The EB-5 Visa provides the most flexible path to a green card based on a US investment. The EB-5 visa does not require the applicant to manage the day-to-day affairs of a business. One may invest in an existing business, or a new business. More than one person may invest in the same business. The EB-5 investor may be a minority owner of the business.
One may qualify for an EB-5 as follows:
- Invest $1 million and hire ten employees anywhere in the USA
- Invest $500,000 and hire ten employees in an area where the unemployment rate exceeds the national average unemployment rate by 150%
- Invest in a regional center.
INS designated specific areas, called Regional Centers, as eligible to receive immigrant investor capital. INS approved over 20 Regional Centers. Regional Center investors may rely on indirect job creation rather than directly hiring ten employees. A competent professional, such as an economist, must quantify the indirect employment. If the regional center is in a high unemployment area the required capital is reduced to $500,000.
Of the 10,000 investor visas (i.e., EB-5 visas) available annually, 5,000 are set aside for those who apply under a pilot program involving an INS-designated “Regional Center.” To date, the quota has not been exceeded.
The following is a compilation of Frequently Asked Questions prepared by Colin R. Singer, Attorney, summarizing the important features of the EB-5 Visa program.
LAW OFFICES OF COLIN R. SINGER
Barrister & Solicitor
Immigration & Employment Law
FREQUENTLY ASKED QUESTIONS
IMMIGRATION TO THE UNITED STATES UNDER THE EB-5 INVESTOR VISA
Q: Who should invest?
EB-5 investors include people from all walks of life; professionals, business people, persons wanting to facilitate a child’s education, and retirees. Because the EB-5 visa permits employment in the US, many EB-5 investors become involved in charity or part time work. Simply put, the EB-5 visa gives you the flexibility to do what you want in the USA.
- If you don’t want to actively manage your business, you should consider EB-5
- If you have a US citizen parent or child over 21 years of age, you should consider family class visa categories.
- If you have exceptional skills or are famous you may qualify for a green card based on your skills or fame.
- If you want to manage your own business, consider L-1, E-2, international manager visa categories.
If your goal is to have a green card and not to actively manage a business, it is most often cheaper to utilize the EB-5 category rather than to start and maintain a business.
Q: Is EB-5 a truly passive investment?
The EB-5 regulations require involvement in management or policy making. The regulations deem a limited partner in a limited partnership that conforms to the Uniform Limited Partnership Act as sufficiently engaged in the EB-5 enterprise. However, the Uniform Limited Partnership, adopted by most states of the United States, prohibits the limited partner from actively participating in management.
On one hand you must be involved in management or policy making, while on the other hand you can’t. We resolve this contradiction by granting the limited partners the right, as a group, to oust the general partner for “cause” and to suggest or recommend issues of overall policy. Furthermore, limited partnerships properly structured, comply with the Uniform Limited Partnership Act.
Q: Where is the investment situated?
We collaborate with a number of highly successful entities. Typically our project associates act as general partner with investors entering as legally protected limited partners. The company does not increase yield by taking on and maintaining debt. The company’s principals have set up personal guarantees covering all debt and no debt is cross-collateralized among the properties and partnerships. Risks to the limited partners are significantly reduced.
Q: How is the investment structured?
Each Limited Partnership owns one building. The investment purchases an interest in the Limited Partnership. You become a Limited Partner. Your percentage share of the Limited Partnership depends on the percentage your investment bares to the value of the project. The prospectus for each project describes the valuation methodology.
The Limited Partnership, managed by our associate in the USA, is the general partner of the Limited Partnership. The general partner, renovates the property, leases the property, and manages the property. The Limited Partners receive their share of the income from the properties. Immigrant investors receive 50% of the profits for the sooner of five years or receipt of the permanent green card, and 70% of the profits thereafter. Investors who do not seek an immigration benefit receive 70% of the profits from the out set time of their initial investment.
To date, each of the investments in which our clients have participated, have generated and continue to generate return on investment in accordance with the project prospectus.
Q: What is a limited partnership?
This is best explained through an overview of the various entities available to investors.
A Corporation, formed by filing a charter with a state government, is owned by shareholders. The corporation is taxed on its income. The shareholders are only taxed on dividends paid to them by the corporation. Shareholders do not pay tax on the corporation’s income. The shareholders only risk the cost of their investment in the corporation they bare no responsibility for the general affairs of the corporation.
