Everything You Need to Know About the US E-2 Treaty Investor Visa for Australians and New Zealand Entrepreneurs

The E-2 Treaty Investor visa

The E-2 Investor visa is available only to citizens of certain countries which maintain a treaty of commerce with the United States. Australia and New Zealand are two of only a few dozen nations whose citizens are eligible to apply for E-2 (and E-1) visas.

We’ve successfully achieved many E-2 visas for all types of Investors and their employees in Australia, New Zealand, and other countries.

The E-2 is at its core the most “consular visa” there is (it involves much more work by the Consulate than any other visa type) and as we are consular specialists practising US immigration law in Australia, we’d like to talk about this visa and share our knowledge on it.

The E-2 visa, also known as the Treaty Investor visa, is a temporary, nonimmigrant visa available to Investors (more on what that means below) and their employees, who are of the same nationality as the Investor, who can be categorised as either “Executives/Managers” or “Specialists.”

The E-2 visa can be used by an Investor to live in the US in order to direct a business. The business can either be created from scratch or an existing business that is purchased by the Investor. The business may be a US expansion of an overseas business, and this certainly can help the merits of an E-2 application, but this is not a requirement: there is no need for the Investor to currently or previously have owned a business outside of the US.

Key Eligibility Requirements for an E-2 Visa for a Principal Investor

An initial E-2 submission for a company and its Principal Investor must include extensive supporting documentation to establish the following key eligibility criteria, amongst others.

Investor has the Nationality of a Treaty Country

This is straightforward: a passport of a “treaty country” (E-2 eligible country) such as Australia or New Zealand will prove this. Dependent family members do not need to be nationals of a treaty country.

Company has the Nationality of a Treaty Country

The company itself must be shown to have the nationality of a treaty country (i.e., Australia). The country where the company is incorporated is irrelevant. For privately held companies, we look to the owners of the shares to establish nationality. If citizens of the treaty country own at least 50% of the US business, then it will be deemed to have the nationality of that country. For example, if a US corporation has 1,000 shares outstanding and four different Australian citizens each own 125 shares, then collectively Australian citizens own 50% of the US corporation. Hence that US corporation will be deemed to have Australian nationality.

Furthermore, if a company is publicly listed, the company is presumed to have the nationality of the country where it is listed, however evidence (such as a share register) should be provided to substantiate this. For example, if a company is listed on the ASX, it will in most cases be deemed to be a company having Australian nationality as most of the shareholders will presumably be Australian citizens.

Control of the US Business

Control of the US business can be established in various ways. The simplest way to demonstrate an individual has control is to show majority ownership of the US business (51% or more). The individual does not need to directly own the business in their individual capacity, however, the chain of ownership must be clearly evidenced and eventually lead to the Investor.

However, even if the Investor has less than 51% ownership, control can still be established in some cases. In cases where two partners share equal 50/50 ownership, the concept of “negative control” establishes that since neither partner has control, nobody does, and as such one partner can be designated to have control of the enterprise, if they are designated to be in an active role such as Director.

In cases where the Principal Investor applicant does not own 50% or more of the shares or units in the business, control can be established via demonstrating operational control, such as the appointment to a senior leadership role such as CEO or Managing Director by the other shareholders / Board of Directors.

If the applicant does not have operational or shareholding control, the applicant can instead apply for an E-2 as an Executive, Manager, or Specialist.

The Investor is in the Process of Actively Investing in the US Business

A key requirement for an E-2 visa for a Principal Investor applicant is that the Investor is currently in the process of actively investing in the US business.

When discussing “investment” in the E-2 context it is important to distinguish it from the accountancy definition of the term investment. Investment need not be solely into assets: expenses incurred when setting up / running the business also count as active investment for E-2 purposes.

The “investment” need not be made from outside of the US (i.e. wiring funds from Australia to the US business). The investment can come from the revenues of the US business.

This requirement always creates a “chicken or the egg” situation for new startups. Investors/entrepreneurs want to be in the US with the E-2 visa in hand before they begin investing money into the business, which, from a business point of view is perfectly understandable. However, from a visa eligibility point of view, the Consular Officer will want to have seen a significant level of investment in the US business before issuing a visa.

Basically, the entrepreneur (visa applicant) should have invested as much as possible in the business before seeking an E-2 visa.

Investments can include premises rents, equipment, inventory, wages, contractor payments, professional services, and more. Evidence should be provided in the form of invoices as well as business bank account statements which show these expenses being paid.

