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Frequently Asked Questions - Direct, Individual EB-5 Cases


Direct, Individual EB-5 Cases

No, if you try doing so, your I-526 gets denied. Believe it or not, some inexperienced people set up a non-RC EB-5 project and tried to count indirect jobs, leading to USCIS denials.

Generally, no, because such jobs created by the loan receiving job-creating business would be considered "indirect" jobs, and only "direct" jobs count for direct, individual EB-5 case. We even observed some direct, individual EB-5 project which did not realize this get denied on I-526 petitions because they did not realize this point. If they read www.eb-5center.com site, they would have realized this.

However, I believe a loan model might be used for Direct EB-5 IF and ONLY IF the foreign investors money need to be injected into a wholly owned subsidiary under the NCE/JCE.

Yes, why not? But better consult with an experienced EB-5 practitioner to make sure you have all necessary evidences to meet the requirements.

Yes, but as a practical step, you should have them appraised and then given a value before contributing them for the use of the new commercial enterprise entity. Otherwise, USCIS examiner might not believe in the value assigned.

Well, legally speaking, B1 business visa allows you to enter the US and carry out these business and/or investment activities, including but not limited to, finding a suitable business, researching business, meeting and retaining attorneys and CPAs, etc. In short, the preliminary activities can be carried out in B1 business visa.

Even after you file I-526 petition, you can travel back and forth from the U.S., but you might have to explain that you will be returning back to your home country to process immigrant visas.

It's not a good idea to enter the US thinking you can get I-526 petition approved and then file I-485 adjustment application and stay in the US without going out. This is because there is no "concurrent" filing allowed for EB-5 cases.

No, each state's applicable agency might have an updated list of TEA areas (divided into "rural" or "high unemployment areas"). Ascertaining TEA area in itself can be an arduous task sometimes.

No, the EB-5 law does not require that the money come from abroad into the U.S.
In short, if you have earned the money in the U.S. in lawful status, that should suffice.

From a legal point of view, we don't see why this cannot be done in a direct, individual EB-5 case, when this mechanism is allowed in a regional center based EB-5 case.

Probably not. USCIS would probably would require that the job numbers saved be at least 10.

Not according to a recent USCIS response: they seem to imply that all jobs must be saved.

USCIS deems that the 40% increase in employees result in at least 10 jobs. Note investing into an existing business must result in 40% increase in capital increase or number of employees.

Aside from making sure that the business really qualifies as a "troubled business" under the EB-5 regulations, we advise potential EB-5 investors to think twice before doing an EB-5 case through a "troubled business" because of the below "opinion" of USCIS on a job-saving issue involving a troubled business.

http://eb-5center.com/node/658

You should also review advantages and disadvantages of a troubled business EB-5 case under the EB-5 law at: http://eb-5center.com/node/286

We do not agree with USCIS' opinion/position expressed.

No, any percentage ownership will do, as long as other requirements are met. This is one aspect in which EB-5 case is better than an E-2 case. This means an EB-5 investor in a direct EB-5 case may have U.S. partners.

Unless you want to waste money and time by pursuing an investment which will not qualify for a direct EB-5 case, it is recommended that you obtain a thorough consultation from an experienced EB-5 attorney to do a pre-investment analysis. This will save you a lot of heartache, money and time.

Basically, an EB-5 investor needs to do not only a due diligence review of the planned business into he/she wishes to invest, but also whether and how he can meet the requirements of I-526 immigrant petition.

[Q] A foreign EB-5 investor is in the process of investing $1 million into a new U.S. company, and he has a U.S. citizen partner who is also investing $1 million. If the company creates 10 new jobs, does that mean the foreign EB-5 investor will get credit for creating 5 of those jobs?

Yes, all jobs created by both the foreign EB-5 investor and the U.S. citizen can be allocated to the foreign EB-5 investor. In addition, the foreign EB-5 investor does not have to be a majority investor.

[Q] The questions are as follows:

1) if I invest $500k where unemployment is 12%, Is it consider part of "Targeted Employment area"?

2) if I invest in Trouble Business where they lost 20% revenue, I still have to create 10 full time job.?

