Escrow agreements can be a valuable tool for E-2 investors purchasing an existing U.S. business. When structured properly, escrow protects capital, allocates risk, and ensures that the investor’s funds are fully committed and at risk in a manner consistent with E-2 visa regulations. However, not all escrow arrangements are equal and misunderstanding the rules can jeopardize an otherwise strong E-2 application.
Below is a clear guide on how escrow works in the E-2 context, especially when the closing is contingent on E-2 approval, which is permitted under federal regulations when structured correctly.
What is an escrow agreement?
An escrow agreement is a written contract in which a neutral third party (the escrow agent) holds funds, documents, or other assets until certain defined conditions are met. Escrow is commonly used in real estate, business acquisitions, and cross-border transactions to protect both sides and ensure obligations are completed before money or title changes hands.
Quick primer on E-2 visa requirements
The E-2 visa allows nationals of treaty countries to enter the U.S. to invest in and direct a qualifying business. Key requirements include:
• Substantial investment: Sufficient to ensure successful business operations
• At-risk capital: Funds must be irrevocably committed to the enterprise
• Bona fide enterprise: Real, active, and operating (or ready to operate)
• Non-marginality: Business must generate more than minimal income and support U.S. job creation
Consular officers evaluate whether the investor has already placed their capital at risk, and escrow is one way to satisfy that requirement when purchasing an existing business.
E-2 Regulations do allow escrow contingent on E-2 visa approval
Contrary to a common misconception, the E-2 regulations explicitly permit a purchase agreement with an escrow closing that is contingent on E-2 approval, provided:
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All purchase conditions unrelated to visa approval are fully satisfied at the time of filing
(e.g., due diligence complete, documents finalized, seller obligations met) -
The full purchase funds from qualifying sources have been irrevocably deposited into escrow
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Escrow instructions credibly require the funds to be released to the seller and the transaction to close promptly upon E-2 approval
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If the visa is denied, the funds may be returned, but only because the transaction did not close not due to any discretionary withdrawal right
This structure meets the “at-risk” requirement because the funds are fully committed and the investor cannot redirect or retrieve them for personal use unless the deal fails to close for reasons outside the investor’s control.
This is an important distinction:
A visa contingent escrow is allowed. What is not allowed is an escrow that gives the investor broad rights to withdraw the funds for reasons unrelated to a failed closing.
Why escrow matters for E-2 investors
When properly structured, escrow accomplishes two critical goals:
• It protects the investor from closing on a business they cannot legally manage without status
• It demonstrates to the government that the required funds are fully committed and at risk
This is why escrow is commonly used when purchasing an existing business for an E-2 visa. It allows the investor to move substantial funds into position and show full commitment without prematurely taking over the business before immigration approval.
Common misconceptions about E-2 escrow (and the truth)
Misconception: Any refund provision means the funds are not at risk.
Correct: A refund provision tied only to visa denial is allowed as long as funds are irrevocably committed and all other conditions are satisfied.
Misconception: Closing cannot be conditioned on E-2 approval.
Correct: The FAM explicitly allows this structure and consulates worldwide often approve it.
Misconception: All escrow is risky for E-2.
Correct: Only escrow structures that make funds refundable for reasons unrelated to a failed business closing undermine the “at-risk” requirement.
Risks to avoid in E-2 escrow agreements
While visa contingent escrow is allowed, certain features can create problems:
• Broad investor controlled clawback rights
• Refund triggers unrelated to business closing (e.g., “investor changes their mind”)
• Numerous unrelated contingencies that make the commitment look speculative
• Large portions of the investment kept in escrow instead of being used for operational expenses
These issues can make adjudicators doubt whether funds are truly at risk.
How to properly structure an E-2 escrow agreement (practical checklist)
To ensure compliance:
• All non-immigration conditions must be satisfied before filing
• Full purchase price must be wired into escrow from qualifying personal funds
• Escrow must close promptly upon E-2 approval
• Refunds must be tied solely to the visa not being approved and the deal not closing
• Escrow instructions must be clear, credible, and unconditional upon approval
• The investor cannot withdraw funds for convenience
This structure is considered fully “at risk” because the investor has no ability to redirect or reclaim the funds unless the business transaction itself cannot legally close.
Examples of compliant escrow structures for E-2
Example 1: Purchase of an existing business
• Buyer wires total purchase price into escrow
• All seller obligations and due diligence are complete
• Escrow instructions: release funds to seller immediately upon E-2 approval
• If denied, funds return ONLY because the business cannot close
This is the classic, compliant visa-contingent escrow.
Example 2: Escrow with small holdback
• Majority of investment goes directly into the company’s operating account
• A small amount (e.g., 10–20 percent) is held in escrow for warranties or indemnities
• No refund provisions except commercial breaches
Documenting escrow in the E-2 application
The investor should submit:
• Escrow agreement + release instructions
• Proof of full wire transfer into escrow
• Purchase agreement showing all non-visa contingencies met
• Evidence that closing will occur immediately upon approval
• Bank records, corporate documents, and business plan
Clear documentation is essential to showing irrevocable commitment.
Practical Q&A
Can I use escrow to avoid losing money if my visa is denied?
Yes, if the refund occurs solely because the deal cannot legally close.
This is the only acceptable refund trigger.
Can most or all investment funds be placed in escrow?
For business purchases, yes, if the purchase price represents the actual at-risk investment.
For startups, no, operational funds must be deployed into the business.
Can closing safely wait until E-2 approval?
Yes. This is common and explicitly authorized.
Final thoughts
Escrow is not only compatible with the E-2 visa when purchasing an existing business, it is often the most effective way to demonstrate commitment while protecting your capital. The key is ensuring the escrow is structured according to E-2 rules: all other conditions resolved, funds fully deposited, and closing triggered immediately upon approval.
When immigration counsel and transaction counsel coordinate closely, a well-structured escrow strengthens the E-2 petition and streamlines a smooth business transition.
Please Note: This blog is intended solely for informational purposes and should not be regarded as legal advice. As always, it is advisable to consult with an experienced immigration attorney for personalized guidance based on your specific circumstances.