January 15, 2012

My first article on this subject included general information about the EB-5 Category, which allows an investor to obtain permanent residency (green card) through $1,000,000 investment (or through $500,000 investment in areas designed as targeted unemployment areas) to a new commercial enterprise.

 

In this category, an investor has two options choose from; first option is investing at new business enterprise owned by the investor; and second option is investing at a Regional Center. A Regional Center is a public or private establishment to contribute to the economy, increase production, create opportunities for work, and to create investment opportunities. Let’s look at the advantages and disadvantages of these two methods:

Personal Investment: In this method the investor invests capital to his/her own commercial enterprise and therefore all of the responsibilities that need to be undertaken in the EB-5 category are the sole responsibility of the investor. Having made the whole investment, the investor would be entirely responsible for the ultimate financial standing of the company. This method seems convenient for investors that would like to have full control over the money invested as well as control of the daily activities of the new enterprise. The main disadvantage would be the inclusion of only “directly created jobs”. The investor must show directly created jobs for 10 full time employees within the two year statutory period by providing employees’ W-2 copies.

Regional Center: In this method the investor is usually a limited partner, a co-owner, who by definition has limited duties in the new business enterprise. For example, the investor who invests $500,000 to a $50,000,000 project at a targeted unemployment area may be a limited partner of the company with 99 other partners who each invested $500,000. This investor takes a minimal role in management and daily activities of the organization since the company is managed by professionals at the Regional Center. One advantage is the inclusion of “indirectly created jobs” by the project, which allows Regional Centers to show creation of jobs by using reasonable methodologies usually through sophisticated marketing and financial plans. This category seems to be appropriate especially for investors who are already extremely busy with their own business dealings and cannot devote time to the investment enterprise. It is important to note that although Regional Centers need approval from USCIS to operate (there are currently around 100 approved regional centers in the U.S.), there is no such thing as an approved Regional Center project. Therefore, the most important decision an investor will make in this method is to choose the specific project to invest. There are numerous factors to consider while choosing a project, including whether the regional center has a takeout strategy for return of investor’s funds.

It should be noted that investment through EB-5 category is a complicated task which is made difficult by lack of guidance from immigration authorities. However, it is still possible to obtain permanent residency through EB-5 category, and most of the applicants (around 80% in Fiscal Year 2009) gained their permanent residency by investing at a Regional Center, which currently represents the more reliable method compared to the Personal Investment method (around 20% in Fiscal Year 2009).

Finally, one of the most important factors to sort out in an EB-5 application is the source of the investment capital. Whether it is an investment made to investor’s own business venture or to a regional center, the investor applicant must be able to clearly show the source of the funds, not only by proving that the capital is owned by the investor but by also by showing that the funds were derived from lawful sources. If the investor is the prominent partner of a legitimate business operation in a foreign country in existence for many years, and deriving the investment amount from the dividends of this profitable company, it should not be so difficult to explain the source of the funds. In any event, it is suffice to say that USCIS scrutinizes the source of funds issue very carefully.

I will discuss the permanent residency filing procedures in the EB-5 category in my next and last article.