|
|
|
|
The applicant must make a substantial investment
There
is no absolute test in determining whether or not an investment is
‘substantial’. Although the oft-cited benchmark of $100,000 is mentioned, no
fixed dollar amount has been set for what is considered ‘substantial’.
A series of tests are theoretically applied to determine whether an
investment is ‘substantial or not’.
(a)
The Amount of the
Investment
As
stated above, the United States authorities have recently confirmed that there
is no fixed dollar amount above which an investment would be considered
‘substantial’.
Basically, in order for
an investment to be considered substantial, it must meet one of two tests;
• It must be proportional
to the total value of the particular enterprise in question (a test usually
applied to investments in existing businesses), or
• It must be an amount normally considered necessary to establish
a viable enterprise of the type contemplated (a test normally applied to new
businesses).
Of course, it is
frequently the case, and especially for new service industry start up businesses
such as I.T. consultancies, that an investment well short of the theoretical
$100,000 benchmark is required. It may be that it is impossible to invest such a
large amount of money to commence viable operations. An investment of far less
than $50,000 may be all that is required.
In such circumstances it
is simply up to the discretion of the adjudicating consular officer in the
particular US Embassy to determine whether the investment is substantial or not.
In certain cases a relatively small investment that is less than $50,000 may be
acceptable, if the enterprise will be employing numerous US employees and has a
well documented business plan evidencing an aggressive expansion.
NOTE that the key
requirement is that the investor be bringing a benefit to the local economy in
which he is operating. This is the spirit in which the requisite treaties have
been passed.
Examples of Investments
that may be considered substantial
1.
Overseas national
purchases a restaurant for $200,000 with ten employees. This would almost
certainly be considered a substantial investment.
2. Overseas national purchases a coffee shop for $100,000 with one full time and two part time employees-This would have a good chance of being approved by most Embassies. Others may question whether such an investment is both substantial and 'marginal'.
3.
Overseas national
establishes a computer consulting business with an initial investment of $50,000
and with the prospect of employing 5 US subcontractors in the next 12 months. If
well documented this may be approved for E2 status. If it can be established
that the investment will significantly improve the employment prospects for US
nationals.
NOTE-The approval
requirements are often dependent on the discretion of the consular officer in
the overseas Embassy. It is often prudent to speak with the approving officer
prior to submitting the application.
What qualifies as an investment?
Normally
the value of purchased equipment and property will be considered invested funds.
For example, the purchase price of an already existing business, including the
amount paid for existing equipment and goodwill will be considered
‘investment’.
Certain investments are normally considered to be ‘non qualifying’
·
Recurring costs such as
rental payments, inventory purchases, and other costs beyond
the start-up of the enterprise. Such costs are assumed to be paid out of the cash flow generated by the
business and are not a part of the initial E-2 ‘investment’
·
Loans or debts for which
the investor is not at risk’-This would include any debts that are secured by
the assets of the enterprise, for example in a ‘seller financed’ situation.
·
Cash not legitimately held
in reserve (Cash reserves alone, without evidence that the business enterprise
has been undertaken, will not satisfy the requirement of an “active”
investment.) by the enterprise-such as an amount of cash held in a personal
account or which will not reasonably be drawn upon