Buying an Existing Business on an E-2 Visa: Four Deal Terms Decide the Petition

Short answer. Buying an operating business is often the strongest E-2 fact pattern available. The enterprise is already real, the financials already exist, and the purchase price supplies a clean number for the proportionality test. But four deal terms decide whether the petition works: how the acquisition is financed, whether you buy assets or stock, how the closing is conditioned, and who owns the buyer. All four are settled in the purchase agreement, which is usually drafted before anyone calls an immigration lawyer.

Why an acquisition is a good E-2 vehicle

The regulation contemplates it directly. 22 C.F.R. § 41.51(b)(9)(i)(A) measures substantiality “in relationship to the total cost of either purchasing an established enterprise or creating the type of enterprise under consideration.” And the Foreign Affairs Manual gives you the denominator: “The cost of an established business is generally its purchase price, which is normally the fair market value.”

Compare a startup, where the denominator is “the actual cost needed to establish such a business to the point of being operational,” proved with invoices, contracts, and appraisals. A purchase price supported by a valuation is a cleaner number.

An operating business also makes two other showings easier. “Real and active” is nearly self-proving when the doors are open and payroll is running. And marginality projections built on three years of historical financials are far more persuasive than projections built on hope.

Deal term one: how you finance it

This is where good acquisitions fail.

E-2 capital must be “the investor’s unsecured personal business capital or capital secured by personal assets.” A loan collateralized by the assets of the business you are acquiring does not count toward the investment, because you have not put anything of your own at risk. Adding personal collateral alongside business collateral does not fix it. If the business is used as collateral, the borrowed funds are not at risk even where some personal assets are pledged too.

The practical consequence: a conventional acquisition loan, including a typical SBA 7(a) structure, may leave your qualifying investment far smaller than your purchase price. Model the numerator before you sign a term sheet.

Seller financing has a second consequence. A seller-carried promissory note is presumptively a security under federal law, though a single, secured, non-distributed acquisition note ordinarily falls within a recognized exception. It is an analysis, not an automatic pass. See When Your Investment Is a Security.

Deal term two: assets or stock

Buyers usually choose between these for tax and liability reasons. There is a third consequence.

The fourth row surprises people. Buying one hundred percent of a company’s stock is a securities transaction, and the fact that you control the company afterward does not change that. For a one-off private purchase this means no registration and no filings, but the antifraud rules attach, which cuts in your favor: a buyer misled by a seller has remedies an asset buyer would not have. The case law and the Texas rescission remedy are in When Your Investment Is a Security. The point here is that it should be a considered choice, not an accident.

Deal term three: the closing condition

Your capital has to be irrevocably committed, and the Foreign Affairs Manual is unforgiving about halfway measures. Mere intent to invest, uncommitted funds in a bank account, or prospective arrangements entailing no present commitment will not suffice, and neither will “simply signing contracts (which may be broken).”

It also blesses the obvious solution. A purchase conditioned on E-2 issuance can still qualify as an irrevocable investment where the funds or assets are held in escrow for release once the condition is met. That structure protects you commercially and satisfies the regulation at the same time, and it has to be negotiated into the purchase agreement.

Deal term four: who owns the buyer

The acquiring entity must be at least fifty percent owned by nationals of your treaty country who are not U.S. permanent residents.

A buyer I worked with had a broker who preferred equity to a commission. Ten percent, which sounded generous until we put it next to the U.S. citizen partner already holding forty-five. The buyer’s own stake landed at forty-five percent, and the enterprise no longer had treaty nationality. The fix was straightforward, because we caught it in the letter of intent. It would not have been straightforward after closing.

Model the post-closing cap table against the nationality requirement before it is papered. See Five Reasons Your Treaty Passport May Not Be Enough.

The diligence items that are also immigration evidence

• The lease. Assignable? Does the landlord consent? A business you cannot occupy is not real and operating.
• Licenses and permits. § 41.51(b)(8) requires the enterprise to meet applicable legal requirements for doing business in the jurisdiction. A liquor license, a professional license, or a permit that does not transfer is an immigration problem as well as a business one.
• Three years of financials and tax returns. These carry the marginality showing.
• Employee census. Not because a number is required, but because payroll evidences a real operating enterprise and supports the significant-economic-contribution route past marginality.
• A valuation. The FAM benchmarks purchase price to fair market value. An arm’s-length price supported by a valuation is much easier to defend than a friendly one that is not.

Why we do both halves

The four terms above are decided in the purchase agreement, the financing commitment, and the entity documents. An immigration lawyer who reviews the petition after closing can tell you the case is weak. He cannot tell you which clause caused it, and he cannot renegotiate a signed deal. We draft and negotiate the transaction alongside the petition, which is the whole reason to keep them in one office.

Immigration is federal. The purchase agreement, the entity, and the governance are governed by the law of the state of organization. We are licensed in Texas and Illinois. Elsewhere we work alongside local counsel.

Send us the letter of intent before you sign it. The financing structure and the asset-versus-stock decision are worth more to your petition than anything we can do afterward. Call or text 512.761.8479.

Read next: Franchises and the E-2 Visa · When Your Investment Is a Security · How Much Do You Have to Invest