Consular Officers vary in how much investment they want to see before granting an E-2 visa. The reality is that underinvesting in the business before applying opens up the applicant for a visa refusal.

In addition to expenses incurred, we generally advise transferring a sufficient amount of working capital over to the US business bank account. While technically not an investment and not at-risk, it’s almost a prerequisite for an initial E-2 visa application. Taking this further would entail moving it into a trust/escrow account which can only distribute funds to the US business for expenses. In other E-2 jurisdictions this might be recommended where scrutiny is high, but in Australia/NZ this is probably not necessary.

The US business must be a real and active commercial enterprise

The US business must exist and must be in operation, actively producing a service, product, or commodity. The business must ultimately produce something (whether tangible or not) and engage in commerce; it cannot be a mere passive investment held speculatively. The business must be for-profit and commercial in nature.

As an example: a company that buys rental properties and holds them as passive investments on its own is not E-2 eligible. However, a property management company that engages in the business of managing and leasing rental properties on behalf of others could be E-2 eligible.

The amount of the investment in the US

One of the most frequent questions when considering an E-3 visa is, “how much do I have to invest?” There is no set dollar figure for the required investment. Instead, the investment must be “substantial.” This means that the capital investment amount must be:

1. Proportional to the cost of the business, in relation to its business model and submitted business plans;
2. Sufficient to ensure the investor is committed financially to the succesful operation of the business; and,
3. Enough to make it likely that the business will be successfully developed.

A simple way to think about the substantial investment requirement is to imagine an IT consulting business versus a tyre manufacturer.

An investor establishing an IT consultancy in the US will not need much capital, relatively speaking. Some working capital to cover the cost of hiring consultants would be needed. Office premises are likely not needed given the rise of remote work and the likelihood that consultants would be placed on client sites. Equipment such as laptops could be leased. Beyond telecommunications such as phones and internet, an IT consultancy could be developed reasonably quickly with minimal working capital invested.

Establishing a tyre manufacturer on the other hand would consume a significant amount of capital. The business would need to construct or lease a large industrial space, purchase heavy machinery, hire factory workers and managers, purchase input materials, and so on and so forth. One could imagine this needing at least $1 million to be invested for a very minimal tyre factory. If the business plan submitted is based around the business being the largest tyre manufacturer in the US, then the capital investment would need to be correspondingly much higher than even $1 million.

The US business must be “more than marginal”

“More than marginal” is a technical term in the E-2 regulations. Simply put this means that the business planned for must not be one that merely generates a minimal living for the investor-applicant and their family. Rather, it should be reasonably likely the business will generate enough income at present or in the next five years to make a significant economic contribution to the United States as well as allow the investor to eventually take a passive role.

In other words a “lifestyle business” that will only provide an income to the investor is not sufficient for an E-2. Rather a business plan must show that the business will soon generate revenues sufficient to pay employees as well as generate a profit for owner(s).

This is where the business plan submitted with the application is essential and why we recommend using our in-house business plan writer.

The visa applicant must be in a Director position

As described above, the Investor visa applicant must have “control” of the US business through ownership and/or managerial control. The Investor should be in a position with authority such as CEO, Managing Director, Director, or similar. If there are multiple shareholders and/or a Board of Directors that control should be formally given in the form of an employment agreement, board resolution or similar.

E-2 Employee Applications

How the E-2 visa process differs from other visa categories

The E-2 (and E-1) visa process differs fundamentally from all other visa categories. The reason for this is that E-visas are what we can refer to as “consular direct.” This means that the entire eligibility assessment is undertaken by the Department of State, via US Consulates/Embassies, rather than via “petitions” lodged with USCIS, a separate agency that sits inside the US and processes requests for immigration benefits.

The E-2 visa requires the submission of a large amount of documents to the Consulate in advance of an interview, in separate categories referred to as “tabs” along with certain State Department forms such as the DS-160 and DS-156E. This advance submission, either via email or by physical post (each Consulate has its own requirements and processes) does not exist for any other visa category.

This is why in-depth local knowledge of each Consulate is important. Being based in Australia we have particular expertise as to the processes and preferences of the US Consulates in Australia and New Zealand.

