Patrick: Hello, everyone! I’m Patrick Findaro, co-founder of Visa Franchise, and I’m here with attorney Rodrigo Da Silva. Rodrigo is going to talk a little bit about immigration issues, especially for investors with the E-2 visa, which is the most common visa to invest in the USA.
He is also going to talk a little bit about corporate legal issues when you already have a business that you want to invest in. How to set up the company, how to do the legal due diligence if you are going to buy a business, etcetera.
Contents
Everything You Need to Know About the E-2 Visa
Q: And then I’m going to talk about different business options. In some case studies for the E-2 visa, some clients already get it beforehand and already have that access in the U.S. with an E-2 visa, with a franchise or business. Welcome, Rodrigo.
Rodrigo: Thank you very much, Patrick. Hello everyone, thank you very much for your participation. Hopefully this presentation will be productive.
I am originally from Uruguay, but I have been living in the United States for more than 20 years. I already have more than 10 years as a lawyer. I studied in New York. In my law firm, we specialize in the areas of immigration, real estate transactions, litigation, estate planning, and others. We also work together with my team with everything that has to do with corporate law as well with respect to incorporation of companies and small business acquisitions. I am licensed as a lawyer in four states, and with my team we speak Spanish and Portuguese.
A: Today the focus of my presentation is going to be specifically on the E-2 investment visa, which, as Patrick said in his introduction, is one of the most popular visas for investors who want to immigrate and invest in the USA.
Treaty countries
The E-2 visa is a visa that is available to citizens of countries that have an investment treaty with the United States. It gives them the right to enter the country to make an investment, establish a new business, or acquire an existing one.
The list of 80 countries is extensive. Here I have made an emphasis on Latin American countries, where Argentina, Chile, Colombia, Costa Rica, Honduras, Mexico, Paraguay, and Panama stand out. At one time Bolivia and Ecuador were part of this list, but the governments of those countries decided to withdraw from the treaty in recent years.
The vast majority of European Union countries are within this treaty (with the exception of Portugal). But there are also countries within the treaty, for example, Spain and Italy, where many Latin Americans residing there have dual citizenship that also qualifies them for the E-2 visa.
What is required to be eligible for a U.S. business visa?
A: To be eligible for the E-2 visa, one must obviously be a citizen of one of those countries. The investor must at least have controlling interest in the company. In other words, it is 50% plus of the shares. There is the possibility that two partners (50% each) may each require a visa. Finally, the shareholding control is 51%, 50.01%, but there is the possibility of being 50%, as long as the other partner also has 50% and there are no more than two partners.
A capital investment is required. The law does not require a specific value. There is more or less an unwritten rule from American consulates around the world that, generally, an investment of $150,000 is considered a substantial investment to invest in the USA.
Of that $150,000 that we set as a floor, it is recommended that 80% of that investment be capital that has already been committed (i.e., that money has already been spent) and that 20% be working capital. Even so, there are cases of visas with lower investments because there is a proportionality rule, which we will also talk about now.
Proportional Investment
A: The investment has to be proportional. The Proportional Rule is a rule in which, for example, if instead of investing $150,000 in a cafeteria, I invest $90,000, this rule allows me that this amount is enough. If it is a restaurant with 60 tables, I may have to invest $160,000, $150,000. It has to be proportional to the size of the business.
The investment cannot be marginal. The law defines a marginal investment as an investment in which the business generates work only for the investor and his immediate family. The idea of this visa is to generate economic activity and generate jobs. While the law does not require a quota or minimum number of jobs, we recommend that there be at least two to three jobs (not counting the investor and immediate family). These jobs can be part-time (meaning 20 hours per week) rather than full-time (meaning 40 hours per week).
Generally speaking, the investment cannot be in real estate, whether it is an apartment or a house, unless it is part of the business. If you buy a hotel, where obviously the building is part of the business, or you buy an office, there are exceptions. The point is that it cannot be a totally passive investment, where, for example, you buy a property, repair or refurbish it, and sell it for a profit. Generally, this type of passive investment does not qualify for the E-2 visa.
The business or the start of the E-2 visa process: What is the first step to take?
Q: Here is a question from Alejandro. “Can you start operations with the business and then start the E-2 visa process?”
