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[HOT] Steps to take on doing a direct EB-5 case by establishing new franchise store(s)
Let's say you are considering pursuing a direct EB-5 case based on a planned establishment of new franchise stores. It could be a franchise store or a non-franchise store. Chronologically, the below are the steps you should take.
- How many franchise stores do you have to establish to meet the 10 new (excluding you and your family members), full-time positions? If one store will require only 6 full-time positions, then you better plan on setting up at least two (2) stores to meet the job requirement.
- Can you establish the required number of NEW, full-time positions within 3 years from now? In addition to 2 years of conditional permanent resident time period, it will take additional time to file and get I-526 approved, complete the IV consular processing or I-485 adjustment of status and acquire CPR status. Therefore, you have at least 3 years or maybe even 3.5 years to create requisite jobs.
- Will the store(s) be located in a TEA area? You have to find out how the agency in your state interprets the concept of high unemployment area or rural area and get the evidence of TEA from the appropriate state agency.
- Will one store be located in a TEA area and another store be located non-TEA area? If so, you better be prepared to invest at least $1 Million USD in the two stores, and then structure your New Commercial Enterprise (NCE) entity to comply with the USCIS definition of the NCE.
- Will your EB-5 funds meet the lawful source requirement? Make sure the tracing documents are clear and understandable. Start getting the EB-5 funds to be deposited into your personal bank account to be wired into either an escrow account or the bank account of the New Commercial Enterprise (NCE) entity.
- Make sure documents for the New Commercial Enterprise entity show that you have the rights to be involved in either policy-making decisions or day-to-day managerial decisions.
- Start working on a comprehensive business plan that meets the requirements of Matter of Ho precedent AAO case. You may need to work with a qualified Business Plan writer. In particular, focus on showing clearly how and when new job positions will be created and how and when your EB-5 investment will be spent to help create these jobs. Note that the jobs do not have to be created all at once, as long as you create all the jobs by the time you submit your I-829 conditions removal petition, some 2 years after you obtain your conditional green card.
- With your business attorney who is licensed to handle legal matters in your state, work on either purchasing the NCE business, if it's an existing business (make sure it will qualify as a NCE, i.e., set up after November 29, 1990); OR work on establishing the NCE if it is a new business. Start executing corporate documents, purchase agreement, franchise agreement, lease agreement, etc.
- If the NCE is an existing business which still meets the NEW NCE requirement of having been established PRIOR to November 29, 1990, transfer the EB-5 funds to an escrow account with specific conditions applicable to EB-5 case. If the NCE is a new business, form a corporation, LLC or LP in which you own an interest and have either policy-making decisions or day-to-day managerial rights, and then wire the EB-5 funds to the operating bank account of the NCE. Do not transfer the money to a NCE's CD account, and make sure your company accountant treats your investment into the NCE as a Capital Contribution investment and not as a loan to the NCE entity.
- Make sure you prepare I-9 forms for any new employees hired and make sure your company accountant will keep clear records of W-2s until you obtain I-829 approval.
- To meet the "investment at risk" requirement, the EB-5 investor must evidence "actual commitment to invest the required amount of capital", not just "prospective investment arrangements entailing no present commitment". In other words, the EB-5 investor-petitioner must show that he or she is "actively in the process of investing". This is often a hazy requirement, but the EB-5 investor must persuade the USCIS examiner that he or she has taken steps to show a real commitment to invest the required amount of capital.
- Start preparing I-526 petition package. The amount of your EB-5 investment money which should actually have been spent AT THE TIME I-526 PETITION IS FILED will vary depending on your business situation. [In our opinion, it is in meeting this particular requirement that is most disadvantageous for direct, individual EB-5 cases compared to most RC affiliated EB-5 cases.]