Entry into the U.S. has become more difficult for foreign nationals seeking permanent resident status. Thus, they are relying on the investment route more frequently than ever before to obtain Permanent Residency Visas (Green Cards). EB-5 is an investment based immigration program. A EB-5 Visa is the easiest and fastest way to get there. However, it is not the cheapest. E-2 & L-1 Visas require smaller investments but require the investor to be involved. Every year the EB-5 program allows up to 10,000 visas to be issued. While this may seem like not very many, the full quota is usually not taken. So you can get one if you have the money. Ah, yes the money. Basically the person seeking the visa needs to make an investment of $900,000 (plus ancillary costs of about $50 to $60 thousand) or a $1.8 Million investment (plus the same ancillary costs).
EB-5 Visa Program
The EB-5 visa program is a good way to raise money for a business. In exchange for the foreign investor investing in your business, he gets both a permanent residency visa (Green Card) and an investment. This type of investment works for both real estate and other business. The principle criterion is that for each $500,000/$1,000,000 investment you must create 10 full-time jobs. Typically the investor receives a relatively modest compensation for the use of their money, approximately 3% +/-. Not only can you raise a lot of money this way, but the cost of the money is cheap.
The typical investment is $500,000. The difference in the two amounts essentially comes from where the business/project is located. If the business/project is located in a TEA (Targeted Employment Area), then the investment is $500,000, if not, it is $1 Million.
There are two basic ways for the foreign national to make their investment: the Direct (Individual) Investment and the Regional Center. One choice is for the foreign national to find his or her own individual investment vehicle in which they will invest and play an active role in management and/or policy making. The second option is a government-approved “Regional Center” investment.
This first choice is more entrepreneurial – I am starting a business and running it. The second choice in a classic investment in a business and is passive – someone comes to me and asks me to invest in a company, gives me some shares, and says you are on the board of directors – minimum involvement. This method comes with an exit strategy.
As an overview, the major advantage of the individual investment option is that the foreign national accomplishes not only an immigration purpose but also invests in a business that may provide significant returns. In addition it may provide a source of income on an ongoing basis. However, there are far more immigration law hurdles to be overcome than with the Regional Center investment.
The Regional Center investment is often the quickest and most secure option (assuming the investment is made in a Regional Center with a strong track record). The immigration process is often quicker, and there are far fewer legal issues to be confronted. However, the investor is not running his or her own business; and the rate of return may be lower than in a successful individual investment.
REGIONAL CENTER vs. INDIVIDUAL EB-5
The profiles of the individual EB-5 investor and the Regional Center EB-5 investor are generally rather different.
The individual EB- 5 investor generally has the following characteristics:
- He or she actually wants to start and/or manage a business.
- His or her business will be creating employment up front.
- The investment is the driving force behind his or her wanting to come to the U.S.
- He or she wants to have control over his or her investment.
- He or she wants to maximize profits from his or her investment.
- On the other hand, the Regional Center often meets the needs of investors with a different set of characteristics:
- He or she is not interested in starting a business.
- He or she may be a retiree.
- Although he or she may want to start a business, it will not create sufficient employment for an individual EB-5.
- He or she wants to be geographically mobile.
- He or she wants to spend a significant amount of his or her time outside of the U.S.
Regional Center is the best choice when the driving force behind the investment is a “Green Card” rather than a business in the U.S.
Comparing Regional Center and Individual EB-5
The major advantage of the Regional Center as compared with an individual EB-5 investment is that indirect employment creation is allowed. In many cases, the sole remaining issues are tracing the funds from the investor to the Regional Center and proving the lawful source of the investor’s funds. This eliminates the need to deal with the many complicated issues involved in an individual EB-5 petition for which the investment enterprise has not been pre-approved. Such as whether the investment entity qualifies as a “new commercial enterprise;” whether the investment is in a “troubled business;” and whether the requisite “direct employment creation” has taken place.