A partnership is comprised of two or more people or entities coming together for an enterprise, without any particular state charter. The partnership does not pay tax, but passes through all items of income and loss to the partners. The partners pay tax on partnership earnings. Each partner, unlike a corporate shareholder, undertakes responsibility for the entire operations of the partnership. If the partnership were to be sued and judged liable, each partner bares full responsibility for the damages. A corporate shareholder has no such direct liability.
A limited partnership combines corporate limited liability with partnership taxation. The limited partnership, formed by filing a charter with a state government, consists of a general partner and one or more limited partners. The charter details the rights and powers of the limited and general partners, percentages of ownership, and distributions of profits. The general partner manages the business.
As in a corporation, the limited partners are passive investors liable only for the value of their investment. As in a general partnership, limited partnership income is taxed at the partner level, not at the entity level.
A limited liability company is a corporation that passes through income and loss to the shareholders but offers shareholders the same limited liability as a limited partner or corporate shareholder. You could say a limited liability company is a corporate version of a limited partnership.
Q: How is my limited partner interest protected?
The Certificate of Limited Partnership must be recorded with the State of Washington as a public record. The Certificate refers to a Schedule A of the limited partnership agreement, which lists the names and percentage interests of the limited partners. The deed for the investment property is held in the name of the limited partnership. The deed is also of public record. This means the property cannot be sold, mortgaged or altered without complying with the terms of the limited partnership agreement.
Q: Is my investment guaranteed?
No. The law requires an “at risk” investment without guarantees or redemption rights.
Q: What are my risks?
As in any investment there is a risk of total loss. Our associate invests in real estate without mortgage or bank financing. This lack of debt eliminates much of the risk of total loss. Like everybody we risk the deleterious effects of acts of god, war, and market fluctuations in rental income or real estate prices. All investors are provided with sound references to permit independent verification of the information contained in the investment prospectus.
Q: Why must I invest before you will apply for my green card?
Our associates understand that other investment companies accept EB-5 investors place funds in a trust or escrow account pending visa approval. In this case the funds may only be released upon visa approval.
The primary activity of our associate in the USA is business in real estate development. Most of the capital injected into their projects comes from investors who do not seek an immigration benefit. These investors invest on financial consideration only, without preconditions. EB-5 investors, however, have two considerations, the soundness of the investment, and obtaining their green card.
The investment must be analyzed upon its merits. Their policy is to require that you commit your capital as any other investor. If for some reason, you do not receive your green card the contract with you requires a refund of your investment. They maintain credit lines with several banks for this purpose. They also have a constant stream of new investors, providing an alternative source of funds to refund your investment, should you fail to obtain your green card.
Escrow or trust agreements present immigration difficulties. They offer investment opportunities on a first first-come first first-served basis. While your investment capital sits in escrow or trust pending the results of a visa application, which may take six to eight months to complete, the target investment, which formed the basis of your visa petition, may have been sold out to other investors. You would be in the unfortunate position of basing your green card on an investment that didn’t exist, and run the risk of having your application denied. Finally, although the regulations permit escrow arrangements we find that INS looks more favorably on petitions based on a completed investment rather than a pending one.
Hopefully, you will be satisfied with your investment and wish to keep all or part of the investment regardless of the out come of your green card application. The need for a green card is situational. You may decide you don’t like life in America, or your family or economic situation may change. The need for sound investments never changes. While you would not have come to us unless you were seeking a green card, now that we’ve met, we hope you will be more than satisfied by the investment results and service.
Q: How does the partnership distribute income?
Each partnership distributes profits to its investors monthly. The distributions are based on the prior month’s gross rental income net of expenses. Investors receive a profit and loss statement with each month’s distribution. At the end of the year the partnership issues a summary report along with Internal Revenue Service form K-1. Form K-1 details your yearly income and expenses. Your accountant will require form K-1 to prepare your US annual tax return.
Q: What is the history of the EB-5 visa category?
The EB-5 visa category started in 1991. Regional Centers started in 1993. Our associate formed its regional center in 1996 and raised capital from some 40 investors between 1996 and 1998. Several companies competed for investment capital during this period. Most of the companies didn’t offer sound investments and were really in business to collect fees rather than to fund an ongoing business. Many investment opportunities didn’t raise the full $500,000 investment capital or hire the required number of employees.
