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Most European citizens who have no prior immigration violation and are in possession of a round trip ticket and an appropriate passport can travel to the United States without first applying for a visa. They are automatically granted what is called a visa waiver. The visa waiver allows certain business activities, such as prospecting for investment opportunities, setting up a business, or attending board meetings. However, it cannot last more than three months and cannot be extended or changed to another visa while in the United States. The following summary will highlight the advantages and disadvantages of more appropriate business visas, such as H-1B, L1A or L1B, E1 or E2, and EB5 with a particular focus on the last two categories that have been specifically created for investors. The H-1B visa, so long as its annual quota has not been exhausted, could be the first option to consider. H-1B visas allow U.S. businesses to hire foreigners in occupations that are considered professional. An occupation is considered professional if it requires a four-year university degree. Through appropriate representation in the United States, the foreign investor can create a U.S. business or purchase an existing business which in turn can sponsor him for the H-1B visa. However, while the investor may have more than four years of university training, it may be difficult to demonstrate to the U.S. administration that the position offered in the United States requires four years of university training. It is particularly true for small entities and for many managerial positions. Indeed, the U.S. administration will often deny an H-1B application for a managerial position on the basis that many individuals reach this kind of position without any formal university training and are solely qualified on the basis of their experience. Thus an H-1B application for a position of general manager will generally be granted only if it can be demonstrated that the applicant will be mostly tasked with the supervision of employees who also work in professional occupations, a condition that is often difficult to meet for small businesses. Similarly, an H-1B application for a position that clearly requires four years of university training, such as a Market Research Analyst or a Financial Analyst, may nevertheless be denied if the sponsoring business is too small to justify the need for such a professional. An H-1B visa is valid for a maximum of three years and can be renewed once for another period of three years. Thereafter, it can be renewed in increments of one year, but only if an application for the green card has been pending for more than a year. Another important limitation of the H-1B is the fact that dependent spouses are not allowed to work unless they qualify for their own employment visas. Finally the H-1B visa might not be an option for small businesses that are unable to pay the minimum wage set by the administration. Indeed, unlike the next options, the H-1B law and regulations have substantial provisions designed to protect U.S. workers from foreign competition. Among them is the obligation for the H-1B sponsoring employer to pay a salary that is at least equal to the minimum wage paid to similar U.S. workers in the same area of employment and as determined by the Department of Labor. The L visa allows U.S. businesses to bring to the United States employees of foreign corporations with whom they are affiliated. The foreign employee must have worked at least one year within the last three years with the foreign corporation and the U.S. position must be either managerial/executive (L-1A subcategory) or a position that requires "specialized knowledge" (L-1B subcategory). It is important to note that the size of the U.S. and foreign entity is not relevant. Thus, the L visa can be available even for very small businesses as long as the required affiliation with the foreign entity is demonstrated. Usually the qualifying affiliation will be met if each entity is controlled by the same individual or group of individuals. Control in a small business generally requires that one owns more than 50% of the votes. For a large corporation with a diffuse stock ownership, owning a much smaller percentage of the votes can be sufficient to establish control. Thus, if the prospective investor already owns a foreign entity, small or large, the qualifying international relationship could be met if he/she would create or purchase an existing U.S. entity of which he/she will own more that 50% of the votes. The potential investor could then choose between the L-1A and L-1B subcategories. However, one needs to know that the L-1A is much more difficult to obtain than the L-1B. The first can be delivered for seven years rather than five. Perhaps the most important reason for the administration's bias against the L-1A visa is that it can lead to the green card with relative ease. Indeed, once in the United States, the L-1A investor could be sponsored for the green card, with minimum requirements, if his experience with the foreign corporation was also in an executive/managerial position. Thus, the administration has been very restrictive in granting managerial/executive status especially for small organizations. To meet the definition one has to be mainly occupied with strategizing and directing tasks rather than implementing tasks. For example, negotiating contracts would not be a qualifying task. Instructing and guiding others to negotiate contracts would be. Thus, for a small organization it might be difficult to show that the L-1 employee will be primarily occupied with managerial tasks. Because of the higher administrative scrutiny applied to L-1A applications, it is often advisable to apply for an L-1B visa instead. However, even for the L-1B category, the administration is very demanding since it often fears that the L-1B visa is being used to circumvent the H-1B protective provisions, including the quota or the H-1B minimum wage requirement, two provisions that do not apply to the L categories. The administration's fear might explain the inconsistency that we sometime find in its analysis of the "specialized knowledge" requirement and it appears that its goal is to limit the L-1B visa to those positions where the applicant can demonstrate unique knowledge of the business or unique accomplishments that are needed for the success of the U.S. entity. The two L-1 categories, unlike the H-1B, allow dependent spouses to work for any employer and in any position. The next two categories have been created specifically to address the need of foreign investors. The E visa category implements the U.S. treaty obligation with certain countries, including most European countries, to allow their citizens to invest (E-2) or to trade (E-1) in the United States with the same rights accorded to U.S. citizens. Unlike for the H and L categories, the U.S. administration does not have as much discretion to limit the types of positions that would qualify