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Imagine investing $150,000 to establish a business in the United States. You’ve registered your company, signed a lease, purchased equipment, and committed a substantial portion of your savings to getting everything ready.
From your perspective, you’ve demonstrated a serious commitment. After all, $150,000 is a significant amount of money.
But when preparing your E-2 visa application, you discover that the amount invested is only part of the equation.
There’s another important question: Can your business generate more than enough income to provide a minimal living for you and your family, or make a significant economic contribution?
This is where the E-2 marginality requirement comes into play, and it’s something investors sometimes underestimate.
What Does Marginality Actually Mean?
Under E-2 regulations, a marginal enterprise is generally one that lacks the present or future capacity to generate more than enough income to provide a minimal living for the investor and their family.
However, a business may also satisfy the requirement by demonstrating the present or future capacity to make a significant economic contribution.
Importantly, a new business doesn’t necessarily need to be profitable immediately. Its projected future capacity is relevant, and that capacity should generally be achievable within five years of commencing normal business operations.
The challenge is demonstrating that the projections are realistic.
Simply stating that the business expects to grow substantially over the next five years isn’t particularly convincing without explaining how that growth will occur.
Two Investors, Two Very Different Business Plans
Consider two entrepreneurs who each invest $150,000.
The first establishes a consulting company. The business projects $120,000 in annual revenue, with the owner performing most of the consulting work and no immediate plans to hire employees.
The second establishes a service business projecting $400,000 in annual revenue, with plans to hire four employees over five years.
At first glance, the second business might appear better positioned to address marginality because of its higher projected revenue and planned hiring.
But the comparison isn’t that simple.
What are the operating expenses of each business? How much profit will remain after those expenses? Can the second company realistically attract enough customers to generate $400,000 in revenue? Will it have sufficient cash to support the proposed employees?
And what about the consulting company? Although it may operate with fewer employees, its relatively low overhead could allow it to generate meaningful profits.
Neither the investment amount nor the number of projected employees automatically determines whether a business satisfies the marginality requirement.
What matters is the financial and operational picture as a whole.
Revenue Doesn’t Tell the Whole Story
One mistake investors can make is focusing too heavily on projected sales.
For example, a restaurant generating $600,000 annually might sound more substantial than a consulting company generating $200,000.
However, the restaurant may have significant food costs, payroll expenses, rent, utilities, and other operating costs.
The consulting company, meanwhile, may operate with considerably lower overhead.
Depending on their respective expenses, the smaller business could generate more profit.
That’s why financial projections need to go beyond revenue.
A credible business plan should explain expected operating expenses, profitability, staffing requirements, and how the company intends to finance its operations as it grows.
It should also demonstrate that the underlying assumptions make sense for the particular industry and business model.
What About Hiring American Workers?
Employment creation can be relevant when demonstrating a business’s economic contribution, but there’s an important distinction between planning to hire employees and showing that the business can realistically support them.
Imagine an investor whose business plan projects eight employees by the fifth year.
That sounds encouraging, but what if the projected revenue barely covers the proposed payroll?
Or what if the business expects to hire those employees before it has enough customers to justify the positions?
These inconsistencies can undermine the credibility of the projections.
At Visa Business Plans, we pay particular attention to the relationship between revenue growth, operating expenses, and staffing.
Our financial projections are developed using industry research and assumptions that reflect the company’s actual business model.
For example, if a company intends to hire a sales manager in its second year, we consider whether the anticipated revenue and available resources can support that position.
The objective isn’t to present the largest possible workforce. It’s to develop a hiring strategy that makes commercial sense and supports the company’s projected growth.
Why the Amount Invested Still Matters
None of this means the amount invested is unimportant.
E-2 applicants must demonstrate that their investment is substantial in relation to the cost of establishing or purchasing the particular business.
A $150,000 investment might be substantial for one type of enterprise but insufficient for another.
However, substantiality and marginality are different requirements.
Substantiality concerns the investment’s relationship to the business and the investor’s financial commitment.
Marginality concerns the enterprise’s present or future income-generating capacity or significant economic contribution.
An investor may satisfy one requirement without necessarily satisfying the other.
This is why preparing an E-2 application involves more than documenting expenditures and demonstrating that money has been committed to the business.
A Business Plan Should Explain How the Business Will Succeed
When developing an E-2 business plan, we examine how the company’s proposed activities, target market, financial projections, and staffing strategy fit together.
For example, if a business expects to double its revenue within three years, we want to understand what will drive that growth.
Will the company expand its customer base? Introduce additional services? Increase production capacity? Hire personnel who will allow it to serve more customers?
We also consider whether the projected expenses and available capital are consistent with that strategy.
This approach helps us develop financial projections that are commercially defensible rather than simply optimistic.
Ultimately, the immigration attorney determines how the business plan and supporting evidence should be presented to address the applicable legal requirements. Our responsibility is to ensure that the business and financial information provides a credible foundation for that presentation.
Your Investment Opens the Door. Your Business Model Must Support the Case.
Investing $150,000 in a U.S. business represents a meaningful financial commitment, but it doesn’t automatically establish eligibility for an E-2 visa.
Investors also need to demonstrate that the enterprise meets the applicable requirements, including marginality.
That means explaining not only how much money has been invested, but how the business expects to operate, generate revenue, manage expenses, and develop over time.
A well-prepared business plan connects those elements into a realistic picture of the company’s future.
Because when evaluating an E-2 investment, the amount spent matters, but so does what the business is reasonably expected to accomplish.
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The information provided in this blog is intended solely for informational purposes. While we strive to offer accurate and up-to-date content, it should not be considered legal advice. Immigration laws and regulations are subject to change, and individual circumstances can vary widely. For personalized guidance and legal advice regarding your specific immigration situation, we strongly recommend consulting with a qualified immigration attorney who can provide you with tailored assistance and ensure compliance with current laws and regulations.
Visa Business Plans is led by Marco Scanu, a certified coach from the University of Miami with a globally-based practice coaching Fortune 1000 company executives, entrepreneurs, as well as professionals in four different continents. Mr. Scanu advises clients on turnaround strategies and crisis management.
Mr. Scanu received a bachelor’s degree in Business Administration (Cum Laude) from the University of Florida and an MBA in Management from Bocconi University in Milan, Italy. Mr. Scanu was also a Visiting Scholar at Michigan State University under the prestigious H. Humphrey Fellowship (Fulbright program) with a focus on Entrepreneurship, Venture Capital, and high-growth enterprises.
At present, Mr. Scanu is the managing partner and CEO at Visa Business Plans, a Miami-based boutique consulting firm providing attorneys and investors with business planning services in the areas of U.S. and Canadian immigration, SBA loans, and others.
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