Three Common Reasons for E-2 Visa Denials
This post(and the video above) covers three common reasons for E-2 visa denials.
This is an important topic. Because, if I was thinking about starting a business in the US and applying for the E-2 visa, I would want to know which requirements are the most difficult to meet. So, in this post you will read about three common reasons for denials(that relate to E-2 investor cases).
Denial Reason #1: Your Business is “Marginal”
The first reason for E-2 denials relates to marginality. In the US government’s foreign affairs manual, you will find the prohibition against marginal businesses. According to the manual…
A marginal enterprise is an enterprise that does not have the present or future capacity to generate enough income to provide more than a minimal living for the treaty investor and his or her family. An enterprise that does not have the capacity to generate such income but that has a present or future capacity to make a significant economic contribution is not a marginal enterprise. The projected future capacity should generally be realizable within five years from the date the applicant commences normal business activity of the enterprise.
Basically, the US government wants to get something out of you and your business. They want to see some benefit to the American people.
So, if you have a business that will not require employees, I would stay away from the E-2 visa altogether or adjust your business model so that you will require some employees at some point in the next five years.
Also, marginality can be an issue for businesses with low start up costs. Let’s say, you want to start a social media marketing business. You can run your business with a few software subscriptions, a cell phone and a computer. Your startup costs will be tiny. Let’s say that your total investment which includes your equipment, software, professional services fees is $10,000 and you have an extra $10,000 in the bank for operating expenses. Now, I know that you can bootstrap a business like this and eventually create jobs. However, I would assume that the US government would be skeptical of your businesses ability to create jobs with such a modest investment.
So while it is great that there is no minimum investment required for the E-2 visa, low investment cases are oftentimes denied on marginality grounds since the person who looks at your application is not confident that your business will create jobs.
Denial Reason #2: Investment not Committed
The second reason for E-2 denials relates to commitment of funds.
When you apply for the E-2 visa you put yourself in an uncomfortable situation. You have to transfer money into the corporate account and then you have to spend the money on everything you need to get the business to the point where it is operational. So ideally you want your business to be operational at the time that you apply. If that isn’t possible, you want to be right on the cusp of becoming operational.
Understandably the thought of spending money on everything that you need to become operational is scary to most applicants. After all, when you apply for the E-2 visa, you don’t have any guarantee that the E-2 visa application will be successful. Due to this completely rational fear of losing money, many applicants hold back. They don’t spend enough money and they are denied on the basis that their investment is not committed to the business.
Denial Reason #3: Applicant’s Lack of Experience
The third reason for denials relates to the decision maker’s confidence in the applicant’s ability to grow a successful business.
The Foreign Affairs Manual states that the applicant(in the case of an individual investor) must be “in a position to direct and develop the enterprise.”
This is a subjective standard, so a decision on this will oftentimes depend on the thoughts and feelings of the government employee who is reviewing your application. If you do not have experience running a business, that could be held against you. Likewise, having a background that is not connected to the E-2 company’s products or services will be a strike against you.
Fortunately, there are a few things that you could do to avoid a denial related to a lack of experience.
The first option would be to pick a business that is connected to your background.
The second option would be to invest in a franchise business. Franchise businesses with specific training and set up requirements can make the decision maker more confident in an inexperienced business owner’s ability to grow a successful business.
Conclusion: E-2 Visa Denials
So, those are three common reasons for E-2 visa denials…
- Marginality(AKA your business wont create jobs);
- Lack of committed funds;
- The decision maker is not convinced of your ability to make the business work.
In order to avoid these potential problems, I recommend that you reach out to one of the many amazing immigration lawyers that you can find across the globe.
Thanks for your time!
Benjamin Frear, Esq.
Immigration Lawyer for Entrepreneurs and High Growth Companies