I am developing LV 8.5 standalone application using serial VISA. The standalone application does not seem to work without installing MAX. Shouldn't the Run Time Engine installation taking care of this?
MAX is not required but you need to install the NI-VISA runtime. The LabVIEW run-time does not include any of the hardware drivers such as VISA, GPIB, DAQmx, etc. You should create an installer and include those if used. You can optionally install MAX as well as your MAX configuration.
It sounds like you may have a VISA alias in your executable that your target machine can't resolve unless it has MAX installed. Do you by chance use a VISA alias in your application, like COM instead of ASRL1:INSTR? If so, you want to change the alias (e.g. COM) to instead use the VISA resource name (e.g. ASRL1:INSTR). Alternatively, consider using a control instead of a constant as VISA resource input. That makes the application more extensible.