Insights

EB-5 for Startups and Entrepreneurs

For EB-5’s, most investors or business people think of large real estate development projects, having $500K or $1 million in money readily available to invest, and immediately creating those 10 jobs that are required to get permanent residence. This is largely a generalization of this underutilized program.

If you are a foreign national considering starting a business here in the U.S. and you would like to eventually obtain permanent residence, an EB-5 immigration path is worth considering. Here are some of the issues that you should consider with an immigration attorney at the outset.

Loans as a Legal Source of Funds

You do not need to have the entire $500K or $1 million readily available, you may take out loans in order to invest in your business. However, you must own the assets that you use to collateralize the loan. USCIS will frequently issue Requests for Evidence (RFEs) requesting more information on your ownership of the collateral if your application shows that your source of funds includes loans.For example, if you own real property and are thinking about either selling the real property to obtain funds or using the property as collateral, USCIS will want to see documentation showing that the property was initially obtained with legitimate funds. If you are using the property as collateral for your loan, USCIS will additionally request documentation of the loan or the mortgage contract and documentation to show that the value of the property is such that it will support the amount of the loan.

Incremental Investments

If you do not have the funds for an EB-5 investment initially, you can invest in your business in incremental investments so that your total investment meets the $500K or $1 million required for an EB-5 petition. This strategy is beneficial for startups that do not have the funds initially but grow to become profitable later. For EB-5 investment purposes, entrepreneurs have the option to use the profits from the business and reinvest back into the business, so as to add to the total amount invested in the business. Word of caution for those using this strategy: investors still must prove that the source of funds came from them personally, not from the business. As such, investors must show that they have taken a distribution from the profits of the company as their own income and then reinvested that distribution back into the business.

No Time Limit For Job Creation

The requirement that the 10 jobs must be created within 2.5 years is a common misconception. There is no requirement that 10 jobs must be created at the time of the filing of I-526, or even at the time of filing for I-829. The purpose of the EB-5 is economic development. USCIS understands that for startups, it may take years for them to sustain 10 jobs. For startups then, the focus of USCIS’s inquiry shifts to whether the business will continuously and increasingly sustain “full-time” and “permanent” positions.

The employees that qualify for “full-time” must work at least 35 hours per week for your business. With all the other business issues that startups often face, it is understandable that EB-5 requirements may fall to the wayside. However, if you are or are considering using your business as a EB-5 investment to get your permanent residence, ensure that you maintain the documents for those that are hired from the beginning (i.e, the pay stubs and the job descriptions of your employees). This will make the EB-5 approval process much less cumbersome.

Qualifying Relationships

Many startups turn to friends and family for assistance in running their business. While the EB-5 regulations do not restrict you in who you can hire, it requires that the business must create “full-time employment for not fewer than 10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrant’s spouse, sons, or daughters).” INA §203(b)(5)(A)(ii) (as quoted by Susan L. Pilcher in “Preserving the EB-5 Option for the Entrepreneur: Strategic Considerations for Startup Counsel,” Immigration Options for Investors and Entrepreneurs, 3rd Ed. 2014).

Immigrants “lawfully authorized to be employed in the United States” include conditional residents, temporary residents, asylees, refugees, or aliens remaining in the United States under suspension of deportation.CFR §204.6(e). Therefore, you may not use your immediate family members or any one here on non-immigrant work visas such as H-1Bs or L-1s to count towards the jobs creation requirement.

Zhang-Louie, Immigration Legal Counsel is a semi-virtual immigration law practice in Cambridge, Massachusetts. Embedded in Cambridge’s innovative culture. we understand that particularly for startups, human resource issues such as where to find the next qualified employee can be daunting. We are here to provide you guidance and counsel on hiring globally so that you can focus on growing your business.