Down and Dirty Mechanics for Acquiring an EB-5 VISA

This monograph provides an overview of the requirements for an immigrant visa

pursuant to fifth preference employment-based category for the alien entrepreneur, the EB-5 Visa. It does not purport to provide specific information about documentation necessary for a successful adjudication of any given petition. The EB-5 Visa allows an investor and family members to obtain lawful permanent residency based upon an investment into the United States. If the alien entrepreneur is able to meet the investment and job creation requirements for two years, she or he, and her/his children, will be granted permanent residency status in the United States. The EB-5 Visa has four primary requirements. Each alien entrepreneur must (a) Invest $1.0 million (or $500,000.00 in rural and high employment areas) of lawfully acquired capital into a new commercial enterprise; (b) Place the entire capital investment at risk for the purpose of generating a return on capital; (c) Create ten (10) new or additional full-time jobs through such investment, and (d) Be engaged in the management of the commercial enterprise. Two or more alien entrepreneurs may invest in the same new commercial enterprise; however, each of them must invest the requisite amount. THE REQUIREMENTS A. Investment of Capital. (a) The standard investment; is $1.0 million. In areas designated as rural or targeted employment areas (TEA), the requisite investment is $500,000.00. A rural area is any area not within either a metropolitan statistical area as designated by the U.S. Office of Management and Budget or the outer boundary of any city or town having a population of at least 20,000. (b) A TEA is an area with an unemployment level at least 150 % higher than the national unemployment rate.

(c) The definition of capital includes cash, equipment, inventory, cash equivalents such as certificates of deposit, Treasury bonds and instruments that may be converted readily into cash as well as indebtedness secured by assets owned by the alien entrepreneur. If the alien uses any source of capital other than cash, the USCIS may well engage in a detailed inquiry as to whether the capital meets the definition of capital under the Immigration and Nationality Act (the INA). Importantly, no portion of the capital invested may be used for any administrative costs, such as legal fees or advertising costs to find investors. (d) A key concept is that the capital be directly at risk! When the capital investment is made into a limited partnership, the USCIS will scrutinize the limited partnership agreement and related documents to confirm that there is no redemption agreement allowing the limited partner to sell his or her shares in the limited partnership for a given dollar amount. (d) Capital invested must originate from a legitimate source. The alien must show that his capital has been legally obtained. This involves showing the USCIS how the alien entrepreneur acquired his $500,000 or $1,000,000. See an experienced securities lawyer. . B. Investment into a New Enterprise. The alien must make his or her investment in a new commercial enterprise. This means any for-profit activity formed for the conduct of a lawful business including a sole proprietorship, partnershipwhether limited or generalholding company, joint venture, corporation, or business trust. Such enterprise may consist of a business created or formed after November 29, 2009; or if created prior to that date, it can still be considered as new if the investment resulted in a restructuring such that a new enterprise results resulted in a forty percent increase in the net worth or number of employees of the existing business. C. Job Creation. The investment must create no fewer than ten new full-time jobs for U.S. citizens, lawful permanent residents (or green card holders) and other immigrants authorized to be employed in the United States, not including the alien entrepreneur or his or her spouse or children or any nonimmigrant alien, such as, E-2 investors or F-1 students.. The jobs must be full time; part time jobs and jobs granted to independent contractors are excluded, although job sharing arrangements, whereby two or more persons join to fill one full-time job, will be counted towards the full time jobs requirement. If the investment is made into a regional center, indirect job creation may be used to satisfy the job creation requirement. Employment multipliers are used to determine how many jobs are indirectly created by a new enterprise in a specific industry for each job directly created by the enterprise. Another exception to the job creation rule is where an alien entrepreneur invests in a troubled business. A troubled business is one that has been in existence for at least two years, has incurred a net loss for accounting purposes based on generally accepted