as investor or trader. As long as the applicant will be in the United States to manage his/her investment or to trade, he/she is generally qualified regardless of the daily tasks assigned. Generally, the main difficulties with an E-2 or E-1 visa application are to demonstrate that the investment or trade is "substantial" and that the U.S. business will not be "marginal". These two terms are not defined objectively by law or regulation. The regulation provides only loose guidelines and therefore leaves substantial discretion to the administration. However, experience allows us to discern patterns if not standards. Usually, the term substantial is not directly related to the actual amount invested. For example, we have had successful E-2 applications with less than $40,000 and as little as $25,000 of personal investment. Rather than meeting an arbitrary amount to qualify as a substantial investment, what controls is the ratio of the personal investment from the applicant and other individuals of the same citizenship over the total amount of capital necessary to purchase or start the business. In general, if the investment is less than $100,000, the ratio needs to be 100%. In other words, all of the capital necessary to start or purchase the business must be personal funds from E-2 investors, and none can be borrowed. Over $100,000 of investment, the qualifying ratio will progressively decrease as the total amount of capital necessary to start the business will increase. For example, a ratio of 50% for a business that needs $500,000 of capital might be considered substantial whereas it would not be for a business that needs $250,000 of capital. Generally, the investment will meet the non marginal test if it creates employment for U.S. workers or has a reasonable prospect of doing so rapidly. Like the amount of investment, there is no magic number of U.S. jobs to be created. One job can be enough if other benefits to the U.S. economy can be shown. For an E-1 visa, the substantiality test is based on the ratio of trade between the United States and the treaty country over the total amount of trade with all countries combined. Like the E-2 investment, the smaller the amount of total trade is, the higher the ration must be. A great advantage of the E visa is that there is no time limitation. It can be valid for as long as the foreign investor/trader remains in control of the business. Generally, the visa is good for five years at a time. Furthermore, the investor can sponsor other compatriots in position that are deemed essential for the E business. This is particularly beneficial for certain activities such as the hospitality industry where it can be very difficult to find qualified employees within the U.S. labor market. For example, chefs and other key restaurant employees can be brought to the United States relatively quickly within about six weeks, provided they are of the same citizenship as the investor. Like the L visas, the E dependent spouse will be allowed to work for any employer and any position. The draw back of the E visa is that it does not lead to the green card and the children will lose their E visas when they reach the age of 21. At that time, they will need to qualify individually for their own visas. To address this limitation of the E visa, one could consider having the E enterprise sponsor the investor or the spouse for a green card on the basis that it can not find any U.S. workers qualified and available to fill his/her permanent position. However, in such a situation, the administration will be highly suspicious of any representation made by the E enterprise since it is controlled by the principal beneficiaries of those representations. Thus, it will be very important to isolate the investor and the spouse from all steps taken by the E enterprise while it attempts to demonstrate that it could not find a U.S. worker for the position offered. At a minimum, all recruitment activities should be conducted without any participation and control from the investor and the spouse. Unlike previous options, the visa EB5 ("Employment Based 5th category") is the only option that leads to a permanent resident status (green card) for the investor and immediate family members. The visa was created in 1990 under the administration of Bush Senior, in order to grant a green card to any foreign individual who invests $1 million US dollar in a new or existing business creating at least ten direct jobs. Those investors are commonly called EB-5 investors, and 10,000 green cards are reserved each year for them. Three thousand such cards are reserved for investments in areas with an employment rate of more than 150% of the national average rate or in rural areas. For those priority areas, the investment needs only be $500,000. Since 1993, another group of 3,000 green cards are reserved for individuals who invest in regional centers pre-approved by the administration. Regional centers are economic projects proposed by governmental or private entities to pool the investment of foreign investors as well as other investors. The projects can be of any kind provided that they benefit U.S. workers. The minimum investment is also reduced to $500,000 for this subcategory. Moreover, the determination of whether the investment will generate ten jobs will consider all indirect jobs created by the regional center. The EB-5 visa seems attractive for those who have enough money. However, until the end of 2007, only 1,000 green cards (including green cards for children and spouses of investors) have been granted each year. The small success for this visa category might be explained by the fact that the administration has been very slow to issue reliable regulations for a program that some people still consider to be an unfair discrimination in favor of wealthy foreigners. Thus, the early regulations were more demanding than what Congress seemed to have intended. For example, the administration added the obligation to prove that the money invested in the United States was legally acquired and that all taxes were paid in the country of origin. The reservations of the administration about the EB-5 program increased with the Clinton administration and probably peaked in 1998 when the administration had the audacity to change the regulation retroactively. Thus, many investors and their family members who had received a permanent green card were badly surprised to find out that it was not as permanent as they were told. Congress intervened in 2002 and 2003 with new amendments aiming to bring clarity and predictability. The situation is progressively improving but the program is still not popular since some regulations are still in the making. In 2010, only about 1,000 daring investors, mostly Asian, obtained a green card. For less daring or less wealthy investors, the H, L, and E visas remain more reliable options, provided they are used judiciously and professionally. Copyright © 2002- Choné & Associates. All rights
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