What is an E2 Visa?
An E2 Investor Visa allows an individual to enter and work in the United States based on an investment in a U.S. Business. In recent years, many non-U.S. citizens living overseas have gained U.S. citizenship by buying a business in the United States. A very common destination spot for such buyers is South Florida. In addition to the great weather and low taxes, our proximity to Central and South America is a huge draw for the overseas buyer wanting a better life (or fleeing a despotic regime such as Venezuela).
Rules for E2 Visa Vary with the Buyer’s Country of Origin
What is the criteria for whether the U.S. business qualifies under American immigration law to allow an individual overseas to use an E2 Visa? In short, the rules governing whether a U.S. business qualifies for an overseas buyer’s use of an E2 Visa vary with the buyer’s country of origin. Generally, there are factors that U.S. immigration authorities use when determining whether a U.S. business qualifies for an E2 Visa:
- Does the business being purchased have a certain amount of verifiable sales and profits on their tax return?
- Does the business being purchased have some minimum amount of employees or independent contractors?
- Does the business being purchased have a long-term lease in place (or is real estate is associated with the purchase)?
Business Being Purchased Must Have Financials
The first factor that immigration authorities use when determining whether a U.S. business qualifies for an E2 Visa is whether the business has a minimal level of sales or profits (on the tax return). The more transparent the financials of the business being sold, the better chances of a successful sale. An accurate set of historical tax records is of paramount importance.
Purpose of E2 Visa Rule for Business Sales
The purpose of the E2 Visa rule is to support economic growth in the United States by attracting immigrants who purchase functioning business that produce revenues and profits. Without a certain degree of sales and profits (on the tax returns), then the immigration authorities may think the business ‘sale’ is really just a scam that enables the immigrant to obtain citizenship. The necessary level of sales or profits vary with the immigrant’s country of origin and with the local rules set up by the American embassy.
Typical Levels of Financials Sufficient for E2 Visa Business Purchase
Typically, $100,000 or so in sales and a measurable amount (say $30,000 or so) of profits is sufficient. For the business owner here in Palm Beach County seeking to sell their business, it amplifies why having reasonably clear and accurate tax returns is essential when it comes time to sell their business.
Business Must Have Employees to Qualify for E2 Visa
The second criteria for an overseas buyer seeking an E2 Visa via purchasing a U.S. business is that the subject business has at least one or two paid W2 employees (or independent contractors if there is sufficient documentation). The reason for this rule is to simply ensure that the business being sold is an actual business and not just a ‘job.’ The way to confirm this is having at least one individual paid legally as an employee or independent contractor.
An Example of What Does Not Qualify for E2 Visa Business Sales
For example, a realtor may decide to self-incorporate but has no employees. This is not a ‘business’ for purposes of an E2 Visa because without the seller of the business (the realtor) there is no business! Here, the overseas buyer is not purchasing a business that provides jobs and can function without the original seller.
Paying Employees in Cash
Some business owners pay their employees only in cash. Unfortunately, such a business is unlikely to qualify as an E2 Visa business because – in the eyes of the immigration authorities – such a business has no employees. It is critically important that before selling a business, the business owner puts such ‘cash’ employees on the books so that overseas buyers seeking an E2 Visa can legally purchase the business.
Business Has Long Term Lease or Real Estate
The final general criteria when determining whether a U.S. business qualifies for an E2 Visa buyer is whether the business has a long-term lease or has real estate attached to the business.
- The requirement for a long term lease – generally speaking – eliminates most home-based businesses.
- Sellers of home-based businesses may indeed have quite valuable businesses, but generally their business would not qualify for the E2 Visa business buyer.
- If the business seller does not have a long term lease in place (long term is usually considered to be three years or more), then the E2 Visa business buyer can be allowed to extend the lease with the landlord concurrent with the business sale.
- The seller of the business – prior to the sale and in consultation with a professional business broker – may wish to ensure their landlord is amenable to extending the lease for a future buyer of a business.
- Usually the landlord will want to extend the lease in order to ensure a stable source of income.
- If the business seller owns the commercial real estate housing the business, then that will greatly help the business qualify for the E2 Visa business buyer.
- This shows the immigration authorities that the business is usually quite stable and has longevity.
- Remember, the point of the E2 Visa program is to have the overseas business buyer become a long-term business owner and contribute to a prosperous American economy.
Expert Business Broker May Guide E2 Visa Businesses Purchase
The E2 Visa business buyer program has had tremendous growth in recent years. It is a critical aspect of the business sale process, and must be considered by both business broker and seller alike. Attracting E2 Visa business buyers (and working with local immigration attorneys) is a key factor in maximizing the sales price of businesses.
Give Martin at Five Star Business Brokers of Palm Beach County a call today for a free evaluation for your business.