A: That is a very valid question, Alejandro. Generally, what determines when the E-2 visa petition can be made is when the money was spent, the $150,000 that I was talking about.
The business doesn’t necessarily have to be operational. It is preferable that it be operational because you can show photos and sales reports to the consulate officer, but it is not essential. What is essential to apply for the visa is that the investor has already put that money at risk by using it for all the expenses necessary to start the operation.
Obviously, the investor cannot work in his business until he obtains the visa that provides him with the legal right to work. But yes, many clients of mine sometimes arrive with only a student visa and go through the investment process, hire the staff, and only after the business is up and running do they apply for the E-2 visa.
Documentation Needed to Apply for the E-2 Visa
A: Regarding the documentation needed to apply for the E-2 visa, you need documentation of the capital contribution, business licenses, tax returns. A very important document is the business plan with five-year projections or Business Plan.
We work with a consultant who prepares this document together with our client and sometimes with the franchisor, if there is a franchise. Lease agreements and so on, all the documents that prove the expenses to start the operation must be present. If you bought machinery, or computers, or furniture, or maybe a car that is necessary for the business, all those contracts and invoices with proof of payment is very important documentation.
Copies of contracts with employees, suppliers, consultants, such as marketing companies and documents to prove the legitimate origin of the funds invested. This is because the law requires the investor to prove that the money you want to invest in the USA was earned in a lawful manner.
Income Tax Return
A: Let’s talk about the income tax return. We have a lot of Latin American clients who, sometimes, their income tax returns are not in line with the reality of the economic activity, but that is not a problem from the U.S. point of view. The U.S. is not concerned with tax issues, as long as it is proven that the money was actually generated in a lawful manner. The money may even already be in the United States, or it may be in your home country and transferred to the United States.
The income tax return is essential to prove the legal source of the funds that were invested. However, there may be other alternative documents such as bank receipts, bank statements, business licenses, purchase contracts. Also included are the sale of real estate (in the event that the funds originate from a sale of assets), contracts with suppliers, rental contracts (if you have real estate that generates a rent, a return, and the money to invest comes from there).
Depending on the individual situation of each client, we define the strategy of how to check the origin of the funds. In many cases, there are also clients who make a donation to a relative, a brother, a son, or a wife. This is because, sometimes, the one who has the money is a family member, but the one who has the qualifying citizenship is the other one. So we do a letter of gift and explain obviously the origin of the estate of the person who is donating the money and how he or she originated it to make that gift.
What are the rights of holding an E-2 visa?
A: The rights of an E-2 visa holder is that the principal investor can work in the company in which he/she invests, can travel freely and enter and leave the United States. As opposed to permanent residency, which requires the person to live here on a permanent basis if they do not want to lose their residency. The E-2 visa you can have and not necessarily live in the United States. You are not required to reside in the U.S. You can come and go as you please.
Whenever you enter the U.S. on an E-2 visa, you are allowed to stay for two years. You leave one day, come back, and get two more years. Whenever you enter on an E-2 visa, you are given a two-year stay. The visa is granted for five years, generally, and can be renewed indefinitely, as long as the business remains active.
The investor may bring dependents who may be spouses, but must bring a marriage certificate. It cannot be, for example, in Brazil there is the concept of stable union, which is not a marriage per se, but it is like a treaty. For U.S. law purposes there has to be effectively a marriage certificate or a marriage certificate to be able to bring children as well, as long as the children are under 21 years of age.
The investor’s spouse can apply for a work permit and work in any enterprise, not just the enterprise in which the principal spouse invested.
Financing for Foreigners
Q: Here’s a question, Rodrigo, before we go on to the next slide: “Does it touch on financing for foreigners to finance part of the value of the business?”
A: You can generally, from the standpoint in practice of accessing a loan from a financial institution in the United States where you don’t have a credit history. It would be very difficult for you, but if, for example, in your home country you get some type of financing (either traditional financing or a mortgage on your property), in order for that money to be eligible for the visa application it is important that it pertain to a credit where there is some type of guarantee. Guarantee where, if the investor does not pay that credit, that loan is going to suffer a consequence in its patrimony. This is because one of the main concepts of the E-2 visa is that the investment has to be at risk and, in this situation, the investor put his equity at risk.
