Visa Problems

Problems in Visa Qualification

When in the process of buying a business to qualify for a U.S. investment related visa, keep in mind that not all businesses and/or investments are suitable… be aware of possible pitfalls.
 

Maze

The first problem to be aware of is excessive financing

Mr. Jones has decided to buy a gas station to use as a qualifying L-1 investment. The purchase price is $250,000; however, he is prepared to invest only $100,000 in cash available. The seller offers to finance the balance. Mr. Jones signs a purchase contract with a promissory note for $150,000, with the business pledged as collateral. Ultimately, his L-1 Visa application is denied because the financing is too high - 60% of the purchase price.

L-1 Visa regulations limit the amount of financing in business acquisitions. A safe guideline calls for a 30% limit to financing the purchase of a business with the business assets as collateral. Although the seller may agree to finance more, it is not in compliance with L-1 regulations.


Marginal businesses:
 
Mr. Black is the owner of a department store in Finland is interested in buying an ice cream store in New York City. The store is operated by the owner with three employees. The seller tells Mr. Black that the business is a profitable cash cow that produces over $100,000 in net profits. However the seller has tax returns that show taxable income of only $40,000. Under the circumstances, although Mr. Black believes the seller’s representation for the businesses earnings, Mr. Blacks L-1 Visa application will most likely be denied because the $40,000 income tax return renders the business marginal, because it will barely support Mr. Black and his family.

 

Passive investments:
 
Mr. Patel is interested in qualifying for an L-1 Visa based on buying a 10 family apartment building with long term tenant leases. He is prepared to pay all cash for a $200,000 purchase price. The building’s financial records show that it employs the services of a part time maintenance man and a fulltime janitor. Based on the lack of a need for full time management on the part of the owner, Mr. Patel’s L-1 Visa application will be denied because it will be considered as a “Passive Investment” for L-1 Visa qualification.
 
Mr. Gold is a successful contractor in England. He is contemplating the development of an assisted living facility in Florida within three years. In furtherance of his plans, he purchases 10 acres of land in Sarasota Florida. Mr. Gold applies for an L-1 Visa based on his land purchase and future building plans. Under this scenario his L-1 Visa application will be denied because it is a passive investment, his future plans are too remote.
 
The visa regulations require that the investor be actively involved in managing and developing the business. Services should be provided primarily by employees rather than the owner, whose responsibility it is to direct and develop the business. Moreover, the business must be close to start-up.
 
In Mr. Gold’s ' case, he should delay a visa application until such time as he is ready to start the land development, and begin generating employment.

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