Fri. Feb 21st, 2020

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How Canadian Entrepreneurs Can Open Businesses In The United States

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Many Canadian entrepreneurs do not realize that it is relatively easy for them to establish a business in the United States and then relocate to the U.S. in order to manage it. This has been possible ever since the U.S.-Canada Free Trade Agreement (which became effective on January 1, 1989) and has continued under the North American Free Trade Agreement, which replaced the Canada-U.S. Free Trade Agreement on January 1, 1994.

Although there is often more than one strategy available to a Canadian entrepreneur seeking to establish a business in the United States, the E-2 treaty investor category remains one of the most popular options. It is essentially available to a citizen of any eligible treaty country (including Canada) who invests a substantial amount of capital in an eligible United States business.

Although E-2 investors do not receive lawful permanent residence (i.e. a Green Card), they are entitled to live in the United States and to manage their U.S. businesses for five years at a time, with no limit on the number of renewals allowed. In other words, it is possible for them to live in the United States almost indefinitely under this category, by renewing their status every five years (provided that they remain eligible).

Dependent spouses and minor children of such applicants also receive E-2 dependent status for the same duration as the principal applicant. These dependent spouses may obtain open work permits (to work for anyone, in any job). Although dependent children cannot seek work permits, they may attend school incidentally to their E-2 dependent status.

Qualifying as an E-2 Treaty Investor

So what does it take to qualify as an E-2 treaty investor? This is obviously a complex category with many technical requirements but I will answer some commonly asked questions below.

“What Kind of U.S. Business Qualifies?”

Virtually any type of business can potentially qualify as an E-2 treaty business. For example, even a franchised business (i.e. a Tim Horton’s franchise in the U.S.) could be used to support an E-2 visa application. However, there are some restrictions, which are briefly described below.

For example, the proposed business must be a real and active commercial or entrepreneurial undertaking, producing some service or commodity for profit. In other words, it cannot be a shell company or a passive/speculative investment (i.e. owning undeveloped land or company stocks). Buying a residential property for the purpose of renting it out will also not qualify, since this would not be an active business.

In addition, the proposed business must not be a marginal enterprise. A marginal enterprise is defined as an enterprise that does not have the capacity to generate more than enough income to provide a minimal living for the treaty investor and his or her family. However, a business that supports several U.S. employees and also earns sufficient profit to support the investor and his or her family would not be considered a marginal enterprise.

“How Much Money Should I Invest?”

Officially, the U.S. Department of State guidelines claim that there is no minimum investment required in order to qualify as an E-2 treaty investor. Instead, United States consulates are supposed to consider the percentage of the applicant’s investment relative to the total cost of starting or acquiring the business; this is referred to as the proportionality of the investment.

The lower the cost of starting/acquiring the business, the higher the proportionality of the investment must be. For example, a business costing $100,000.00 USD might require the investor to contribute 75% of the required capital. However, a business costing $500,000.00 USD might only require the investor to contribute 60% of the require capital.

In practice, there actually is a minimum investment requirement, although it is only informally applied. At the United States Consulate General in Toronto, which adjudicates all new E-2 visa applications for Canada, cases involving a minimum investment of $100,000.00 USD are usually fine (provided that the proportionality of the applicant’s investment is also sufficient). However, cases involving investments as low as $75,000.00 USD (or perhaps even $50,000.00 USD) may also be acceptable in appropriate cases.

“What Qualifies as an Investment?”

The investment funds must come from legitimate sources (i.e. savings, a gift, an inheritance, etc.) and the applicant must be in possession and control of those funds at the time of the investment. The applicant must therefore be able to document the source of the investment funds. Also, since the applicant must be in possession and control of the investment funds, it is not possible to simply inherit a U.S. business. However, inherited funds could be used to purchase the U.S. business.

The funds must also be irrevocably committed to the U.S. business and must be at risk of loss if the business fails. In other words, the investment capital must actually be invested into the operations of the proposed business. Loans secured on the assets of the proposed business cannot qualify because they are not at risk to the investor; in the event of a default, a secured creditor will attempt to seize the business assets before taking action against the investor. However, the investor’s personal capital, unsecured loans, and even loans secured on his or her personal assets (i.e. a loan secured by a personal residence) can be considered eligible investments.


Canadian entrepreneurs who wish to start or acquire a U.S. business should explore their potential eligibility for E-2 treaty investor status. If eligible, they can use this option to establish a U.S. business and then live in the United States for as long as it continues to operate.

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