INS, rightly wanted to stop these abuses of the program. In 1998, INS wrongly applied their revised rules retroactively to people who already had approved petitions. INS attempted to revoke these visa petitions. This started the litigation. In 2002, Congress passed a new law to protect the pre-1998 investors. Also, in 2002, in a case commonly known as “Chang” the 9th Circuit Court of Appeals ruled that INS may not apply their new rules retroactively. In August of 2003, INS began approving regional center petitions for the first time since 1998.
It is now common knowledge that EB-5 immigration petitions based on sound investments, for the full $500,000 as prescribed by the rules, with proper supporting documentation, will be approved.
Q: What documents must I prepare to process my visa petition?
You must prepare complete biographical information for each applicant and the principal applicant must prove the source of the investment funds. To prove the source of investment funds, INS requires five years of tax returns, five years of bank records, proof of ownership in any businesses, financial statements for each business and business licenses. The idea is present a track record of an honest course of dealing. If your capital came from a specific transaction, such as sale of a house, inheritance or gift, you must prove the transaction occurred, by providing an official document, such as a closing statement or contract or other official documents. This is not an exhaustive list. Documents Other documents may be required and vary on a case-by-case basis.
Q: What issues have been problematic in EB-5 cases?
Our associate uses the same investment model for each case. INS has reviewed their investment model and has approved visa petitions based on their model. The most common problem area has been insufficient documentation of the source of funds. Many people try to disclose the least possible information only to have the file returned with a request for further information. It is better to provide too much information rather than too little information. In this era of terror alerts, and suspicions about money laundering, INS case examiners require a well- documented source of funds.
Q: Where can I find a copy of the relevant law and regulations to study?
Please go to the Bureau of Citizenship and Immigrations Services web site. A direct link to investment visa information is:
Q: How long does INS take to process my visa petition?
Processing times vary from as little as a few weeks to as much as eight months. We can’t predict or promise a particular processing time. You should plan for the entire process to take approximately one year to avoid disappointment.
Q: What are the processing procedures?
A general outline of the application process follows:
Step 1) File form I-526 Petition for Alien Entrepreneur with the California Service Center. This petition requests INS to certify the applicant and the investment as eligible for EB-5 visa status.
Step 2) Upon approval of the I-526 petition, (a) if you are in the United States you may apply for Adjustment of Status to Permanent Residence by sending form I-485 and supporting documents to the INS regional processing center nearest your US residence. (b) If you are abroad you must wait for notification from the Embassy in your home country to prepare documents for the visa interview.
The purpose of the Adjustment of Status or consular visa interview is to make sure you are not subject to a grounds of exclusion, e.g. a criminal past, infectious diseases, etc.
Step 3) Upon approval you receive a form evidencing the approval and as well as a travel document. You will also receive the temporary green card in the mail. If you are abroad you must enter the US within six months of the date of the Embassy approval.
Step 4) After two years, you may file for removal of conditions or your permanent green card using Form I-829. This procedure permits INS to verify that you have maintained your approved investment for the required two-year period.
Q: What are the fees?
The Real Estate investment firm receives the first $50,000 of profit from your investment. There are no other fees charged for the investment. Investors must pay their own attorney fees which we can estimate to be in the area of $10,000 (paid under a result oriented installment mandate) to prepare and secure approval.
Q: How can I receive further information?
If you require any clarifications please take the liberty to contact Colin R. Singer, Attorney by Toll Free telephone (1-888-817-2011) or by email – [email protected] to discuss any issues related to the foregoing.
The Treaty Investor Visa permits citizens of certain countries to reside in the United States through an investment in the U.S.A. The investor must come to manage or oversee the investment.
The Treaty Trader visa is the same as the Treaty Investor visa except that it involves qualifying trade between the US and the treaty country. Instead of investing the qualifying activity is import/export of goods or services.
One may invest in virtually anything or trade in virtually anything. While some under $200,000 investments are approved, its safe to say that the investment capital and reserves should total at least $200,000 and the applicant must be prepared to demonstrate that the business will employ at least 3 – 4 persons. Minimum annual trade should be at least $500,000.
The investment funds and the applicant both must come from the same Treaty Country. 50% or more of the U.S. investment must be owned by citizens of the Treaty Country.
