Appearance of Attorney as Representative” and should include contact e-mail address and phone number for the attorney. If your representative is not an attorney, please submit a letter of agreement between the investor and the representative signed by both parties.
Tab C (Application Information)
- A color photocopy of the bio data page of the principal applicant’s passport and similar copies of any US visas, US entry/exit stamps, and I-94’s.
- A resume or curriculum vitae of the principal applicant.
Tab D (Ownership-this section is to establish ownership of the U.S. entity by the treaty national-investor)
- Articles of Incorporation (for corporations) or Organization (for LLC’s) for US business.
- Share certificates and/or operating agreement (as applicable) to verify ownership.
- If you have a large company with several owners or subsidiaries or if the chain of ownership includes intermediary entities, please also submit the following:
- An organogram of the full ownership structure;
- Legal evidence of instances of ownership within that chain;
- Color photocopies of the bio data pages of the passports of the owners of the ultimate parent company.
Tab E (Investment-money trail from the Treaty Investor’s accounts to the US business entity-normally bank wires and deposits. The consulate also wants to see that the money is from a legal source. Finally, the US consulate wants to see expenses related to the start-up of the US enterprise such as legal fees for incorporation, licenses, furniture, signed lease, and other start-up costs)
- A complete money trail of the funds invested, including:
- Documentation of the original source of the funds (sale of property, inheritance, loans, earnings, sale of business, income tax returns etc.)
- Movement of these funds to a U.S. account;
- Use of these funds for qualifying business expenses. Please include invoices, cancelled checks, and bank statements showing matching debits (highlighted).
- If you are buying an existing business, please provide all of the following that apply in your case:
- A signed, dated, valid purchase agreement
- Signed, dated, valid lease for business premises, including evidence of payments.
- Evidence of any other funds spent to acquire and set up the business
- If you are establishing a start-up, please provide all of the following that apply:
- Signed, dated, valid lease for business premises, including evidence of payments;
- Evidence of equipment and/or inventory purchases.
Tab F (Real and Operating)
- Relevant local, state and/or federal or SEC licenses or letter;
- Monthly bank statements for current calendar year (if any).
Tab G (Marginality)
- Start-up Business should also provide: A business plan that analyzes the local market and competition and gives a 5-year projection of profit and loss. The plan normally consists of: A description of the business, what the business produces or the services provided and the objectives of the business. A breakdown of start-up costs necessary for the business to become operational. A comprehensive market analysis that often includes an assessment of identified competitors and/or a solid description of your target market with an explanation how they will be attracted to become your customer with reasonable estimates of projected revenues and income over the five year period. A detailed personnel plan is also required that outlines the business’s organizational structure and projections of job growth over 1 through 5 years based upon projected revenues. You should detail both current and future hires along with pay and job description;
- Three years of Personal Tax Returns to show lawful source of investment money.
This is a generic list. The actual documents presented are always tailored to the specific investment and sometimes it is modified due to consulate instructions.