E-2 Visa for Small Consulting Company

Consulting services are in high-demand in the U.S. especially in the areas of digital transformation and data analytics. But growth is not limited to these sectors. As a result, many foreign entrepreneurs are evaluating whether to expand their services to cater to the American corporate client. Accordingly, global entrepreneurs looking to start-up a consulting business in the United States may consider an E-2 visa. By analyzing several of VERDIN’s consulting company clients, this case study will provide background on the challenges and solutions that entrepreneurs seeking an E-2 visa may experience as they establish consulting companies in the U.S.

The Challenges:

• How to establish that the investment is substantial?
• How to establish that the enterprise is more than marginal?
• How to establish that the investor will develop and direct the business, and not merely be self-employed?

The primary challenge that foreign entrepreneurs face is how to demonstrate that the amount of capital they are investing is substantial. Entrepreneurs in the professional services space recognize that it is not necessary to invest large quantities of capital to launch operations for a
consulting start-up. However, the U.S. consulates require that investments be substantial.
And, the consequence of failing to meet the substantial investment requirement is a denial of the E-2 visa application. Thus, the challenge arises to meet this requirement.

The secondary challenge is that foreign entrepreneurs must establish that the enterprise will be more than marginal. This marginality issue requires that the foreign entrepreneur demonstrate that the enterprise has or will have the capacity to generate enough revenue to support the investor and his or her family. Because there is no obvious evidence to meet this requirement, the U.S. Consulate will often look to the enterprise’s employees. The Consulate will reason that if the enterprise has employees, surely the enterprise has the capacity to generate sufficient income. But what if there are no immediate employees? Hence the challenge to meet this requirement. Again, if the entrepreneur fails to meet this requirement, he or she risks a denial.

A third, but lesser, challenge is that foreign entrepreneurs must establish that they will develop and direct the enterprise. Policies prohibit foreign entrepreneurs from merely setting up an enterprise to create self-employment. Instead, foreign entrepreneurs must show that they are intending to develop and direct an enterprise. The idea is to focus on developing a business by directing others to produce a service or product for profit. The challenge arises when setting up a start-up because the foreign entrepreneur may not yet have employees to direct because of the recency of operations. Furthermore, the revenue model may be based on a contract basis, and thus the entrepreneur may not have the justification to hire employees without securing contracts.

Failing to address the above challenges would invariably lead the U.S. Consulate to deny the E-2 visa application.

The Solutions:

Substantial Investment. To tackle the problem of where to invest in a professional services consulting company, the foreign entrepreneur must commit capital in creative ways to reach a “healthy” amount and yet minimize risks of loss in case of denial.

VERDIN clients have used the following strategies to meet the substantial investment
requirement:

1. Purchase of a company vehicle to visit company clients.

• Benefits: In most cases, this asset will be valued around $40,000 to $75,000. This amount will cover a substantial amount of the total investment. If the U.S. Consulate denies the E-2 visa, this asset may be liquidated, and the foreign entrepreneur may recover the majority of the funds. A related item would be parking or storage. These expenses may be accrued as operational expenses, which can be credited toward the total investment.
• Risks: As mentioned above, there is a risk of notable depreciation in case of
  rapid liquidation.

2. Office space lease.

• Benefits: A prepayment of 12 months lease + deposit can accumulate to a substantial amount of capital. Tip: Negotiate a sublease with a trusted strategic partner to include a cancellation clause if the E-2 visa is denied.
• Risks: If the E-2 visa is denied, a lease agreement with a long-term contract would pose financial risks. However, this may be mitigated if the landlord is willing to agree to a cancellation clause if the E-2 visa is denied.

3. Purchase of company software.

• Benefits: Prepayment of an annual contract for Customer Relations Management (“CRM”), document management, or human resource management, or accounting software can tally to a substantial amount of capital. Tip: Purchase these items after the company is established.
• Risks: If the E-2 visa is denied, if may be difficult to recover this expense, however, cloud-based software can be utilized from any location.

4. Legal Expenses.

• Benefits: Payment of your corporate and/or immigration attorney fees through your business is a legitimate operational expense, and thus it will be tallied toward your substantial investment.

5. Business Travel.

• Benefits: Once your company is established, pay for any business-related trips to the U.S. under the company account. This operational expense will accrue toward your substantial investment.

6. Website Development.

• Benefits: Website development may be expensive, so be sure to pay for the company website through the company account. This will accrue toward your investment. Moreover, a sophisticated corporate website will assist the applicant to establish that the company is real and operating. In addition, the foreign entrepreneur may begin to operate from abroad so they may begin to generate customers.

7. Advertising.

• Benefits: Once the company website is established, the foreign entrepreneur may allocate funds to advertise the website.
• Risks: This expense will generally not be recovered.

VERDIN clients seeking an E-2 visa through the establishment of a consulting company have used the above methods to satisfy the substantial investment requirement.

Marginality. As a start-up consulting company, to overcome the challenge of meeting this capacity requirement, the foreign entrepreneur should achieve the following objectives:

Objective #1. Create a detailed business plan. In this step, it is critical to use a professional business plan company to prepare the plan. VERDIN clients use professional business plan preparers to maximize the probabilities of success. Tip: The plan will need to forecast revenues and profits for five years.

Objective #2. To show that the company has the capacity to generate more than enough revenue to support others, obtain a letter of intent from prospective independent contractors or employees that will serve to support future projects. This evidence will assist in meeting the marginality requirement.

Objective #3. To show capacity to generate revenues, foreign entrepreneurs may also submit evidence of contracts or agreements to provide consulting services to specific clients and/or projects.

Solely to Develop and Direct. Again, the goal is to show that the foreign entrepreneur is starting up a consulting company for two purposes: 1) to develop it; and 2) to direct it. The goal is not to start a company for self-employment. As discussed, it is a challenge for a start-up investor in a consulting company to meet this requirement. VERDIN clients have implemented the following tactics to satisfy this requirement:

• Present a business plan clearly articulating the growth vision.
• Present evidence of prior achievements and successes to show that the applicant has experience or training in developing businesses.
• Present a projected organizational chart demonstrating that the foreign entrepreneur will direct others to accomplish key functions. In many cases, the entrepreneur has not yet identified the individuals that will support the E-2 organization. Thus, we explain the necessary functions that the organization will require to support it.
• Present letters of intent from independent contractors establishing that they will support projects that the enterprise delegates to them.
• VERDIN has had success in presenting cases for consulting companies without employees on the date of the application review.

The Opportunities:

In sum, there are many sectors in the U.S. economy that regularly use consultants to help solve problems. U.S. companies are keen to utilize experts in different industries and functions to help them strategize and implement solutions.

America desires foreign talent to help support its industries. Therefore, for those individuals who would enjoy the experience of developing a consulting enterprise in the United States, there is a solution: the E-2 visa.

The Benefits:

• Opportunity to grow a business in the U.S. for an estimated $100,000 USD investment
• Indefinite visa renewals
• Spouse and children under 21 may enter the U.S. as dependents
• Ability to obtain a social security number for principal and spouse (children do not obtain social security numbers)
• Ability for the dependent spouse to have employment authorization
• Children may attend university and pay tuition rates as a resident, and not international student rates
• Access to U.S. capital markets
• Own property in the U.S.
• Sponsor nationals from the same country as the investor to work for the consulting
  company