Let’s compare the H-1B visa process to the E-2. The H-1B is the main work visa category in the United States. To obtain an H-1B visa for an employee, the employer will lodge a paper-based petition with USCIS in the United States, via post, along with all supporting evidence and fee payments. USCIS will then analyse the submission and respond in writing whether the H-1B petition is approved. If it is approved, the employee will attend a US Consulate interview abroad and carry the petition approval with them. The Consulate will be concerned primarily with traditional visa eligibilities: criminal and health backgrounds, security checks, etc. It will not be overly concerned with the merits of the role, the salary, the job descriptions, etc., because USCIS has already assessed and approved this with the petition process. The employee will then receive an H-1B visa label in their passport and travel to the US.

For the E-2 visa on the other hand, in Australia the supporting tabs will be emailed to the US Consulate in PDF form. The Consulate will review all of these documents internally and write back and offer an interview, if all documents have been provided. At the interview, the applicant will be questioned regarding the business plans, investment, source of funds, and so on, in addition to health and security checks. If the consular officer decides to approve the visa, an E-2 visa label will be printed in the applicant’s passport. USCIS will not have been involved at any step and will not even be aware of this E-2.

It should be noted that it is possible to lodge an E-2 petition with USCIS, however, this should only be done when changing statuses in the US and is generally not recommended if traveling to a consulate interview is possible. Further, even with a petition approved by USCIS, the Consulate will disregard the petition approval and still perform the same eligibility assessment as with any E-2, rendering the petition essentially moot.

What are the government costs of an E-2 visa?

Each E-2 visa requires a government visa fee of 287 AUD to be paid in order to book the interview. This will apply for each visa applied for, including dependents. The reciprocity fee applies if the visa is issued (this is discussed below). There are no other government fees.

E-2 visa reciprocity / issuance fee

The State Department charges visa “reciprocity fees” based on visa category and nationality when it decides to issue a visa (i.e., only after the visa has been approved).

Unfortunately in December 2019, the Trump Administration decided to increase the E-2 reciprocity fee charged to Australians significantly. The current E-2 reciprocity fee is 3500 USD per visa. This means that a family of four E-2 will be required to pay 14,000 USD total. However, given the visa for an investor will be valid for four years, this fee can be seen as 875 USD per year and will simply have to be factored in as a cost of doing business. The fee was previously only 115 USD. The justification for this fee is that Australia charges similar fees for its own work visas.

As part of our early assessment for an E-2 case, we ask clients which nationalities they have. If there is another E-2 eligible citizenship applicable, this can result in considerable savings. We have saved a dual Australia-UK national client tens of thousands of dollars simply by processing the E-2 visas under their UK nationality rather than Australian.

Duration of the E-2 visa validity period

The validity period of an E-2 visa depends on the nationality of the applicant as well as the category (Investor or Employee). Australian E-2 are valid for a maximum of four years. Investors will be given a four year validity. Employees on the other hand will either be given 2 year or 4 year validity periods. We always attempt to establish the critical requirement of the employee in an attempt to ensure a 4 year validity is granted.

Other frequently asked questions about the E-2 visa

Can an E-2 company have two nationalities?

Yes. In cases where two individuals own a US company in a 50/50 split, and the individuals have different nationalities which are both E-2 eligible nationalities, the E-2 company can be deemed to have two nationalities. This will allow both individuals to obtain E-2 investor visas and it will allow employees of both nationalities to apply for E-2 employee visas. We have experience with this situation.

Remote virtual businesses and the requirement for premises

Demonstrating a suitable premises (office, warehouse, etc) was traditionally a key requirement of an E-2 investor application, with the lease being a considerable investment as well as demonstration that a real, more than marginal business exists. However, in 2020, the State Department updated regulations in light of the shift to remote work in the pandemic. As such, office premises are not required for an E-2 application. However, if the business model is a brick and mortar retail shop, or a factory, then it will still be important to show suitable premises are secured.

Using a B-1/B-2 Visitor Visa or ESTA to Setup a Business Before an E-2

The regulations allow a B-1 visa to be obtained and for entry to be made as a visitor to the United States for the purposes of “seeking” an investment in the United States for purposes of a future E-2 visa application.

The regulations do not define what “seeking” means but we can infer this refers to looking for a business to purchase. With regards to setting up a new business, this is less clear and would be subject to staying within the confines of other approved business visitor activities. Contact us for advice on what you can and cannot do in the US as a visitor.

Contingency Clauses in US Contracts

Often times E-2 applicants need to demonstrate sufficient investment in the US in order to obtain the E-2 visa but want to limit their exposure and risk, understandably, as the visa is not guaranteed.

As such, it is permissible to insert clauses into contracts such as leases and with providers of services that state that the contract will terminate if the E-2 visa is not granted.