State choice for an E-2 business is often driven by where an applicant has personal connections or has visited, rather than a deliberate business analysis — but the state you choose affects your investment breakdown, licensing requirements, and market analysis in ways your business plan needs to address specifically.
Cost Structure Varies Significantly by State
Leasehold costs, labor costs, and licensing fees vary widely by state and even by city within a state — this directly affects what "substantial investment" looks like for your specific business, since substantiality is proportional to your actual total cost of establishing the business in that specific location.
Licensing and Regulatory Environment
Some states have more burdensome (or different) licensing regimes for certain business types — contractor licensing, liquor licensing, professional licensing — and your business plan's operations section should reflect the actual requirements of your chosen state, not generic national requirements.
Market Fit for Your Specific Business
The state and city you choose should have a genuine market rationale in your plan — target customer density, competitive landscape, and demand specific to that location — rather than an assumed location with no market analysis connecting it to your business concept.
Practical Considerations Beyond the Plan Itself
State tax treatment, cost of living for you and your family, and existing personal or professional networks are legitimate practical factors, but they don't substitute for the market and cost analysis your actual business plan needs to demonstrate for the E-2 substantiality and market viability arguments.
Consulting Your Attorney Early
Since your investment breakdown and market analysis are built around your chosen state, deciding on a location early — ideally before finalizing your investment structure — avoids having to substantially rework your plan later.
This is general orientation, not location-specific legal or business advice — consult your attorney and conduct real market research specific to your chosen location.