Decoding Direct & Indirect EB-5 Investment for US Residency

Since 1990, the objective of the EB-5 Immigrant Investor Program is to allow investment from foreign investors in projects that can create employment for Americans by offering them residency in the USA. This permanent federal program was clubbed with a temporary and simplified program known as Regional Centre Program, which is usually reauthorized annually. Both these programs are termed direct and indirect EB-5 investments, where the investments made in projects not sponsored by Regional Centre are termed direct investments.

These investment options have the same minimum requirements regarding the value of the investment to be made, which has been cut down to $500,000 and 10 American job creation; the significant difference is reflected in the counting of total jobs created. It is easier to create more jobs by investing in projects sponsored by Regional Centers than direct investments.

The calculation of the job creation differs in EB-5 direct and indirect investment models. Indirect investment, only those jobs are counted created by the New Commercial Enterprise (NCE) in which the investment has been made. These jobs include –

• Ongoing Operational Jobs
• Construction jobs (if construction will continue for more than two years and if the NCE or a wholly-owned subsidiary directly employs them)

These jobs must be permanent and continuous for full-time for at least two years. The focus is more on the position than the employees.

On the other hand, by investing in projects sponsored by regional centers, the counted jobs include –

• Direct jobs
• Indirect jobs such as spending on materials and equipment, services like legal counsel
• Induced jobs that are created when employees spend their earning

Hence, it is pretty easier to do the jobs using the indirect EB-5 investment pathway.

Since job creation is a crucial requirement for the EB-5 investment program, the applicant must provide a business plan to the US Immigration Authorities along with the I-526 petition. This plan must consist of straightforward strategies to create the required number of jobs within 2.5 years after getting the I-526 approval.

Here are some of the FAQs that may come up in your mind while deciding on EB-5 Investment.

Where can I invest?

Look out for a feasible commercial enterprise that needs investment and can create the required number of jobs. The obvious options are restaurants, retail and wholesale trade business, and a salon or convenience store franchise. You can also buy or expand an existing business and invest in a troubled business to provide support and make it profitable.

Can I invest in an existing business?

Sure you can; however, you will have to meet additional requirements in terms of NCE and job creation. Simply, transfer of ownership does not amount to a business being an NCE, but it should also fulfill the below-mentioned criteria –

• The business must be restructured or reorganized to become a new business (Only companies established after 29^th November 1990 are eligible to become NCE). This change has to be comprehensive, and merely changing the name does not qualify.; or
• The EB-5 investment must result in an increase of net worth or staff count by 40% in case of expansion

What businesses qualify for the troubled company?

Such businesses must exist for at least two years and suffered a net loss during the 12 or 24 months before the priority date as mentioned on the investor’s I-526 form. The failure must amount to at least 20% of the net worth of the troubled business being targeted. In a troubled company, both new and preserved jobs will be counted in job creation; however, they must have come into existence because of the EB-5 investment.

What should be my role as an investor?

It typically depends upon the type of investment that you have made. In any case, you should be involved in the management of the business. While investing indirectly (regional center sponsored project), you can become a member of the entity designed to manage the loan that constitutes EB-5 investment, and you can take a more hands-off approach. While investing directly, you are supposed to be straight and actively involved in the management, but you do have the provision of limiting yourself to the policy decision-making.

Can there be multiple investors?

Yes, since the investment is enormous, there can be multiple EB-5 investors. The primary concern here is that each EB-5 investor must create the required number of jobs in the NCE. However, if the investors are domestic and do not belong to the EB-5 category, they are exempted from the job creation requirement.

Which Investment model should I choose?

You must think that indirect investment in a project sponsored by a regional center is the better option, which is indeed the popular choice. Still, the lapses in authorization in July 2021 left the investors with no choice but to look for other direct investments. It is a crucial decision as there is no backing off once you invest in one project. Therefore, you should consult with a business immigration expert to help you out with the right choices. Also, they will inform you about every minute detail that is necessary to understand the entire process of different models.

We at Abhinav Immigration Services offer exemplary services with hands-on experience dealing with various immigration options from study to business for multiple countries. Contact us to discover your immigration prospects by dialing 8595338595 or writing us at [email protected].