How will I spend a “substantial” amount for a service-based business?
This is a question I get all the time. Honestly: All. The. Time. The great news? I’ve successfully helped many clients through this exact scenario. So, let’s break it down and get you thinking about how to spend a substantial amount on a service-based business and get the E2 visa.
First things first – What’s a substantial amount for a service-based business?
I get this call at least three times a week: I want to start a marketing company/software company/app development company/accounting firm/recruiting firm/other service-based business. How much do I need to invest?
Answer: I always recommend an investment of a minimum of $100,000 USD or so. As you likely know from your research on the E2 visa, there is no set minimum amount that must be invested. However, there are some general guidelines.
- The amount invested must be substantial in a proportional sense. This means that the more expensive the business, the lower the percentage of the start-up costs you need to invest. However, the government points out specifically that a business with a start-up cost of $100,000 would require a 100% investment.
- The investment amount must be enough to ensure the investor’s financial commitment to the business.
- Finally, the investment must be enough to support the likelihood that the investor will successfully develop and direct the enterprise.
So, what does this mean? It means that the government is looking for more than just $15,000 for a couple of computers and a Facebook advertising campaign. Even though this may be enough to cover the start-up costs of your business, the government wants to ensure that you have a financial commitment to the business and that you will successfully develop the business.
In other words – you need to have financial “skin in the game.” Think about it from the consular officer’s side. This person doesn’t know you or your work ethic. He or she may not know much about the industry in which your business will operate. The interview is (in most cases) 10-15 minutes long. Therefore, this person needs something to give them assurance that you will work hard to make this business successful. Your investment is your bond. Your “substantial” investment is the one thing that this officer has to ensure you won’t simply move to the U.S. and drop the business. The officer wants this financial commitment to prove you will work hard at making the business successful.
So, the more you invest, the more assurance the officer has that you will continue to operate the business and do everything in your power in order to make the business successful.
How do I spend $100,000 on a business that only costs $30,000 to start?
Although it may seem overwhelming, the good news is that I’ve never had a client who couldn’t figure out how to investment the money. More importantly, I’ve never had a client who spent the money on something that was completely frivolous. Let’s go through a few ways to figure out your investment.
What counts toward the investment?
This is a bit difficult to answer in this short article, since every business is different. However, I am happy to give you most of the categories of expenses that I typically see for service-based businesses.
- Professional services: This category includes your immigration attorney, the business plan writers, any corporate attorney or other service that helped you set up the LLC or Incorporation and more. Anyone who gives you professional help or advice in order to start this business will likely fit in this category.
- Equipment: This may include computers, work-only phones, printers and the like. In some instances, you may be able to include a car. (Please note, however, that if it is your only vehicle, you can probably only include 50% of the value of the vehicle. Also, please note that if the car is leased, you can only include the lease payments you have made at the time of the application.)
- Office rent: Rent will definitely count toward your investment, but only the rent you have paid before you apply for the E2 will count. So, if your rent is $1,000 a month and you pay for a whole year up-front, you can use $12,000 as investment. However, if the rent is $1,000 a month and you have signed a year-long rental agreement but only paid for the first two months, only $2,000 will count toward the investment.
- Software/online systems: There may be software that is helpful to run your business. You should be able to use the cost of this software or internet system as part of the investment.
- Marketing/advertising: This is a big category and can include a website design, Google ads, Facebook ads, a marketing consulting company, a trade show and more.
Please note that this list is not exclusive! There may be other investment that will work. This is something to discuss with your attorney.
Let’s make a list
Now that you have a sense of the typical investment for a service business, it’s time to put pen to paper. Sit down and make a list of everything you will need for your business for the next 18 months. Computers? Maybe a work-specific phone? Website? Make a list of everything that you will need to buy.
Once you have the list, go through and think about upgrades you can do to increase the amount. Were you thinking about a used iPhone? Why not by the latest version instead? Were you thinking of building your own website? Maybe you can hire a company instead and really have the website stand out.
I’ll bet that after this short exercise you are probably already to $100,000 or so. Want to discuss even more? It would be a pleasure to speak with you. Contact Rupert Law Group today, and we can help you and your service-based business through the E2 visa process.