If you receive a loan where there is no equity consequence for non-payment, this value could not be considered as part of the investment. Now, if you, for example, are buying a $300,000 business and you invest $150,000 of your own money and finance the other 50% or $150,000, in that case there would be no problem if there is no equity consequence for not paying the loan. Because if you already invested enough capital on your own $150,000 that would be at risk.
Some Limitations of the E-2 Visa
A: As I said earlier, the principal investor can only work in the enterprise in which he/she invested. We always advise our clients to set up a legal structure where, if the investor wants to open other businesses in the future (as long as those businesses are related and to the same core holding company), the investor can work in all the companies of the same economic group of companies. However, as a general rule, the investor has some limitations in that he can only work in the companies that are part of his investment.
Children, once they turn 21, can no longer remain as dependents and lose their E-2 visa status. In that case, they will have to migrate to another visa such as a student visa or an E-2 visa of their own where they are investors.
Duration
A: The visa has an initial duration of five years. Some countries like, for example, Mexico in Latin America, as a matter of reciprocity, gives only one year to U.S. citizens for a visa similar to the E-2?
Q: Recently that changed: Poland one year and Mexico four years.
A: Interesting…
Q: This change is for 20 years. It was one-year visa and now it is four for Mexicans who want to invest in the USA.
A: Yes, that is updated. Just so you all know, every year the State Department (which is our ministry of foreign affairs) does an evaluation of all the countries and the years of visa they give to American citizens and it is updated, is a concept of reciprocity. But the great majority of the 80 countries that have an investment treaty, the visa is granted for five years. This is the case of Argentina, Chile, Colombia, and Paraguay, where it is five years. The vast majority of European countries, such as Italy and Spain, also have five years.
The E-2 visa does not have a natural pathway
A: Another limitation is that the E-2 visa does not have a natural path to permanent residency. There were at one time bills that, to me, made a lot of sense because they would allow a person on an E-2 visa, for example, for 10 years to apply for a green card. However, those bills unfortunately never came to fruition.
What can be done is a permanent residency for investment, but we are talking about a minimum investment of $900,000 and the obligation to generate 10 full-time work quotas. However, it is possible for a person to start with an investment of, for example, $200,000 for the E-2 visa. And in the future there is no time limit. It can be five years, 10, 20, or 30 or whatever.
It is prospective that in the future you invest an additional $700,000 and, once you add up the $900,000 of investment and the 10 sources of work, you can petition for EB-5 residency, taking credit for the investment that was made in the past for the E-2 visa, at the beginning of immigration.
How is the E-2 visa itself processed?
A: It is a visa that is processed and is relatively expeditious. The whole business and investment part comes first. You cannot process the visa without having made your investment before. As I said, the business does not necessarily have to be operational. Consulates, in non-pandemic times, take between two to four weeks to process a visa petition.
Today, many consulates are closed and, because the interview is a mandatory requirement, that’s why in some cases it’s taking longer. But we believe that with the new administration that will enter our government at the beginning of the year (January 20) there will be substantial changes. We hope that the issue of visa processing in the different consulates will be regularized again.
Legal Structures to Invest in the United States
A: The United States is a group of 50 sovereigns, which are the 50 states, plus some territories such as Puerto Rico, and each state has its own local legislation, but in general there are corporations, partnerships, and limited liability companies as legal entities to conduct business.
We generally recommend and the most common structure today for small businesses, for businesses that are not open capital in the capital markets, is the limited liability company or LLC, which is the abbreviation for Limited Liability Company, which are companies that are very flexible from a tax point of view, because you can year by year depending on the needs, make a change of tax strategy and also give much asset protection, because the shares of these companies can not be, for example, subject to seizure or a judicial execution of a creditor, of the partner of that company. So they are companies that provide a lot of asset protection and well, in the United States, I wanted to emphasize that the process of incorporation of companies, whether corporation, partnership, or limited liability company is a very expeditious process.
Generally a company can be incorporated in only one or two days. That is to say, it is a very fast process. Almost no documentation is required – it is a very simple form. The name of the company, who are the directors, who are the partners, the corporate name.
The Corporate Name
A: In Latin America and Europe it is customary that companies have a specific purpose and then the company migrates to another line of business. You have to keep changing the bylaws of the company and the registrations, etcetera.