3) If I buy Motel for example & run through the property management company & management company will create 10 jobs in my investment will be still qualify on EB-5 category?

4) I am *** citizen & having E2 in my business in **, interested buying business under same corporation for EB-5 & would like to invest required $500k would work?

5) What they mean by Expansion or Re-structuring the existing entity?

6) what is your opinion on investing in Regionl Centers ? Since the investment is at "Risk", I don't see return on investment.

I would appreciate your response.

Answers are as follows:

1) if I invest $500k where unemployment is 12%, Is it considered part of "Targeted Employment area"?

Answer: An area is a TEA only if an authorized state agency or governmental body -- whatever that may be for each state -- says the area is a TEA. To be considered a TEA, the area must be either "rural" or have a "high unemployment rate".

2) if I invest in Trouble Business where they lost 20% revenue, I still have to create 10 full time job.?

Answer: If a new commercial enterprise qualifies as a Troubled Business, then you can "preserve" 10 full-time jobs, rather than create them anew.

3) If I buy Motel for example & run through the property management company & management company will create 10 jobs in my investment will that still qualify on EB-5 category?

Answer: Yes, as long as the property management company is the new commercial enterprise into which you invest the money. Basically, in your contemplated investment, you would have to form a holding company that operates as a property management company and then you would have to invest into this holding company which would also purchase a motel either by itself or through a wholly-owned subsidiary.

4) I am *** citizen & having E2 in my business in **, interested buying business under same corporation for EB-5 & would like to invest required $500k would this work?

Answer: Yes, as long as EB-5 requirements are met.

5) What they mean by Expansion or Re-structuring the existing entity?

Answer: You have to expand or restructure an existing business ONLY IF the business has been in existence before November 29, 1990. You should review the "Easy as EB-5" section above.

6) what is your opinion on investing in Regionl Centers ? Since the investment is at "Risk", I don't see return on investment.

Answer: You can't make a good profit on most regional centers, but they do have advantages.

I would appreciate your response

[Q] For a direct EB-5 case, can investor invest in a large apartment building, and then create a management company to run it? Job creation will be in the management company, while the funds will be mostly invested in the property. The strategy I believe, should be the investor invest in a holding company, the holding company then purchases the apt complex. The holding company will also create a management company to create the necessary job opportunities. Can this be done?

We don't see any problem, as long as the management company creates requisite jobs. Whether the underlying property is an apartment building or a shopping center, as long as the management company creates the jobs, that should be that.

[Q] What are some of things I have to ascertain or find out when I want to establish or purchase a business and pursue a direct, individual EB-5 case?

The first thing you have to determine or ascertain is whether the U.S. business qualifies as a TEA area. This is sometimes not an easy thing to do but is important, because if it's a TEA, then only $500,000 USD investment need to be made. However, this might sound good in theory, but in practice, $500,000 USD investment may not be sufficient to start or purchase a business and also create 10 new, full-time jobs that will not lose money for you.

Here is a general checklist:

1. Does the business qualify as a new commercial enterprise?

2. Does the business qualify as a TEA?

3. Can the business create 10 new, full-time jobs, not including myself and my family?

4. Will my fund qualify as lawful source?

No, all jobs have to be created directly in a direct, individual EB-5 case.

This question was answered by USCIS. See below link.

http://eb-5center.com/node/517

This means even if your previous investment was for E-2 visa purpose, as long as you meet the requisite investment amount and new job-creation, you should be able to meet the EB-5 requirements.

No, for two reasons. First, just buying a real estate and holding it is not considered to be a commercial activity. Second, how are you going to create 10 new, full-time positions through such investment?

However, if you purchased a shopping center or a golf course and added 10 new, full-time jobs within 2 years, then, yes, no problem.

Yes, as long as the business was established after November 29, 1990. But you have to remember that you cannot just take over the existing employees and meet the requirement to create 10 new, full-time positions, not including yourself and your family members.

You used to not be able to invest in an existing U.S. business to meet the requirement to establish a new commercial enterprise, but several years ago, the EB-5 law was changed to allow this, as long as the business was legally formed after November 29, 1990. See below link for USCIS' clear position on this issue:

http://eb-5center.com/node/160

Generally speaking, here are advantages of direct, individual EB-5 case over a regional center based EB-5 case.