Treaty Country List
Who uses the Treaty Investor Visa?
- Large companies who establish manufacturing plants
- Real estate investors
- Small businessmen who purchase a franchise or small business
- Retirees who use the Treaty Investor visa as a means of getting US status so they can retire in America.
The Treaty Investor visa lasts as long as one maintains the investment. That’s good and bad. If you sell the business you loose the visa unless the money is reinvested.
The Treaty Investor Visa includes the principal applicant and children under 21. At the age of 21 children must either convert to an investor green card by investing more capital or get married or attend a US University and then find job as an H1B professional or make an investment themselves as a Treaty Investor.
The E2 has tax advantages. Green card holders pay tax US income tax on world wide income or they can loose their green card. This can be expensive for people with foreign sources of income. E2 visa holders have ways to avoid world wide taxation. Green card holders have no way out. For this reason many investors prefer the E2 visa to the green card.
One may not apply for a treaty trader or treaty investor visa unless the funds are committed to an investment or unless trade exists. Traders must come to the US as business visitors to get things going before applying for the Treaty Trader visa. Traders must produce evidence of existing trade such as purchase orders and bills of lading to obtain the visa. Investors must place their funds in the hands of a bank or closing agent who is instructed to release the funds to the seller of the property or business upon visa approval. Investors developing their own business must come to the US as business visitors to get the business started before applying for the Treaty Investor visa.
Those who serve as a manager of a business located outside of the U.S.A. and who are transferred to a business in the U.S.A. as a manager or executive may qualify for a L-1 visa if the foreign and U.S. business are linked by 50% or more common ownership. Those who fall under this definition qualify for the L1A visa for managerial transferees. The L-1A visa may be extended for a total of 7 years and is easily converted to a green card.
The L1A visa was designed to permit multinational corporations to assign managerial staff to foreign operations. Small business may also take advantage of the L1A.
Suppose Mr. Smith owns a real estate development company in the UK. This company employs three full time staff and has gross sales of about $500,000 USD. This would be the smallest size company that should attempt the Two Step. Mr. Smith decides to open a U.S. subsidiary company to engage in a similar business. Mr. Smith incorporates a company in the U.S., and makes plans to develop a small apartment complex. Mr. Smith hires at least one staff. Mr. Smith now may transfer himself to manage and establish the US operation using the L1A visa. INS will grant Mr. Smith an initial validity period of one year. After one year of doing business in the US Mr. Smith may extend the L1A for an additional three year period and he can apply for his green card. Mr. Smith could have hired people to establish his US business and after one year of doing business in the US applied for his green card from the UK without obtaining the L1A.
The key points to the Two Step are:
- 50% common control between the US and foreign company
- Applicant served as a manager with foreign company for one of three years prior to transfer to US as L1
- After one year of doing business in the US whether or not the applicant has an L1 one may apply for the green card.
- The L-1A visa includes spouse and dependents under 21 years of age. Spouses and dependents may not work in the US without a work visa but they may go to school.
This simply put, is the Two Step Method.
The Two Step permits the small businessman to earn his way to a green card with a minimum of capital, say $150,000 to establish an office, start his business and survive for a year, compared to the $500,000 minimum requirement for the investment green card. The obvious disadvantage is that one must be prepared to manage a business in a foreign land, hire foreign employees and more than likely spend a lot of time on airplanes.
The Two Step also permits virtually every managerial employee of a multinational company who is transferred to the US to obtain a green card. Just plan to file about six months in advance of the transfer. Even those white collar workers who don’t wish to live in the U.S. permanently may want a green card so their spouses can work in the US and so children can attend state supported universities at the lower local tuition rates.
Immigrant Investors may qualify for a green card by investing $500,000 in a high unemployment area and hiring 10 persons or by investing $1,000,000 anywhere and hiring 10 persons. Immigrant Investors must maintain their U.S. investment for 2 years.
Many people have the required capital but don’t want to hire 10 employees:
If one invests in an INS designated project called a Regional Center, INS waives the 10 employee requirement. In this case the Regional Center operator or manager will direct the investment activities. There are some 10 or so active Regional Center’s in the U.S. The projects as well as the terms and conditions of the investment differ.
We do business with the Golden Rainbow Freedom Fund. We urge you to shop around to find the investment program that best suits your needs.