In the United States it is customary that when you incorporate a company you put as a corporate name that the company is going to develop any legal business, which means that if you open the company and tomorrow you start a bakery and tomorrow you sell that bakery and make a restaurant you do not have to change the documentation. It is something that is very expeditious.
Incorporating Two Companies
A: As I said earlier, we generally recommend that E-2 applicants incorporate two businesses. An LLC, where the investor has 100% of those shares of that company, and below that company, the operational company that would have the E-2 business, because in the case of the future that wants to open other businesses, as long as they are all linked to the first parent company that would be on top of the pyramid, the investor could work in all the companies of his economic group.
Are the earnings from the franchise enough to live on?
Q: Rodrigo commented a little about the countries for the E-2 visa. On the back I have a map of the world. The blue colors are the countries that have a treaty for the E-2 visa and it also has a preview on our website to see more information about the orders. So, Mexico like four years, Colombia five years, Poland one year, as Rodrigo mentioned.
Franchise to Support a Family
Q: Before I get into the presentation there is a question from Cristian Duran. “In general with the earnings of the franchise is enough to live a family? Understanding that it always has a risk like any investment.” Yes. So, we at Visa Franchise do searches for personalized clients. We have already opened 1,800 franchises. We have 1,800 franchises available through our website vettedbiz.com. You have franchises that yes, you can earn well. Some franchises you don’t, you shouldn’t invest in, and you have no other chance of being successful with some franchises.
So it all depends on the business model and also on you. Your career, your experience, how much you are going to work, and so on. So, from Visa Franchise we are going to minimize the risks and we are going to maximize the profits by our studies and how we are connecting clients with business opportunities, mainly franchises. So, just a minute.
Options for the Latino Market
Q: You must speak English to be a customer, but if you don’t speak English we have some options. There are seven or eight of those franchise options that focus more on the Latino market here. So, you don’t need to speak English to be a Visa Franchise customer today.
We also have clients who don’t want to work as hard. They have already earned a lot; they have their own company in their country. They need operational support. To be a client you need to have a net worth of $1 million. They will invest in a U.S. business starting at $200,000.
Autoguided Search
Q: And we also have a new option, Self-Directed Search. So, if you guys didn’t make the decision to move to the U.S. in the next year, you better do a search on vettedbiz.com, where you have 1,800 franchises. Next month you’re going to have 3,000 existing businesses for sale.
So, you can explore on our website, but if you want a step-by-step consultant who is going to filter all your business options, etcetera, you can also contact our service. We do a pre-investigation of all your businesses and even the disclosure document, the last three years of financial results. We will also look at customer satisfaction and also the satisfaction of the franchisor or franchisee.
We are also going to do a personalized study that we are going to see several franchises to see which one is the best to invest in the USA for your case. We are talking about you, daily contact until we receive the visa. Then we are by your side working on your case in everything you ask for.
Some factors to consider when investing in the United States
Q: Some factors to consider in, for example, the fast food industry are that you better do delivery, not just for dinner, etcetera. You have real estate, healthcare, cleaning. Pet care is growing too much in the last few years. In these industries these are some industries that there are opportunities now, especially with this pandemic.
Some factors to consider solid profitability, recurring revenue, it can be like a barber shop that they have the same customer all month or commercial cleaning that’s going to have the same customer every month and it’s going to grow the customers, the customer base.
Phantom Kitchen
Q: High margins, management team, industry and brand growth, and solid liquidity, it’s super important, especially in this pandemic. And to understand, there are industries that are growing too much, like a food industry, ghost kitchen, that to-go with these snacks like DOORDASH, Postmates, GRUBHUB, UberEats, SEAMLESS. They’re already up 100% in sales.
So it depends on what they are focusing on, but with a phantom kitchen you can earn well, more this year or next year than before where they were coming from. There are always opportunities with crisis as you should know. A phantom kitchen has some benefits. Like lower rent, maximized workflows, lower overhead costs. As well as some energies with marketing and business operations. You can see some important questions to think about that industry.
