02 Feb MAKING THE RIGHT CHOICE BETWEEN REGIONAL CENTER AND DIRECT INVESTMENT WITH DAVID HIRSON
EB-5 Investment Voice
Mona Shah & Associates Global Podcast Series
Reported by Hermione Krumm, Esq.
EB-5 Investment Voice is the only Podcast series that focuses on and the United States immigrant investor visa, EB-5 and foreign direct investment. Mona Shah, Esq. welcomes guests from the industry, including: Developers, Regional Center Operatives, Attorneys, Legislators and Politicians.
Of the 15,000 immigration lawyers in the United States, only about 300 specialize in the EB-5 program. An experienced lawyer who understands the nuances of the program and your unique situation can help you navigate the system and make informed decisions around the type of investment you choose to make. Unfortunately, it only takes one misstep along the way to lose your money—and your green card.
The guest for this episode is David Hirson, the managing partner of David Hirson & Partners. Like Mona, Mr. Hirson has been continuously voted as one of the Top 25 Attorneys by the EB-5 Investors Magazine and is on the list of Year 2017’s Top 25 Attorneys. He has been working on EB-5 cases since establishment of the program, preparing and filing one of the first EB-5 cases back in 1991. Mr. Hirson is an active member of the immigration law community, and his firm is often called upon by trade groups, investors, projects and universities to serve as subject-matter experts on the topic of EB-5 investment visas.
Mr. Hirson joins Mona in this episode to discuss the differences between a Regional Center and a direct investment, specifically the job creation requirements and the investor’s level of involvement in project management. They cover the common mistakes made by investors who purchase existing businesses and misconceptions among inexperienced attorneys with regard to the two-tier level of investment. Finally, they speak to the difficulty investors face in getting meaningful information from Regional Centers as well as USCIS and the value of securing assistance from a qualified EB-5 attorney.
Choosing a Top Attorney
- Though there are 15,000-plus immigration lawyers in the US, only about 300 deal with EB-5. It is arguably the most difficult type of cases to prepare, and it is in an investor’s best interest to work with an expert as failure can be disastrous to them and their family.
- Investors should try to make sure their attorney understands their specific situation as well as the full spectrum of immigration options available. EB-5 may not be the best choice for some investors.
- While an applicant could conceivably file an I-526 on their own, the 13-page form can be a minefield. An experienced EB-5 attorney can help you avoid mistakes and deal with any changes to the program in real time.
EB-5 Investment Options
- There are two programs under the EB-5 umbrella: (1) Regional Center and (2) Direct Investment.
- When asked which program the lawyers prefer, David Hirson responds that he prefers the case of direct investment, for the following reason: in a direct project, there must be ten full-time employees per investor on payroll to fulfill the job creation requirements. Regional Centers, on the other hand, can count indirect and induced jobs. If a project is short on the final job count, a direct investment can still get approved by proving that additional employees will be hired within a reasonable amount of time. (USCIS has gotten better about understanding the legitimate reasons why there might be a delay.) In comparison, it is very difficult in a regional center model to increase the job count.
Level of Involvement
- Another difference between regional center and direct investment projects involves management. Regional Center project managers are unrelated to the investors, while investors who put their money into a direct project have the option to manage the project themselves.
- The type of investment an investor chooses should depend on their circumstances. If an investor plans to attend school full-time, it makes more sense to do a Regional Center project that they do not have to manage themselves. If, however, an investor intends to earn an income by managing the project, he/she should choose the direct investment option.
- Don’t make the mistake of buying an existing business that already employs ten-plus full-time workers and thinking your work is done. Ten new jobs per investor are required to be generated. There is one exception to this rule, but it requires proof that an investor is saving existing jobs in a failing business. If an investor buys a business that has a 20% loss of equity over the last one to two years, he/she may be allowed to count those existing jobs. Again, the investor should ensure that his/her attorney is capable of a careful analysis.
- Investors should begin with a specific plan regarding how their investment will be used to create jobs and be careful not to over- or under-capitalize.
Regional Center Pros & Cons
- Unlike direct investment, the Regional Center program is not a permanent program. So far, Congress has continued to extend the program, but there are no guarantees. The direct investment program, on the other hand, is not in danger of sunsetting.
- The big advantage of investing in a Regional Center is the unique way job creation is calculated. Businesses generate economic growth in an area, creating new jobs beyond the walls of the business itself as employees spend money in the community. Regional Centers get credit for those ‘hidden jobs.’
- Unless the business is profitable from the outset, $500,000 is usually not a credible sum for a business with 10 full-time employees.
- Choosing to invest in a Regional Center project does not prevent an investor from starting their own business in the US. Mona contends that it may be easier to invest in a feasible Regional Center project to get your green card, and then start your own business without the associated worries around immigration.
Location vs. Project
- There is a common misconception among inexperienced immigration attorneys that entrepreneurial visas require a $1M investment. The two-tier level of investment actually applies to both Regional Center and direct projects.
- The option to invest $500K is based on location rather than project type. The smaller investment amount is allowed on projects in target employment areas whether Regional Center or direct investment.
- Perhaps the most frustrating aspect of Regional Centers is that some communicate better than others. Investors often struggle to get the information and documents necessary when it is time to file an I-829.
- Mr. Hirson contends that it is nearly impossible to get useful information from USCIS. While they do respond promptly to inquiries, the information provided does not offer a real sense of what is going on.
Please see the link below for access to the podcast episode: http://mshahlaw.com/making-right-choice-regional-center-direct-investment-david-hirson/ .
About the Author:
Hermione Krumm, Esq. is an associate attorney with Mona Shah and Associates Global. Hermione works with EB-5, corporate, merger and acquisition (M&A), intellectual property and foreign direct investment (FDI) matters involving China, the UK and the US. Hermione writes and comments frequently on current business and immigration issues. Her articles have been published by LexisNexis, ILW, EB-5info, EB-5 Supermarket, etc. Hermione received her LL.B. (Hons) from the University of Manchester School of Law (UK), and obtained her LL.M. from Cornell Law School. Hermione speaks fluent English, Mandarin and Cantonese.