Yesterday, we spoke with an E-2 investor who came to us after his visa renewal had been denied.
He was devastated.
His previous attorney had submitted a business plan the client prepared himself, and from his perspective, everything seemed fine. The company was operating, he had been running it for years, and he was proud of the way he had kept expenses under control.
Then the denial arrived.
The government found that the business was marginal.
His attorney suggested he contact us to review what he'd submitted and see whether we could help with a new filing.
So we started where we always start in this situation. We read the denial carefully, reviewed the business plan, and looked at the supporting financial information.
Once we finished, we had to tell the client something he wasn’t expecting to hear.
We agreed with the adjudicator.
One of the first things that caught our attention was something the client had actually presented as a strength in his business plan. He was proud that he had built what he described as a very lean organization.
The company had no W-2 employees and occasionally used independent contractors.
From a traditional business perspective, keeping overhead low can certainly be a positive thing. But an E-2 business cannot be evaluated only as a traditional business.
An E-2 enterprise must be more than marginal. Under the regulations, a marginal enterprise is one that does not have the present or future capacity to generate more than enough income to provide a minimal living for the investor and the investor’s family. A business may also qualify based on its present or future capacity to make a significant economic contribution.
This is where the client’s idea of running lean began working against the immigration story he needed to tell.
There was another issue that concerned us.
An E-2 investor comes to the United States to develop and direct the enterprise. When we see an established company with no employees, we naturally want to understand what the investor is actually doing every day.
Who is handling customers? Who is providing the company’s services? Who is taking care of sales, administration, and the everyday work required to keep the business operating?
Using contractors can certainly be part of how a modern business operates, and the E-2 regulations do not impose a specific minimum number of W-2 employees. But in this particular case, the complete absence of employees raised an important question about whether the investor was truly directing the company or was largely doing the work himself.
As we continued reviewing the file, we found another problem.
The company’s financial statements showed losses.
This was especially concerning because the client explained that his CPA had approached the books primarily from a tax perspective. Lower taxable income may have seemed advantageous from that perspective, but nobody appeared to consider how the resulting financial picture would look when the client returned to immigration to renew his E-2 visa.
We have seen the consequences of this firsthand for years. Business owners who had invested significant money, built companies, and established their lives in the United States lost their E-2 visas when their financials failed to support the immigration requirements.
What makes these situations particularly frustrating is that many of the problems didn’t appear overnight. The warning signs had been sitting in the financials for months, sometimes years.
That experience is actually what led us to create ProfitWise.
We realized there was often a disconnect. The CPA was understandably looking at taxes. The immigration attorney was focused on the immigration case. The owner was busy running the company. Meanwhile, nobody regularly looked at financial performance through the unique realities of owning a business tied to an E-2 visa.
Sometimes the problem isn’t that the business isn’t generating enough revenue. Certain expenses may be classified or recorded in a way that creates a financial picture the owner didn’t realize was there. In other cases, the books are perfectly accurate and they are exposing a genuine problem with profitability, expenses or some other part of the operation.
The distinction matters, but so does the timing.
When the books are reviewed monthly, there is a much better opportunity to notice when profitability is declining, expenses are becoming a problem or something else is moving in the wrong direction. If the issue is operational rather than bookkeeping-related, that may also be the point where deeper financial analysis and Fractional CFO guidance become useful.
A problem discovered two years before renewal may give the owner an opportunity to understand what is happening and make changes. Discovering the same problem after the renewal has already been denied is an entirely different situation.
That’s also why, when we review an E-2 business approaching renewal, we don’t simply ask whether the company made money last year.
We want to understand how the business has developed during the visa period. Is it profitable? How has staffing developed? Is the company growing? And is the investor actually directing the business, or is the operation still largely dependent on the investor performing its everyday work?
The client we spoke with yesterday had looked at his business through the eyes of an entrepreneur.
He saw a lean company with very little overhead.
His CPA had looked at it through a tax lens.
Immigration looked at the same company through the requirements of the E-2 visa.
Those three perspectives produced very different conclusions.
A business can be run in a way that seems perfectly reasonable to its owner while creating a very different picture when viewed through the requirements of an E-2 visa.
For an E-2 investor, the time to discover that difference is while there is still time to do something about it, not after the denial arrives.
Contact us today to get startedThe 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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