When starting a business in the United States, owners must choose a legal structure. This decision affects personal liability. For an E-2 treaty investor visa, the business must meet rules on ownership, control, and active operations.
Many investors ask a practical question first: which structure protects personal assets if the business faces debt or legal claims? Once that is clear, the next question follows: which structures work best for E-2 visa purposes?
To answer both, it helps to understand how the main business types differ.
Common U.S. business structures and liability protection
Sole proprietorship
What it is: A sole proprietorship is owned and operated by one person. The business and the owner are the same legal entity.
Liability protection: None. The owner is personally responsible for all business debts and legal obligations. Personal assets may be used to satisfy business liabilities.
General partnership
What it is: A general partnership is owned by two or more people who carry on a business together.
Liability protection: None for general partners. Each partner is personally liable for business debts. A partner may also be liable for actions taken by another partner on behalf of the business.
Limited partnership (LP)
What it is: A limited partnership has at least one general partner who manages the business and one or more limited partners who usually invest capital.
Liability protection: General partners have no personal liability protection. Limited partners typically have liability limited to their investment.
Practical limitation for E-2 investors
For an E-2 treaty investor, this structure creates a conflict. Under state partnership law, limited partners often have limited involvement in management. An E-2 investor must show active control and direction of the business. This can make a limited partnership difficult to use for E-2 purposes.
Limited liability company (LLC)
What it is: A limited liability company, or LLC, is a separate legal entity formed under state law. Owners are called members.
Liability protection: Strong. Members are generally not personally liable for business debts or legal claims.
Tax classification does not change this protection.
Important note
Liability protection depends on the proper operation of the company. Courts may disregard limited liability in certain cases, such as when legal separations between the owner and the company are not respected.
Corporation
What it is: A corporation is a separate legal entity owned by shareholders.
Liability protection: Strong. Shareholders are generally not personally responsible for corporate debts or legal obligations.
An S corporation is a tax classification of a corporation. It does not change liability protection.
Important note
Liability protection applies when corporate formalities are followed. This includes maintaining separate finances, proper records, and required corporate documents.
Which structures fit E-2 visa requirements
U.S. immigration rules for the E-2 treaty investor visa do not require a specific business structure. The focus is on ownership, control, and active business operations.
The investor must show that they develop and direct the enterprise. Ownership must usually be at least 50 percent or provide clear operational control.
Structures commonly considered
Limited liability companies and corporations are often considered because they:
- Provide strong personal liability protection
- Allow ownership interests to be documented
- Allow management and control to be formally defined
These features allow ownership and management authority to be documented.
Structures that raise concerns
Sole proprietorships and general partnerships often create challenges because:
- They provide no liability protection
- Personal and business assets are not clearly separated
- Ownership and control are less formal
Limited partnerships require careful documentation of control.
Key takeaway
Choosing a business structure affects risk and visa planning.
From a protection standpoint, limited liability companies and corporations offer the strongest safeguards for personal assets. From an E-2 visa standpoint, these structures allow ownership and control to be formally established under state law.
Sources:
- U.S. Small Business Administration. https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
- Internal Revenue Service. https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
- Internal Revenue Service. https://www.irs.gov/faqs/small-business-self-employed-other-business/entities/entities-3
- Internal Revenue Service. https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
- Cornell Law School Legal Information Institute. https://www.law.cornell.edu/wex/general_partner
- Cornell Law School Legal Information Institute. https://www.law.cornell.edu/wex/limited_partnership
- Cornell Law School Legal Information Institute.
https://www.law.cornell.edu/wex/limited_liability_company_(llc) - Cornell Law School Legal Information Institute. https://www.law.cornell.edu/wex/corporation
- Cornell Law School Legal Information Institute. https://www.law.cornell.edu/wex/piercing_the_corporate_veil