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EB5 Investment Options

The EB-5 Investment Visa provides flexible options to obtain a permanent resident visa. Foreign investors can invest in any type of for-profit lawful business entity. The structures of the business entity can be any of the following for-profit business categories:

New Business Enterprise

Any for-profit lawful business entity is considered a commercial enterprise. There are four types of sub avenues classified as new business enterprises.

Creating a new business:

The EB-5 program defines a ‘new’ enterprise as one that was “established after November 29, 1990.” Immigrant investors can invest the required amount of capital in a commercial enterprise that was established after November 29, 1990, provided that other criteria are met. Based on a 1998 precedent, an EB-5 investor was required to be present at the creation of an enterprise. However, this was problematic for businesses created under a partnership model. A partnership is typically formed first among the main partners and then other limited partners are sought afterwards. Because of the 1998 precedent, such limited partners could not qualify for an EB-5. In 2002, Congress overruled this decision, only requiring a petitioner to show that he or she has invested the required amount.

Buying an existing business that is restructured or reorganized:

An EB-5 investor can restructure an existing business. USCIS does not consider merely changing the legal structure of an enterprise sufficient. In Matter of Soffici, a 1998 decision, the USCIS Administrative Appeals Office ruled that an investor who had purchased a Howard Johnson hotel and continued to run it as a Howard Johnson hotel did not meet the requirements of adequate restructuring or reorganization of an existing business. The AAO stated that “a few cosmetic changes to the décor and a new marketing strategy for success do not constitute the kind of restructuring contemplated by the regulations, nor does a simple change of ownership.” USCIS gives the examples of a restaurant that is converted into a nightclub or a plan that adds substantial crop production of an existing livestock farm as two examples of adequate restructured or reorganized commercial enterprises.

Expanding an existing business:

An EB-5 investor can also create a “new” business by expanding an existing one. Through this avenue, an EB-5 investor must either expand the net worth of an existing business or the number of employees by 40%. If an investor chooses to increase the number of employees, he/she could be required to create more than 10 jobs; the larger the number of existing employees, the more of a burden this becomes.

Pooling:

Multiple EB-5 investors can combine their money to invest in an enterprise. All investors must infuse the required amount into an enterprise and create at least 10 jobs each. All jobs created by a pooling arrangement will be distributed evenly among investors. For example, if there are 3 investors and only 21 jobs are created, this does not mean that 2 of the investors created 10 jobs each and the third investor only created one job. It means that all three investors created 7 jobs a piece.

General Requirements for Investing in a New Commercial Enterprise

Invest in or currently be in the process of investing at least $1,000,000. If this investment is made in a company located in a targeted employment area, the minimum investment is lowered to $500,000.

Must provide benefit to the U.S. economy in the form of goods and/or services.

Must create 10 full-time employment positions. If an investor chooses to expand an existing business’s workforce, he/she could be required to create more than 10 jobs.

Must be involved in the daily management of the company. Acceptable positions include acting as a corporate officer, board member, etc.

Troubled Business

The definition of a troubled business is one that has existed for a minimum of 2 years. Furthermore, this business must have incurred a net loss for the 12 to 24 month period before you file Form I-526.

This loss must be equal to at least 20 percent of the business’s total net worth.
 

General Requirements for Investing in Troubled Businesses

Invest in or currently be in the process of investing $1,000,000, or $500,000 if the business is located in a TEA.

Maintain at least 10 jobs before you invested money for at least 2 years. This means that the investor must show that the number of existing employees in the troubled business is being or will be maintained at no less than the pre-investment level for a period of at least 2 years. This regulatory provision, while allowing job preservation in place of job creation, does not decrease the statutory numeric requirement. Ten jobs must be preserved, created or some combination of the two. For example, an investment in a troubled business that creates six qualifying jobs and preserves all four pre-investment jobs would satisfy the statutory and regulatory requirements.

Must be involved in the daily management of the company. Acceptable positions include acting as a corporate officer, board member, etc.
 

Regional Center Pilot Program

To encourage immigration through investment and to concentrate investment in specific regions, Congress directed USCIS to set aside 3,000 visas for people who invest in a designated “Regional Center Program.” A “Regional Center” is a designation granted by USCIS on the basis of a proposal for economic growth in the particular geographic area. Approximately 90-95% of EB-5 applications submitted to USCIS fall into this category. Originally, Congress set a date for the Regional Center Pilot Program to sunset in March 2009. However,that date has been extended several times, most recently until September 30, 2015.

The following are some typical Regional Center Programs: a real estate limited partnership program that offers investment in industrial properties in a specified major city, a limited partnership program that makes low interest loans to businesses in a specified major city, ownership of an 80-acre almond farm in a specified location in California.

General Requirements

Invest at least $1,000,000 in a regional center or $500,000 if the Regional Center is located in a Targeted Employment Area. The area of the regional centered must be clearly defined.

Create 10 new full-time jobs directly or indirectly.

A detailed description of how the investment within the specified area will create jobs directly or indirectly.

A detailed administrative structure of the regional center which explains how it will promote more investment, assess investor projects, oversee all investment activities, and structure its own investment capital.


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