1. You have more control (and responsibility) over the direction of the U.S. business which acts as a new commercial enterprise.

2. You can make a lot of money if the business does well.

3. You can decide when to fold or sell your interest in the business.

4. You can invest in an existing business, as long as job-creation requirement is met.

5. You can be more nimble and try to find an alternate solution when something goes wrong.

What are disadvantages of direct, individual EB-5 case compared to a regional center based EB-5 case?

1. You need to spend more time and effort on the operation of the business.

2. You need to take on associated potential liabilities of owning any business.

3. You have to also focus on keeping paper based evidences of job creation.

4. All jobs have to be created directly, and indirectly-created jobs or induced jobs cannot count. This is perhaps the biggest disadvantage of a direct, individual EB-5 case.

5. Your investment amount may well exceed $1 MM when running your own business.

6. If business fails, you can lose all your money.

Ultimately, the differences between the two types of EB-5 cases can be explained using an analogy of driving yourself on a trip or using Greyhound to get there. If you are a good driver, you have more freedom to take your business to a direction you want, but you have to be the driver and paying attention all the time.

We would say that a direct, individual EB -5 case is something you should consider only if you are competent in English language, U.S. business practices and willing to put in a lot of time and effort staying in the location of where you made your investment, and you are really motivated to own and operate your own U.S. business.

Yes, unlike an E-2 visa case, you can be a minority interest holder or owner of a U.S. business. For example, you can own and operate a U.S. business as a 10% owner, along with a U.S. citizen who owns the remaining 90% interest in the business. The other investor can be green card holder or another alien EB-5 investor also.

This is because for direct, individual EB-5 cases, project documents must also be prepared from scratch, tailored to the needs of the specific case. In addition, the alien EB-5 investor probably has to negotiate through business attorney or another professional many business and investment transactions before a direct, individual EB-5 case can be filed.

For regional center based EB-5 case, all these documents related to the project are pretty much prepared for you by the regional center operator, and all you need to do is focus on the preparation of lawful source documents, after you have done your due diligence and selected a particular regional center based EB-5 project.

There are many business consultants, including commercial realtors and other professionals. Our office does not have a list of U.S. businesses to offer to potential EB-5 investors, although we may refer them to other professionals without incurring any liability.

The first and obvious thing to find out before you make your investment is if any business would qualify as a new commercial enterprise and you will likely be able to meet all EB-5 requirements.

Right at this site (www.eb-5center.com) at:

http://eb-5center.com/direct_eb5

We especially recommend that you review the below site also to get a good grasp of basic concepts of EB-5 requirements.

http://eb-5center.com/easy_eb-5

We also advise, analyze, prepare and process direct, individual EB-5 cases. We would say about 60% ~ 70% of EB-5 law is the same for both direct, individual EB-5 cases and regional center based EB-5 cases; but they differ dramatically on some key requirements.

The answer given would depend on the person answering and the particular project, but in general, we would say direct, individual EB-5 case takes more work and effort, and is often more difficult to obtain green cards through direct, individual EB-5 case than a regional center based EB-5 case. The main reason for this is that for a direct, individual EB-5 case, it's not easy to create new, ten full-time jobs. Of course, it's not easy for a regional center based EB-5 project but RC based EB-5 project can count indirect/induced jobs.

The answer does not become clear unless you gain a better understanding of EB-5 law. Suffice to say that according to USCIS, over 85% of all filed EB-5 cases are regional center based EB-5 cases. There is a reason for this. This is not to say that alien investors cannot obtain green cards through direct, individual EB-5 case. It really takes different attitude and effort.

Either depending on whether the new commercial enterprise is located in a Targeted Employment Area (TEA). TEA concept is a separate concept from whether an EB-5 case is a regional center case. TEA determines the amount of investment that needs to be made.

This refers to an EB-5 case where you do not participate through a regional center based EB-5 project, and the alien investor himself makes an investment in a new commercial enterprise by himself or with other U.S. citizen or green card investors or with another alien investors and try to meet the EB-5 requirements.

Sometimes, this type of EB-5 case is also referred to as "direct, individual EB-5 case" or "individual EB-5 case".