The regional center program offers convenience in that one need only make a payment. There’s no need to hire employees or to manage an investment in a foreign country. On the other hand one should undertake an investigation of regional center managers and their investment scheme.
Individual investors may choose among four U.S. immigration categories
L-1A International Managers
- Manager or executive works for foreign company that is related to a US company by 50% or more common ownership. The manager must have worked for the foreign company for one of the past three years and must be coming to the US company to work in a managerial or executive capacity.
E-1 Treaty Traders
- Manager or executive from a treaty country controls substantial trade between the US and the treaty country. Substantial as a general rule means $500,000 or more a year of trade.
E-2 Treaty Investors
- Owner or Developer of the new enterprise from a treaty country (see list of treaty countries) has 50% or more ownership in a substantial US employment creating investment. As a general rule substantial means $200,000 or more. Although smaller investments are often approved the risk of denial increases as one heads south of $200,000.
Eb(5) Immigrant Investors.
- Individual invests $500,000 in a high unemployment area (150% of national unemployment rate) or $1,000,000 elsewhere and hires 10 persons within 2 years, or invests in a Regional Center and may use job multiplier studies instead of direct employment. Because this category has been controversial INS processing times are slow and unpredictable.
None of the investor categories have language, education or business experience requirements.
The Investor Decision Tree
1. You own or control a business in your home country and want to establish a branch office, affiliated company or subsidiary in the USA.
- Use the L1A visa. INS grants 1 year to start up the US business with a total extension periods of seven years. The biggest advantage of the L1A visa is that it can be easily converted to a green card after doing business in the U.S. for one year.
2. You own or control a business in your home country that already own a U.S. branch office, affiliated company or subsidiary company.
- You can apply for a green card as a managerial transfer from abroad without coming to the US, you can come to the US as an L1A (above), or you can come to the US as E1 or E2 if you are from a treaty company. In all cases you may apply for a green card as long as you qualify as an international manager (serving one of past three years as manager or executive of the foreign company).
3. You want to establish a US business that is not connected with an overseas company.
- If you are a citizen of a treaty country you can use E1 if the US business is based on trade or in all other cases use E2. If you do not also qualify as a managerial transfer you will probably never qualify for a green card unless you invest $500,000 or $1,000,000 per the Eb5 category. If you want to know why, you need to contact us. Otherwise take our word for it. Its too complicated to describe in summary form.
Now you need to know the basic differences between the E visas and green cards.
The green card lasts forever, and permits one to work, invest, study or do none of the above with complete freedom. Green card holders are subject to US world wide taxation and must make the US their permanent residence. Green card holder dependents also receive green cards valid for the rest of their lives.
E visa holders may only work for themselves or the E visa enterprise. E visas may be extended as long as the E visa enterprise is operating. E visas are generally issued in five year increments. E visa dependent children loose their E visa status when they turn 21 years of age. At that time they need to find another status. E visa holders and dependents may study in the US. E visa holders do not have to live in the US any particular amount of time and may arrange their affairs so they are not subject to world wide taxation.
Those wishing to retire in America, live in America say six months a year and have no kids under 21 years of age, should consider an E visa investment. In this case the E visa is more flexible both for tax purposes and there’s no requirement to come to the US for at least one time every six months. The US does not have a retirement visa category. The E visa is as close as it gets.
Families with young children need to consider the fate of their children once they turn 21. In this case green cards are the better alternative. If a green card is not possible, then consider that children can go to university on F1 visas, upon graduation qualify for H1B visas and at some point they will get married, more than likely to a US citizen. If you don’t qualify for a green card and don’t want to expose your children to the added immigration pressure of having “ify” status then stay home or invest under Eb5 below.
If all else fails consider EB-5.
EB5 has been controversial. If you check around you will here a variety of horror stories. Here’s the truth according to us. First, your are only considering this because you don’t qualify for another visa category and you want a green card. If you invest in a pooled immigrant investor fund, INS will deny your file. Its that simple. If you as an individual invest the required capital amount in a job producing enterprise INS should, after a long processing period approve your case if you have a detailed business plan, a verifiable source of funds, and if you add some value to the business either through your experience/education or as an owner operator. Because of the uncertain processing times, we suggest that you apply for an E visa first, then apply for the EB5.