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 utilized this program and gained U.S. citizenship from 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 many overseas buyers wanting a better life (or fleeing a despotic regime such as Venezuela). As a general rule of thumb, franchises with proven business models and businesses which are labor-intensive and require multiple employees serve as the surest route for obtaining an E2 Visa.

Rules for E2 Visa Vary

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 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 associated with the purchase)?

Qualifying Business Must Have Financials

The most important qualification factor for E2 Visa businesses is whether it has a verifiable and required amount of sales or profits. The more transparent the financial statement of the business being sold, the better chances of a successful sale. An accurate set of historical tax records is of paramount importance. Without a certain degree of sales and profits on the tax returns, the immigration authorities may think the business ‘sale’ is really just a scam. 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. Typically, $100,000 in sales and a measurable amount of profits of $30,000 is sufficient. For the business owner seeking to sell their business, it amplifies why having reasonably clear and accurate financials 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 with sufficient documentation). The reason for this rule is to ensure that the business being sold is an actual business and not just a ‘job.’ Since businesses with one or two paid W2 employees demonstrably employs other people – and help the American economy – the criteria is satisfied. An example of a ‘job’ rather than a business is a self-incorporated realtor with no employees (other than himself or herself). 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 discontinue this practice. Otherwise, it will not be possible to sell the business to an E2 Visa seeker. Eliminating this pool of potential buyers ultimately drives down the business valuation. In such cases, the business owner should place ‘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 may be allowed to extend the lease 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 real estate housing the business, then that will greatly help the business qualify.
This shows the immigration authorities that the business is stable and has longevity.
Remember, the point of the E2 Visa program is to have the overseas buyer become a long-term business owner and contribute to a prosperous American economy.

Expert Business Broker Guides E2 Visa Buyer

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 the business broker and business owner. Brokers with knowledge of the E2 Visa program and experience 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.