In addition, the Regional Center option is advantageous because:
- The foreign national can live anywhere he or she wishes in the U.S.;
- The foreign national can work anywhere he or she wants; or not work, as he or she pleases;
- The foreign national’s children may stay in the U.S. and study in the U.S.; and
- The foreign national can travel in and out of the U.S. as frequently as he or she desires.
The “How To” Of Individual EB‐5
EB-5 Investor Characteristics
An Individual EB‐5 investor generally has the following characteristics:
- The investor actually wants to start and/or manage a business.
- The business will be creating employment up front (hire at least 10 people over a 2-year period).
- The investment is the driving force behind the visa holder wanting to come to the U.S.
- The investor wants to have control over their investment.
- The investor wants to maximize profits from their investment.
The driving force behind the investment is the business opportunity specifically, and not the Green Card, generally.
Several items need to be kept in mind. Because this is an active investment, the investor needs to have a residence located approximate to the business. The business can’t be in Miami if they live in New York. However, they could live in West Palm Beach and operate a business in Miami (a distance of about 60 to 70 miles – a long but plausible commute). Further, while he must be active in the business he can have help with management. Also active does not mean they have to be there every minute. However, the investor does need to show that they have the ability to operate the business and have an understanding of it.
In addition, the business does not have to have only one investor. There could be multiple investors, but each investor must have an active role in the business. Thus while on the surface it might seem that you could only raise $500,000 (TEA – Targeted Employment Area) or $1,000,000 in a non‐TEA, in fact you could raise significantly more. That doesn’t mean if you needed to raise let’s say $25,000,000, you could get 50 investors of $500,000 who are all activity involved. While in theory, the answer is yes; in practice, probably not. However, the thing to remember is that while the minimum investment is $500,000, there is no maximum. Therefore, if you need to raise, let’s say $5,000,000 you might be able to get 3 investors of a million and one of two million. As to how this would work structurally, that would depend on the business form (i.e. Corporation, LLC or LLP) you choose and the responsibilities each investor takes on.
The process of establishing the Individual EB‐5 (Direct Investment) business or enterprise is not dissimilar to the Regional Center or any other start‐up. The steps include:
- The development of a business idea or economic concept – what do you want to do?
- A Business Plan with support – an economic model & geographic area covered (typically the area covered by the TEA if going that route).
- Setup of the Company’s legal structure (i.e. Corporation, LLC, LLP, etc.).
- Economic Impact Study that supports the creation of 10 Jobs (direct) per investor/investment and determines whether the Business is in a TEA (Targeted Employment Area) which determines the minimum investment. Either $500,000 in a TEA or $1,000,000 if not in a TEA. The determination of jobs created is based on an economic or mathematical formula adopted by the consultant
- Operating Agreements:
- Management in the beginning
- LLC/LLP Operating Agreement
- Get Approval from the USCIS
- Make the investment
- Develop Operational Plans
- Create a Brand
- Marketing Plans
- Website, Logo, Business Card, Brochure Design etc.
- Start Marketing
There is an underlying assumption that the investors are already in place, and when approved, you are ready to start. The cost of starting an Individual EB‐5 investment (Traditional Direct Program) is significantly less then that of a Regional Center. It should cost from $60,000 to $100,000. Also, the time involved is also much quicker, from 6 months to a year, with 6 to 9 months not being unusual.
- EB‐5 Investment Green Card (Traditional Direct Program – “I want to start my own business”)
- Permanent Residency/Green Card program.
- Investor must purchase or start a Non‐Passive Business.
- Investor may invest into an existing business or start a new one.
- The Investment must be at least $1 million or $500,000 in qualifying locations.
- Non‐Passive, Investor must manage the business.
- The Investment must create at least 10 new U.S. jobs per investor.
- There is no plan for repatriation of investment.
- Conditional Green Cards will be issued to the investor, spouse and children under 21.
- Processing Time: 6 to 15 months.