Can I Sell my Business to a Non-US Citizen or Foreigner?

Jacob Orosz Portrait
by Jacob Orosz (President of Morgan & Westfield)

Executive Summary

Is it possible to sell my business to a non-U.S. citizen who is not in the United States? I recently put my business on the market and have been dealing with a potential buyer from China, but I’m not sure how feasible it is to sell my business to someone from outside the country. What is involved in selling my business to a foreigner?

Selling your business to a foreign buyer is both possible and common. But there are caveats.

The United States is a talent magnet for innovative entrepreneurs from around the world, and U.S. immigration laws are designed to attract skilled entrepreneurs from other countries, which ultimately boosts our economy in the long run. This benefits the U.S. by increasing our pool of skilled labor and by attracting those who have a demonstrated track record of successful entrepreneurship in other countries. This results in a broad and diverse array of entrepreneurs and a constant influx of new ideas, products, services, and other technological innovations. It’s a win-win for both the U.S. economy and the buyer.

One of the most common pathways to gain U.S. citizenship is through the purchase of a business. A foreign-born buyer also has the option of obtaining U.S. citizenship by starting a business, though the majority feel that acquiring an existing business is a safer investment. Passive investments, such as real estate or businesses in which the owner is not required to play an active role, do not meet the requirements for obtaining a long-term visa to the U.S.

Here are the pertinent questions when it comes to dealing with foreign buyers:

  • Do foreigners make good buyers?
  • What types of businesses do foreigners like to buy?
  • Is the process of selling a business different if you are selling to a foreigner?
  • What countries offer the E-2 visa?
  • What are the requirements for an E-2 visa?
  • How should you negotiate with a foreign buyer? Is the negotiating strategy different from negotiating with another buyer?
  • Is selling to a foreign buyer worth the hassle?

Each of these topics is addressed in the article that follows.

Why Foreigners Make Good Buyers

Foreigners make good buyers for two primary reasons, both of which mitigate risk to you, the seller:

  • U.S. immigration laws require a high degree of capitalization, or down payment, normally at least 50% to 60% of the price of the business.
  • The foreign buyer’s visa status is contingent on the ongoing success of the business. As a result, they are more apt to persevere during difficult times to avoid losing their visa and having to return home. This is beneficial to a seller if the seller is financing a portion of the sale.

Due to the requirement that the business remains operational to ensure their visa remains active, foreign-born buyers are more risk-averse than domestic buyers. Imagine you move to South Korea — would you feel confident assessing demographic, socioeconomic, and other factors and creating a new strategy for the business? Most likely not, unless you are already familiar with the industry and the local marketplace.

Every marketplace has subtle nuances that can only be understood by developing a thorough understanding of the various elements that make up the marketplace and the industry, such as demographics, psychographics, consumer preferences, competitive landscape, political landscape, and dozens of other factors. These factors are difficult for any outsider to fully understand.

As a result of this lack of knowledge, foreign buyers purchasing a business are more risk-averse than their domestic counterparts. Most foreigners are looking for a low-risk business that has a high chance of survival.

The exception to this rule is if no change in strategy is needed for the business and the business only needs an investment in new capital for equipment, inventory, or working capital. In this case, a foreign buyer might not view this investment in capital as risky.

To some intermediaries, this aversion to risk may be misinterpreted as if the individual is looking for a guarantee. However, it must be kept in mind that if the buyer fails in their new business, they face the possibility of a change in their visa status and possible loss of their entire investment. This means that because their visa status is dependent on the continued operation of the business, they may have a stronger motivation to succeed and persevere during difficult times. As a result, foreign buyers are much more cautious, and their aversion to risk should be considered when communicating and negotiating during the sales process.

The investment required to obtain a visa is significant, and the chances are high that the individual is astute and experienced and therefore in a position to gauge the riskiness of an investment. At the same time, you should point out to the buyer that there are no guarantees and risk is present in any investment. The buyer should be able to develop a healthy perspective towards risk and seek to mitigate risk but should also possess the strength to ultimately take the plunge. The ideal foreign buyer is a serial entrepreneur who has owned multiple businesses before. Such an individual will be comfortable with managing risk and will be capable of taking the plunge.

The E-2 Visa

The primary visa obtained in connection with the acquisition of a business is the E-2 visa.

The United States has signed a reciprocal treaty of friendship, commerce, and navigation with dozens of countries. It is possible for the buyer from such a country to become a U.S. citizen through several pathways.

