A foreign national investor (FNI) can, by investing in a U.S. company, potentially gain conditional legal permanent residence – and ultimately U.S. citizenship. Generally, this is described as an investor visa program. One particularly exciting investor visa program is called the EB-5.
Basically, an EB-5 investor must invest in a new commercial enterprise that benefits the U.S. economy. There are a number of other key requirements:
The amount of the investment is substantial: $500,000 to $1,000,000 U.S. Dollars. The amount required depends upon whether the business is located in a Targeted Employment Area (TEA). A TEA is basically either a rural area or one with a recorded unemployment rate that is 150% of the national average.
Source of funds must be legal and traceable. A FNI must be able to provide documentation showing not only that he or she acquired the investment through legal and acceptable means, but also an acceptable path to a U.S. bank. This can be particularly daunting for FNIs from certain countries for two distinct reasons. The first reason has to do with restrictions set by the source country. These restrictions include currency control laws, such as we see in China and Bangladesh. The second reason is restrictions set by the U.S. government. These restrictions make it more challenging for FNIs from countries which rely on informal banking networks or hawalas or those such as Iran and Syria where OFAC restrictions apply. An OFAC license is likely to be required for such investments.
The investment must be at risk. This requirement means that the FNI must have no guarantee of return. Some companies providing finder services misinform investors, telling them their investment is guaranteed. This assurance is misplaced as a guaranteed investment must by law disqualify the EB-5 visa applicant. Thus, careful attention must be paid to all documentation spelling out exit strategy(ies).
Documentation must show that the business is viable. Extensive documentation must be provided to the government showing that the business is a viable one. This means a solid business plan, and much more.
The investor must take on a managerial role. Each investor must become a manager. The extent of the managerial role varies. For general or troubled businesses, this means hands-on management. Conversely, investors in a Regional Center – specially designated enterprises – help to craft management policy and oversight.
A minimum of ten full-time direct jobs must be created through the investment during the statutory period. One of the goals of the EB-5 program is job creation. An important set of documents establishes that the investment will create ten full-time direct jobs, or indirect if the investment is in a Regional Center. This job creation is documented first in the initial application packet, along with the I-526, but also validated at the end of the conditional statutory period.
Assuming the I-526 application has been approved, the FNI petitions to remove the conditions from their permanent residency with an I-829. Here, it is critical to prove that indeed the investment created the required jobs, but that the business had no material change from the initial plan.
As with any investment, due diligence is an absolute necessity, and the FNI should assemble a team of qualified professionals. The team will likely include a professionals such as a CPA, securities advisor, business valuator, and immigration attorney.