Some Case Studies
Q: I have a client who invested in 2017 from Latin America. He invested $110,000. That included working capital, as Rodrigo mentioned. He already has 100% business ownership stake in that company. The first year was difficult. He worked a lot, long hours, and was earning little. But the second year he started earning well. The third year he was earning super well and he is earning over $100,000 per year. Which was the initial investment. So, that’s an example of a client that’s like 40 years old. He’s working, he invested a lot, 45 hours a week, not too much. But he can relax on the weekend with the family and he’s not working. He is only working during the week with two, three employees. Plus one that works more on the weekend.
The next example, it’s landscaping. We have a client with another estate that doesn’t want to work as much. He invested $225,000 to own 51% of a company. He is not working every day on the company. But he is reviewing almost all day long the financial information. They have meetings every two weeks, every four weeks with the whole team. Also with the other owner who has 49%. This owner who has 49% is taking more care of the day to day business, than our client with 51%. He is more like a CFO, he is more strategic.
The estimated annual return is low, 5%, 7%, 10% compared to 100%. There is a big difference. Basically it is the time he is dedicating for the business. He is going to earn more if he is working more.
Differences Between Industries
Basically it works like this. Obviously there are some industries that earn well more than others. There are some business models that earn more than others. It’s going to vary depending on the city, etcetera. But there is one criterion that the return is going to change a lot. The hours that you are going to dedicate to the business. I’m not going to touch on these videos now, but we have some testimonials on our website that you can visit.
Franchise Options for Investing in the U.S.
Q: I want to present some franchise options to invest in in the United States. One franchise that we have some investors in is Estrella Insurance, which is basically insurance, at the $50,000 or up to $80,000 investment level. So in order to qualify for the E-2 visa you may need to invest in two units or buy an existing business and turn it into an Estrella franchise to qualify for the E-2 visa, but that’s a good option that’s been around for 40 years.
Well, another option, Rush Bowls. I’ve done some livestreams with Rush Bowls and Estrella. Then you can visit our YouTube channel to read that. Rush Bowls has been on the market for 15 years now. They have 84 units. You need with this pandemic can be more like $200,000 – $230,000 to order a Rush Bowls. They are expanding too much here in Florida. They even have a store for sale here. If you want to learn more you can go to the full Rush Bowls profile on our website, vettedbiz.com, and get in touch with Rush Bowls and see what their opportunities are. That is if you want to explore that healthy fast food franchise further.
Minimize All Kinds of Expenses
Q: We’re here to minimize your time and expenses. The money that you can spend by investing in a business in the United States that is right for the visa and also right for your lifestyle, it should also be right for gaining vitality, basically. So, we do that business screening for you. I mentioned several factors that we are screening for our clients. We also do an extensive custom study that takes about two weeks to finish.
We are talking to you all the way through. We have a 12-month contract. But in general our clients only need about three, four months. That’s to make the decision to invest in the United States, to form the contract. Like to enter with a franchise and to start the business relationship with a franchise. So Visa Franchise is more for people who already want to invest and move in 2021. People who just need to identify the right business for this type of potential customer.
If you are in the search phase and you need to sell the house or you are still making the decision with your family, it is better to go to our website, vettedbiz.com, to explore the businesses to invest in in the United States and get more financial information about them. But Visa Franchise needs to be dated within the next 12 months and already have the money settled. Besides that it has already made the decision to invest. Veted Biz has 1,800 franchises registered for your search. Next month it will have 3,000 existing businesses.
Visa Franchise is more for people who want an advisor who is there for them step by step. That does a more in-depth screening.
Frequently Asked Questions in the Interview with the Consul
Q: We have a question from Alejandro. “In the consul interview, what are the frequently asked topics or questions?”
A: Yes, the questions generally are: How did you find the business, how did you find the opportunity? As I told you earlier, one of the main documents is the business plan, which has five-year projections. It is important that you study this document in detail. Generally, the consuls have questions about the projections, the generation of jobs, sales, where did you get the resources to invest in the USA.
Basically those are the main questions. We do a rehearsal 24 to 48 hours before the interview. This is to prepare our clients where we send them a more specific list of questions. It is usually a relatively quick interview, between 20 and 30 minutes. Some cases are faster. The historical approval rate for the E-2 visa ranges from 92% to 93% overall.