Countries Where an E-2 Visa is Available

Following is a list of countries the United States has signed treaties of friendship and commerce with:

  • Argentina
  • China (ROC)
  • France
  • Italy
  • Netherlands
  • Sweden
  • Australia
  • Colombia
  • Germany
  • Japan
  • Norway
  • Switzerland
  • Austria
  • Costa Rica
  • Greece
  • Korea
  • Oman
  • Thailand
  • Austria
  • Denmark
  • Honduras
  • Latvia
  • Pakistan
  • Togo
  • Bolivia
  • Estonia
  • Iran
  • Liberia
  • Philippines
  • Turkey
  • Brunei
  • Ethiopia
  • Ireland
  • Luxembourg
  • Spain
  • United Kingdom
  • Canada
  • Finland
  • Israel
  • Mexico
  • Suriname
  • Yugoslavia
Information Sources

Requirements for an E-2 Visa

The E-2 visa is issued to a person who seeks to enter the U.S. to develop and manage a business enterprise into which they have invested, or is committed to invest, a substantial amount of capital, and which investment is not marginal.

Following is an explanation of the three major components comprising the requirements to obtain an E-2 Visa:

  • Substantial Amount of Capital: There is no fixed formula that determines substantiality. Rather, a test of proportionality, or a relative test, is used. The amount of capital invested is considered relative to the value of the business as a percentage of the down payment. Down payments required might range from 50% to 90% for small businesses and as low as 10% to 20% for larger businesses. For example, a $5 million investment might suffice, regardless of the value of the business. The absolute minimum amount of cash that will generally suffice starts at $100,000.
    • Exceptions may be made if the business is highly specialized and the investor possesses unique skills.
    • The foreign buyer must be investing their own funds. Loans suffice as long as the assets of the business being acquired are not collateralized by the loan.
  • Direct & Manage: The foreign buyer must own at least 50% of the equity in the business being acquired, and must have an active role in the management and operation of the business. Passive investments do not meet the criteria for an E-2 visa.
  • Marginality: The business must have a history of generating a large enough profit to provide the foreign-born buyer with a means of living. The business must also provide employment for other U.S. citizens. If the business will only employ the foreigner and a few additional employees, it’s unlikely to qualify. The more employees the business employs, the less weight that may be given to the other factors. In other words, if the business employs 100 people, then a lower down payment may be required.

The purpose of the three requirements above is to ensure that the foreign buyer is committed to the continued operation of the business. The factors are considered collectively, and there are no hard and fast rules.

Tips on Dealing with Foreign Buyers

Following are some tips when dealing with a buyer whose purchase is contingent on them obtaining a visa:

  • If you are negotiating with multiple parties, do not entertain offers from foreign buyers unless the offer is significantly more attractive than other offers due to the extended time frames and potential risk of the foreign buyer not being granted a visa.
  • The U.S. immigration process is time-consuming and difficult, and the buyer will likely have legal help to navigate the process. You can discuss questions regarding the time frame and other factors you should consider with both the buyer and their immigration attorney.
  • Foreign buyers share the same characteristics as domestic buyers — the desire to earn a living and a return on their investment. Bear in mind the foreign buyer’s dual objectives of maximizing opportunity and minimizing risk when positioning your business to them. Focus especially on why your business is more stable than other businesses and specific methods that can be taken to reduce risk, such as eliminating fixed costs or reducing working capital requirements.
  • Be prepared for delays and the requirement to use escrow. Your funds will be released once the visa is issued, but be prepared for numerous delays for the foreign buyer to obtain their visa.


Are there any other benefits for the foreign buyer?

Yes, once they purchase the business, they can employ family members without jeopardizing the status of their visas.

How long does an E-2 visa last?

The visa can be renewed indefinitely as long as the business continues in operation. The visa is normally granted for an initial period of five years. For most immigrants, the E-2 visa is a pathway to gaining permanent residency.

Are there any downsides to the immigrant?

Once an immigrant becomes a “permanent resident,” their worldwide income is subject to U.S. taxes. This is a significant and costly disadvantage if the immigrant has investments outside of the United States.

Is selling to a foreign buyer worth the hassle?

The liquidity requirements usually outweigh the disadvantages, inconvenience, and extended time frame involved, unless you are negotiating with multiple buyers and the foreign buyer’s offer is no more attractive than other offers.