Assess the actual obligation, conditions and commitment rather than simply adding its maximum amount. A future payment dependent on revenue differs from money already transferred or irrevocably committed under qualifying terms. The substantiality analysis must use supportable facts about the business and investment, not the largest number printed in the purchase agreement.
Read the trigger for payment
Identify whether the buyer can avoid the earn-out, whether the seller retains control and how the contingent obligation relates to the purchase. Show the initial contribution and any additional active investment separately. Counsel should examine the complete arrangement; a qualifying transaction cannot be established merely by renaming future compensation as purchase price.
Counted as a Canadian case, this purchase fails before any other question is reached: nationals of Canada would hold forty-five percent, which is short of the threshold, and no amount of management authority repairs a shortfall in ownership. E-2 requires treaty-country nationality — Canadian permanent residence alone does not establish it — and the enterprise itself must carry qualifying treaty ownership, with the investor positioned to develop and direct it through at least 50 percent ownership or genuine operational control. At the chosen application stage, the evidence must show treaty nationality, qualifying enterprise ownership, development and direction, capital committed beyond recall and exposed to loss, plus a real non-marginal operation.