Franchising and the E-2 Visa

Franchising and the E-2 Visa

     The United States attracts many business owners and investors each year seeking to secure their wealth and future through America’s robust private sector and private property protections. For foreign nationals the US remains the premier offshore wealth and asset protection and investment haven. One of the major benefits of starting a US based business or investing is the ability to acquire residency under one of the investor visa programs. While there are many business visa options, one of the best options for those interested in franchising is the E-2 Visa.

     An E-2 visa is a temporary investor visa for individuals from treaty countries who are making a ‘substantial’ investment in a small or medium sized business in the United States. There are a number of requirements covered below, but this is one of the simpler visas for foreign nationals to acquire residency in the US. The first requirement of the E-2 is that the applicant must be a national of a treaty country. Over the years, the United States has signed “Friendship, Commerce, and Navigation” treaties with many nations across the globe. These treaties are designed to help foster friendship and commerce between the two nations by offering some basic reciprocal rights and obligations. These country’s nationals are allowed to apply for an E-2 visa. There are currently 83 countries on the list, including Argentina, Bahrain, Chile, Egypt, Greece, Iran, Jordan, Oman, Pakistan, Turkey, Ukraine, and several other nations. Many former eastern block nations have treaties enabling their nationals to take part in the E-2 visa. Note that some major countries have not yet signed an applicable treaty with the US including: Brazil, China, Russia, India, and Venezuela. For a full list of the eligible nations, click HERE.

     The next important requirement is that the investment must be considered substantial. There is no minimum dollar amount required under this standard and it may vary depending on the type of business and whether it is new or purchased. Typically on the low end of the range of acceptable investments around $100,000 to $150,000. This is much lower than the more stringent EB-5 visa which requires a minimum $500,000 investment. Generally financing can be acceptable, but only up to 25-30% of the total investment. These funds must be irrevocably invested in the business. Most franchising fees for medium and large franchises will more than meet the substantial investment requirement.

     While there is no requirement that the business generate a certain number of American workers, the investment must be ‘non-marginal.’ This requires that the investment demonstrate that it will generate enough income to support the applicant and also contribute to the US economy, by employing workers for example. You will need to have a well drafted and researched business plan for your application to be considered. In addition, the investment is not to be passive which requires the applicant be involved actively in the direction and development of the business.

     One benefit of the E-2 visa is that two treaty eligible foreign nationals may invest and apply together. They do not need to be be related or from the same country, but they both must be treaty eligible and own at least 50% of the business. Also, the spouse and dependents of an E-2 visa holder are eligible to reside and legally work within the US. The E-2 visa is temporary and must be renewed every 5 years. The renewal process includes a review that the business continues to meet the E-2 requirements described above. While the E-2 is not a path to permanent residency or citizenship, there are other methods which can be used to help investors achieve this with careful planning.

     Franchises are a great fit for the E-2 visa because they are a real business that immigration officials can vet and easily understand. While the franchise fee may not wholly cover the minimum investment for a successful E-2 visa, other associated costs with a franchise will often help you meet this requirement. Franchisors are required to disclose a detailed estimate of the required investment for franchisees, this makes it much easier for you to demonstrate to immigration officials the amount of capital that will be required and expended for the investment. Franchises also often disclose earnings claims which can help you better plan what revenues and expenses the business will have. Lastly, franchises provide additional help and support for their franchisees which can be invaluable for an overseas investor looking to establish themselves in another country. From providing a proven path to success to training you and you team, a franchise can help reduce the risk of starting a business.

     To find out more if you or a franchise would be an option for an E-2 visa, call Reidel Law Firm today at (832)510-3292 or use the email button below.

Schuyler Reidel