Read This Before Buying An Existing Business For Your E2 Visa Application

Buying an existing business has a big risk. We discuss what you need to beware of before buying one and why franchising is a smarter choice.

Why buying an existing business is a high risk?

The Cons Of Buying An Existing Business

The E2 visa is a non-immigrant visa that allows individuals to enter and work in the United States. This visa is specifically designed for entrepreneurs and investors who wish to start or acquire a business in the United States. When it comes to E2 visa applications, buying an existing business can seem like a viable option. However, there are several potential downsides to this approach. These include higher risk, less flexibility, and the possibility of unforeseen liabilities.

Finding a truly successful existing business for investment can be a challenging task. While many businesses are listed for sale through various resources, such as business brokers, real estate agents, and online databases, it cannot be easy to discern profitable investment opportunities. This is because many successful business owners are often reluctant to sell their businesses. It’s natural to question why an owner would sell a business that is generating profits and doing well. If the business is truly successful, shouldn’t the sales price reflect the profits?

While some owners may decide to sell for personal reasons, successful business owners may gift the business to a family member or hire a general manager to manage the business for them instead. In cases where the business is a franchise, the unit may be purchased by another franchisee or even the franchisor themselves to facilitate quicker expansion. Therefore, it is important to carefully evaluate existing businesses for sale and consider alternative investment options such as franchises.

We will explore these disadvantages and how purchasing a franchise can offer a more stable and secure path to obtaining an E2 visa. First, let’s discuss what you should beware of before buying an existing business:

Higher Business Risk

  • Uncertain profitability

When purchasing an existing business, it can take time to determine its profitability. Based on our experience, many business owners presented false financial information. Business owners may inflate sales figures or understate costs to make the business appear more profitable. If an existing business for sale appears too good to be true, it usually is.

  • Unforeseen liabilities

Buying an existing business also comes with the risk of unforeseen liabilities. These may include outstanding debts, legal issues, or unresolved customer complaints. These issues can be costly and time-consuming to address and can negatively impact the business’s success.

  • Lack of control over operations

When purchasing an existing business, the new owner may not have complete control over its operations. The previous owner may have established a certain way of doing things that may not align with the new owner’s vision. This can make it difficult to implement changes and improvements to the business.

  • No support

This means that the success or failure of the business will depend solely on the new owner, unlike franchises with established processes in place. While experienced entrepreneurs may be an exception, most new owners will likely experience a drop in sales, quality, or increased costs. This is especially relevant for foreign nationals seeking E-2 visas, as they may be unfamiliar with the competitive US market. The worst-case scenario is the failure of the purchased business, which requires a new investment to retain the investor visa.

  • High cost in due diligence

Conducting thorough due diligence is a critical step in the process of evaluating a potential investment opportunity in an existing business. This requires hiring an accountant or other qualified professional to review financial statements, tax returns, lease agreements, contracts, and liabilities associated with the business.

This step is crucial in verifying the accuracy of the financial information provided by the business owner. Unfortunately, it is not uncommon for potential investors to discover that the financials provided by the owner are not entirely accurate. This can be a costly and time-consuming process, as due diligence typically requires a significant investment of time and money, including accounting fees ranging from $1,000 to $2,000 and 10-30 hours of the investor’s time. Failing to conduct proper due diligence can result in wasted time and resources.

Less Flexibility

  • Limited ability to make changes

Buying an existing business means taking on its established practices and procedures. This can limit the new owner’s ability to make changes and improvements to the business. It can also be difficult to implement new ideas and strategies that may be necessary for success.

  • Existing contracts and agreements

Existing contracts and agreements can also limit the new owner’s flexibility. These may include leases, supplier contracts, and employee agreements. The new owner may be bound by these agreements, making it difficult to make changes or negotiate new terms.

  • Established employee base

An existing business will also come with an established employee base. This can be positive if the employees are skilled and dedicated. However, it can also be difficult to change the team if necessary. The new owner may also inherit any employee-related issues or conflicts.

  • Longer process

Buying an existing business is not necessarily faster than investing in a new franchise, as finding, contacting, and conducting due diligence on existing businesses can take months to complete. Discovering fraudulent numbers or unknown aspects of the business late in the process is possible. On the other hand, the Federal Trade Commission regulates the information franchisors can share with potential franchisees. This allows potential investors to obtain crucial information early on in the process and decide whether to continue with the evaluation.

A man signing an agreement while the other is explaining the agreement

Why is it better to go with franchising?

Both men and women smiling in front of the computer because of successfully buying an existing business

The Benefits Of Purchasing A Franchise For E2 Visa Applications

A franchise does not give you a competitive advantage in the eye of an immigration officer but also many other benefits, such as:

Established Brand and Business Model

  • Proven track record of success

Franchises come with an established brand and business model already proven successful in the market. This can help the new owner to quickly establish a customer base and generate revenue.

  • Established customer base

Franchises also have an established customer base. This can help to reduce marketing costs and increase revenue in the early stages of the business.

  • The strong support system from the franchisor

Franchisors provide a strong support system for their franchisees. This includes training, ongoing support, and access to resources such as marketing materials and operational procedures.

Reduced Business Risk

  • Franchise disclosure documents provide transparency

Franchisors are required to provide franchise disclosure documents that provide transparency about the franchise’s financial performance, legal history, and other relevant information. This can help the new owner to make an informed decision about the franchise and reduce the risk of unforeseen liabilities.

  • Established operational procedures

Franchises also come with established operational procedures. This can reduce the risk of mistakes and ensure the business runs efficiently.

  • Training and ongoing support from the franchisor

Franchisors provide training and ongoing support to their franchisees. This can reduce the risk of operational errors and ensure that the business is successful in the long term.

Easier to Meet E2 Visa Requirements

  • The investment amount is easier to determine

Franchise investments typically have a set amount that is required. This makes it easier for E2 visa applicants to demonstrate that they have invested substantial capital into the business.

  • Easier to demonstrate managerial skills

Franchise agreements often require that the owner has a certain level of managerial experience. This can make it easier for E2 visa applicants to demonstrate that they have the necessary skills to run a business in the United States.

  • The franchise agreement can be used to show substantial investment

The franchise agreement can be used as evidence of a substantial investment in the business, which is required for the E2 visa. This can make it easier for E2 visa applicants to demonstrate that they meet the requirements for the visa.

Get The Best Franchise Options According To Your Need And Goals.

How can help you?

Our Service is a consulting firm specializing in helping E2 visa applicants find the best franchise opportunities. Our services include:

  • In-depth consultations to understand the client’s needs and goals

  • Identification of franchise opportunities that match the client’s profile and preferences

  • Analysis of franchise disclosure documents to assess the risks and opportunities of each franchise

  • Assistance with the due diligence process, including legal and financial review

  • Negotiation of terms with the franchisor

  • E2 visa business plan writing

  • Ongoing support after the purchase to ensure the success of the business

We have extensive experience and expertise in the immigration and franchise industry. Our team has worked with numerous clients to find the best franchise opportunities that meet their needs and goals. We have a deep understanding of the franchise industry, including the legal, financial, and operational aspects of franchise ownership. As well as the immigration process and procedure.

Choosing as your consulting firm for finding a franchise can provide you with the expertise, support, and guidance needed to successfully navigate the franchise ownership process and meet the requirements for the E2 visa. Consult today for free.

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