accounting principles during the twelve or twenty-four month period prior to the submission of the petition, and the loss for such period is at least equal to twenty percent of the troubled businesss net worth prior to such loss. If an alien entrepreneur invests in a troubled business, he need not create jobs but must demonstrate that the number of existing employees will be maintained at no less than the pre-investment level for a period of no fewer than two years. D. Engaged in Management. The alien entrepreneur must be engaged in the management of the enterprise either through day-to-day management control or through policy formulation. The entrepreneur may not be a passive investor. However, there is an important exception: In the case of a limited partnership, if the alien is a limited partner and the limited partnership agreement provides the alien with certain rights and duties normally granted to limited partners under the ULPA the alien will be considered sufficiently engaged in the management of the new commercial enterprise. One example might be if a developeras a general partnerenters into limited partnership agreements with alien entrepreneurs to develop a large property with each entrepreneur investing $1.0 million dollars. Each entrepreneur can then petition for permanent residence status! This option may be particularly attractive where a developer, as the general partner, is engaged in a large construction project in a rural area. However, when the enterprise is created as a limited partnership under the Uniform Limited Partnership Act, it becomes subject to blue sky and Federal securities laws and it must hire an attorney to draft a Private Placement Memorandum providing investors with the demonstrable ability to evaluate the risk of their investment and provide the enterprise with an exemption from registration requirements.

Filing Procedures The alien entrepreneur must first file a Petition for Alien Entrepreneur (USCIS Form I-526) and supporting documentation with the USCIS. The supporting documentation which includes a detailed business plan will show that the investor has met or will meet each of the necessary requirements. If the petition is approved and the alien is currently living abroad, he can then apply for an immigrant visa at the U.S. Embassy or Consulate in his home country.
If the alien is in the U.S. as a lawful nonimmigrant, he should file an Application to Register Permanent Residence or Adjust Status (Form I-485) to adjust his status in the United States to that of a conditional permanent resident. He then will be granted the status of conditional permanent resident for two years. Ninety days prior to the two-year anniversary of becoming an alien entrepreneur, he or she must file with the USCIS a petition to remove the conditional basis of his or her permanent residence. The alien must again prove that he/she met all the requirements described above and has sustained the investment and the ten job requirement for two years. If the USCIS

determines that he has not sustained these requirements, it may terminate the alien's permanent residence and initiate deportation proceedings. Therefore, it is important that the entrepreneur meet all the requirements described above until the conditional status is removed and the alien and his family have obtained the status of lawful permanent residents of the United States. ______________________
About the author

Web sites and blogs that Douglas Slain has managed for the last several years include PrivatePlacementAdvisors.com, RegDConsumersReport.com , RegDLaw.com, and startup-seedcapital.com. Books he has authored include Real Estate Blind Pools, Delivery Services, and EB-5 and U.S. Securities Law. Doug is the manager of a LinkedIn discussion group focusing on state securities enforcement and private placement law with over 950 members, styled Securities Enforcement Group/Securities Enforcement Law. He is available as an expert witness in litigation involving compliance with Regulation D and private placement law. Doug was the founding editor and long term publisher of Insurance Litigation Reporter (with Bills Gates Sr. on the original editorial advisory board), Professional Liability Reporter, Medical Liability Reporter, Pleadings and Briefs and Construction Litigation Reporter, titles initially purchased by McGraw-Hill, Inc., and now published by Thomson-Reuters. More recently, he was the founding editor and publisher of Securities Enforcement Reporter and Blue Sky Chronicle. Doug practiced real estate and finance law at Pillsbury, Madison & Sutro (now Pillsbury Winthrop) after graduating from Stanford Law School. He was honored to serve as an A BA rule of law consultant to the Ministry of Economy for the Republic of Latvia as its secured transactions adviser. He has taught at Stanford Law School as an adjunct clinical law professor. He has served as chairman of the American Bar Associations Professional Responsibility Committee (for two terms). His first job out of college was as a reporter for The Wall Street Journal. Doug initiated (and then associated with Lieff Cabraser Heimann & Bernstein to pursue) a class action against the infamous Fund America, where $37 million was recovered 10 months after the class was certified. He was also the lead plaintiffs lawyer in the largest consumer class action filed against the even more infamous WorldCom, Inc. Doug received a JD from Stanford Law School, a MA from the University of Chicago (working with Hannah Arendt and Saul Bellow in the Social Thought Committee), and a BA from DePauw University (Phi Beta Kappa), a diploma from University College London, and a certificate from the Goethe Institute. He can be reached by email at doug.slain@gmail.com or via Skype at dslain2134.