Catalog Articles Resources Find A Broker Franchises Kudos Guarantee Site Map About Us

This article is one of a series that offers insight and guidance into the process of buying, selling or valuing a business. Whether you want to buy, sell, or appraise the valuation of a going-concern business, these articles provide specific guidance and references to help you accomplish your goal.

Selling to the Foreign Investor

by Tom West

Now that the world is a global village, many business owners are beginning to think foreign when they make the decision to sell. And why not? Foreign buyers are making a major impact on the American independent business scene, with every indication that they will continue to be aggressive purchasers. However, sellers of the small to midsized business should be aware that foreign-buyer status raises issues with the U.S. Immigration and Naturalization Service. The following is a look at the U.S. visa system as it applies to the acquisition of a business by the non-national buyer:

E-2 Visa. This is a non-immigrant, long-term, temporary visa, issued to a person who makes a substantial investment in an enterprise that is active ("not marginal") and that the foreign buyer will direct and manage. "Substantial investment" is not defined by a minimum amount. There are, however, certain percentage requirements. For example, a business costing less than $100,000 requires an investment of at least 75 percent; a business selling for between $100,000 and $500,000 requires a minimum investment of 60 percent. The term "not marginal" means that the business must have a large number of employees and/or an established record of profitability; otherwise, the foreign buyer must show proof of an outside source of income with which to sustain him- or herself during the first few years of operation.

An additional requirement is that the investor must be legally committed to the purchase of a business by paying the deposit--even before the E-2 Visa has been approved. To avoid incurring substantial liability should the application be denied, the business broker handling the sale will usually recommend an escrow closing, wherein the deposit is paid into a special account and turned over to the seller only upon issuance of the visa.

Only foreign buyers with citizenship in specific countries may apply for the E-2 Visa, and depending on the country of origin, the visa will be issued for a period of three to five years, renewable without limitation as long as the investment is in effect.

Some advantages of the E-2 Visa: the foreign buyer may (1) bring to the U.S. supervisory personnel who are nationals of the same country; (2) draw a salary in the U.S.; (3) bring his or her family into the country, and send children to school or university without obtaining a separate L-1 Visa. This "inter-company transferee" visa, available for up to seven years, is issued to a non-national who has been employed abroad by a company for one out of the last three years in an executive, managerial or specialized-knowledge position. The person must be entering the U.S. to work for a subsidiary, affiliate or branch of the same company for which he or she was employed abroad. Unlike the E-2, there is no minimum investment set for the L-1, the chief requirement being that the company can prove its readiness to begin operations and its ability to pay the transferred persons annual salary. A person already owning a company abroad can form a U.S. company in order to acquire a business in this country, whether or not the businesses are of the same nature.

One of the main advantages of this visa is that, after the U.S. company has been in existence for at least one year, it may petition for a Permanent Residency Visa for its executive officer or manager, thus avoiding the complications and expense of a labor certification application.

Employment Creation Visa. More commonly known as a Permanent Residency Visa, this type is issued to a non-national who invests at least $1 million in a newly-created or newly-organized U.S. business enterprise that creates or protects ten or more jobs. The required investment for the Employment Creation Visa can be reduced to $500,000 if the investment is made in a rural or "targeted employment" area. This visa is issued for a period of two years on a conditional basis, to be made permanent upon proof at the end of this time that the investment has been completed and the employment level has been met.

The principal advantage of this visa is the following loophole: if the buyer acquires a "troubled" company (one that has sustained a 20 percent reduction of its net worth during the past two years), it is not necessary to create an additional ten jobs, regardless of the area where the business is located. (The minimum number of total employees, however, must be at least ten.) For example, if the company already has seven employees, the foreign investor must create only three additional jobs.

Sellers who are interested in exploring the expanding world of foreign buyers should keep in mind the reality that U.S. immigration authorities are vigilant defenders against illegal entry. They will keep an eagle eye on business-motivated visa applications to ensure that the foreign buyer has a legitimate interest in contributing to the U.S. business scene. A professional business broker can help both buyer and seller understand the requirements and documentation necessary for the successful completion of the foreign-investment transaction.

About the Author

Mr. Tom West is the editor/publisher of The Business Broker, a monthly newsletter for the business brokerage field. He has written or co-written numerous books including the The Business Reference and Pricing Guide and The Resource Handbook for Business Brokers. He is a founder, past president, and former executive director of the International Business Brokers Association (IBBA). He is a frequent lecturer and seminar leader on all aspects of buying, selling, or appraising a business. Mr. West is probably the most knowledgeable individual in the country today concerning the issues of buying or selling small to mid-sized businesses.

If you're considering buying, selling, or determining the value of a business, please take a look at some of the excellent books, reports, and software we have at Business Book Press to help you achieve success. For example:

The Business Reference and Pricing Guide is the bible of the business brokerage world. If you're a shrewd business buyer or seller, you will want this book to learn what just what the business broker knows. It will pay you big dividends throughout every aspect of the purchase and sale process. Learn more about it...

BizPricer™ Business Valuation Software is an accurate and inexpensive resource for prospective business buyers and sellers (and business brokers) who want to know the fair market value of a business. No financial expertise or specialized knowledge is needed. Save hundreds to thousands of dollars over hiring an appraiser to provide you with a similar result. Learn more about it...

Preparing A Business for Sale provides business owners with an understanding of the process they need to know to sell their business for the most money. Contains hundreds of little known tips, ideas and strategies to maximize the selling price of a business. Learn more about it...

Strategies for Successfully Buying or Selling a Business is our bestselling book. It has been recommended by Kiplingers Personal Finance Magazine, the BottomLine Personal Newsletter, and has been awarded the Best Business Book of the Year Award from the North American Bookdealers Exchange (NABE). Learn more about it...

Anatomy of a Business Purchase Offer provides you with all of the practical hands-on knowledge you need to make a successful purchase offer to buy a business. The author uses an actual Purchase Offer form to show you exactly what needs to be written and why! He details all of his recommendations in a line-by-line format for each and every aspect of the purchase offer. Learn more about it...

The Business Buyer's How-to Kit: We've assembled a specially-priced Kit with all of the key information you'll need to know to successfully buy a business.

The Business Seller's How-to Kit: We've assembled a specially-priced Kit with all of the key information you'll need to know to successfully sell a business.

Send this page to a friend! (click here)


BBP Resources

Business Valuation Software
BizPricer software to easily, quickly, accurately, privately and inexpensively value a business.

Business Valuation Rules of Thumb
Most complete source of business purchase and sale information available. Hundreds of valuation rules of thumb.

Buy/Sell Business Process
Strategies, tips, due diligence process and insider secrets for buying or selling a business.

How to Make a Purchase Offer
Detailed process including interactive form on CD for making a successful business purchase offer.

The Resource Guide for Business Brokers
Extensive information about the business brokerage field. Includes 45 different forms on CD.

Preparing a Business for Sale
This book provides 100's of strategies and tips to increase the selling price of a business.

Business Broker Professional Starter Kit
Get started in the lucrative field of business brokerage.

Business Buyer's Kit
Everything you need to successfully buy a business. Hard copy or download.

Business Seller's Kit
Everything you need to successfully sell a business. Hard copy or download.

Catalog | Articles | Resources | Find a Broker | Franchises | Kudos | Guarantee | Site Map | About Us | Home

© 1996-2011, All Rights Reserved
A Division of RDS Associates, Inc.
The best way of contacting us is by email (click here), It's fast, easy and free!
RDS Associates, Inc., Niantic, CT 06357