Denial
I have only had one client who was denied. One only because he made a bit of a blunder of having placed the children in public school. This while he was here on an interview visa. Unfortunately he made that decision without consulting me. When he went to do the interview they said, “No, why if you were on vacation did you put a child in a public school?” But that is a point also to highlight and generally the reasons for denying an E-2 visa are two. Some criminal record or failure to abide by the conditions and terms of a visa in the past. But if the investment requirements are met, and if it is a real business that is going to sell some product or some service, then it is very difficult for them to deny this visa. Very, very difficult.
And in the case that it is denied, you can always resubmit the petition and do the process again.
Strategies to Increase the Amount of Money Invested
Q: With Rodrigo from Visa Franchise our clients always received the first time. We have some clients (like eight out of 360) that they needed to go back to the consulate. This because there was a problem with the business plan or they invested little like $90,000 – $100,000. They needed to invest in the USA, invest more capital. So, you need to listen to Rodrigo. If he is saying that you need to invest more money to have another chance of visa approval, then you probably need to invest more money and have more working capital, working capital, etcetera.
A: Yes, and to complement that, there are some strategies to increase the amount of money invested, without increasing your risks too much. For example, if you are going to rent a commercial room for your business, you can pre-pay 6, 7, 8 months of rent. There you increase your investment value because you already paid for it and it is low risk. This is because you were going to have to pay the rent for that commercial room anyway. So these are creative strategies that we use so that you can be accepted on the application as well.
Q: If you are using the car for business and you need to visit customers. I have a client who invested like $30,000 in a car and that was part of the $150,000.
A: Exactly.
Can you open a non-resident bank account?
Q: And also blackboards and stuff like that. So every case is different, but you need to consult with Rodrigo to see that depending on your case with the business.
A question from Manuel. “Initially, can you open a non-resident bank account?” Is that possible, Rodrigo?
A: Yes, in the United States, regardless of whether you apply for a visa or not. The vast majority of banks open accounts for foreigners. It is a very simple process. They ask for a copy of your passport, some other form of identity such as a cedula or a driver’s license. Plus proof of address from your home country. Opening an account in the United States is relatively easy, sometimes with as little as a $10 deposit. There are no minimum deposits required. But it is always face-to-face, always account opening has to be face-to-face, not remote.
What is the difference between the E-1 visa and the E-2 visa?
Q: Okay. Another visa question. “And what is the difference with the E-1 to E-2?”
A: Yes, the E-1 visa there are also treaties. They are for people who have citizenship of countries that have treaty with the United States. Virtually every country that has the E-2 also has the E-1, but there are some exceptions. However, the E-1 is not an investor visa. Let’s say as a trader in which the applicant has to prove that he/she is going to import enough products from your country. A substantial amount of product for marketing.
Contrary to the investment visa (which is opening a business that sells a product or service), this is more for what we would say trading for import and export. Between products between countries that have treaties. Whether it is the United States and Argentina or the United States and Colombia, etcetera.
Q: There are some countries like Greece that have the E-1 visa but don’t have the E-2 visa, but there are few countries that have that.
I think there are no more questions for now. In Buenos Aires, it is already 10 o’clock at night. So I guess it’s almost time to sleep, but thanks to everybody. There were people from Peru, Colombia, Argentina, Mexico. So, thank you very much to Rodrigo for being our special guest. We are going to do another livestream for our Latin audience here.
A: Thank you all very much for participating. I was looking at Sebastian’s last question. To go from the E-2 visa to a residency, as I said you would have to make additional investments. Some residency per investment of $900,000.
If you invest more in your business and generate 10 full-time jobs, you could get the residency.
Spouse Possibility
Another possibility that I was running into with some clients is the spouse. Being the wife or husband who has a work permit. He/she gets a job and that after demonstrating ability with that employer, it is possible that the employer decides to do a work-based residency process. That benefits not only the spouse, but also the investor spouse if the employer proceeds with a work-based residency petition. Well, Patrick, I think he is going to send the filing.
Q: Renewing the E-2 visa because the spouse is receiving the visa, the green card through another company as Rodrigo mentioned. So, there are several to get the green card working with Rodrigo. He can explain some suitable ways for you.
Thank you very much to all the participants. Thank you again, Rodrigo, for your time.
A: Thank you very much to you, Patrick, and good night to everyone.
Q: Thank you.
