The Entrepreneur Visa – Episode 2
In this show we are speaking with Mona Shah, Rebecca S. Singh, and Hui Zeng from the firm Mona Shah & Associates, and we will be talking about EB-5 visas – specifically the Entrepreneurial (or “Stand alone”) aspects of the EB-5. We cover who it is good for and who it wouldn’t be a good fit.
The EB-5 investment
The EB-5 Program is a method for foreign nationals to invest in and start a business in the United States. Unlike E, L or other non-immigrant visas, EB-5 applicants receive conditional permanent residency in the U.S. for a period of two years, upon approval. If all conditions of the EB-5 Program are met, as well as other criteria, the applicant will become a lawful, permanent resident of the United States.
The EB-5 Program was developed as part of the Immigration Act 1990, to stimulate the U.S. economy and create jobs, while increasing immigration to the United States, and encouraging foreign investment. Initially, the program was unpopular but, recently Congress has reaffirmed its commitment to the EB-5 Program and aims to ensure that the full potential of the Program’s is realized. As a result, interest in the EB-5 has increasing steadily.
The Entrepreneurial visa
All EB-5 Programs must include the three elements of:
• investment of foreign capital
• development of a new commercial enterprise
• create a minimum of ten (10) U.S. jobs
The three types of EB-5 projects available are: partnering into a Regional Center Project; resource pooling with other investors; or, through the Entrepreneurial visa. Success of the Entrepreneurial visa is more difficult because of the amount of the investment; simply put, more can be done with a larger investment created through pooled monies and resources. It is important for investors to remember that, while the EB-5 is an immigrant visa, the aim of the Program is to create a legitimate, successful, viable business. The USCIS 12:35 sees a viable business as a credible business and in order to be successful it needs to be shown that the business in question is credible.
It is vital for clients to understand that the business must be sustainable; it is the responsibility of the attorney to advice on the business aspects of the visa 13:15 and that the business is worthwhile and that it will produce money. Additionally, it is important that they must understand the nuances of the business and the attorney should assess the client’s knowledge and experience in the business and the U.S. market before moving forward 14:35 . At times, the best recommendation an attorney can give their client to pool their resources or make a more passive investment – once in the United States and after they get their initial investment back they can concentrate on starting their own business. Very often investors are in a better position to succeed once they’re facing less risk and pressure.
Differing goals
It is necessary for the attorney to understand the social and cultural subtleties of their client and explain the USCIS’s expectations for the business prior to deciding which avenue to pursue. Once the clients fully understand what is expected, and have looked beyond the obvious benefits of the EB-5, you can better assist your client down a successful path.
Chinese Market
The U.S. tax structure is a major concern for some Chinese investors and a reason for not wanting to do business here. Also, many Chinese investors are very conservative and do not want to be personally involved in the daily operation of a new business venture. Despite the USCIS’s aim to create viable businesses, Chinese investors do not want to get involved like other cultures do, they are investing so their children can receive an American education. While interested in the benefits of the EB-5 – primarily the granting of permanent resident status – they would not be interested in the Entrepreneurial option, because they want to remain hands off. Generally, Chinese investors would rather pool resources, letting someone else run the business or a franchise which already has an established corporate structure.
Latin American Market
Many EB-5 investments are coming from Brazil, Venezuela and Mexico. While many Latin American investors wants to create a viable business that will succeed in the U.S. market, the primary goal of these investors is to create better lives and provide more opportunities for their family.
Indian Market
Like Chinese investors, potential Indian investors are focused on securing an American education of their children and doing what is needed to better their lives. They want to make a living for themselves in the United States and are focused on developing a business here. Additionally, because of the long history of British colonial rule, there is a shared business culture between the U.S. and Indian and, investors face fewer language barriers.
Corporate structure and employees
Undefined or unclear corporate structures can be red flags for the USCIS and make for easy denial for the EB-5. Money being invested into a new business ventures must be used to create the required ten (10) jobs; if the job forecast is part of an existing business, it must be clear that the new positions are part of the new commercial enterprise. If these jobs are not clearly created by the correct entity, denial is inevitable and it is very difficult to revise for the corporate structure and reapply.
The Risks: with great power comes great responsibility
Though it depends on the nature of the business, every business faces risk and a period of uncertainty when in its early stages. It’s not unusual for years to pass before a business begins to turn a profit. As a result, of the available options offered by the EB-5, the Entrepreneurial aspect is the riskiest. When partnering through a Regional Center or by pooling resources the investor is removing much of the associated risks to the individual. At the same time, an investor who will place a large financial investment at risk, will happily face the challenges of running the business, and is excited about overseeing the daily operations of the business, can be rewarded with not only a successful and profitable business but with visa approval and permanent resident status in the United States.