Considering EB-5 Direct Investment, but don’t think you are qualified? Think again!

For the right investor, Direct Investment can be a very attractive EB-5 immigration option. It gives the investor the relative security of knowing and trusting the way their investment funds are being used. It also allows the investor to get hands on experience with running a business and a chance to develop their business portfolio.

But on the other hand, as a foreign national, you may encounter some challenges running a business in a new country. Additionally, many EB-5 investors are investing straight after graduating from university, and may have very little experience running a business. Questions that often stem from these challenges are:

How involved must I be in the daily operations of my business?
Can I get help running my business?

As you may already know, one of the requirements for a Direct Investment EB-5 visa is that the investor must be actively engaged in the daily operations of the company. So-called “active engagement” means that the investor must be in a position to exercise either managerial or policy-forming power in their business.   

When deciding to grant or deny I-526 petitionsUSCIS officers are given a great degree of leeway when determining whether “active involvement” has been satisfied. According to the USCIS EB-5 Training Manual, the “active involvement” requirement is actually less important to a successful I-526 petition than other requirements, such as “lawful source of funds, required amount of capital fully invested and at risk, and the creation of 10 jobs per alien.” 

Structuring Your Business

Investors pursing the Direct Investment method of EB-5 may choose to structure their business in one of several ways. The business structure that you choose will have an effect on the way you will maintain active engagement. Some structures may actually allow you to get help with daily business operations, and to rely on the business expertise of others.

In general, businesses can take the form of a general partnership, limited partnership, corporation, or limited liability corporation (LLC), among others.

Limited Partnerships

Foreign investors may benefit from structuring their new company as a Limited Partnership. In a Limited Partnership, the investor may partner with an individual having the requisite business expertise. In this way, the investor can count on their business partner for guidance, and hold a slightly more passive role in the company. You may have heard of limited partnerships before, as most Regional Centers are set up in this structure.  

According to the Code of Federal Regulations, specifically 8 C.F.R. § 204.6(j)(5), as long as “the limited partnership agreement provides the petitioner with certain rights, powers, and duties normally granted to limited partners under the Uniform Limited Partnership Act,” then the requirements of “active engagement” will be considered fulfilled.  

It is important to note that there is no requirement for the investor to exercise or act on these rights in reality. That the investor merely has the required rights, powers, and privileges is in and of itself enough to satisfy the active engagement requirement.

Corporations

In the event that the EB-5 investment is set up as a Corporation, the “active management” requirement may be fulfilled through the investor’s position in the company. A professional position that is high enough such that he or she is involved in the day-to-day management or policy formation of the company will qualify. Sufficiently high positions include President, Vice President, CEO, CFO and Executive Vice President. 

If the investor plans to rely on the business expertise of another individual, it may be preferable for the investor to hold the position of either President or Vice President and hire someone more experienced as the CEO, CFO, etc. Under such an arrangement, the investor will still be responsible for policy formation and some management of his or her company, while other employees will handle day-to-day operations.

Evidence

In order to obtain your EB-5 visa, you will need to submit certain documents to USCIS with your I-526 petition. According to the Code of Federal Regulations, the proof that must accompany your I-526 petition includes:

  1. A statement of the position of the investor, including the position title and a description of the duties;
  2. Evidence that the investor “is a corporate officer or a member of the corporate board of directors;” or
  3. In cases of Limited or General Partnerships, evidence that the investor “is engaged in direct management or policy making activities.” Again, as long as the limited partnership agreement gives the investor the “rights, powers, and duties normally granted to limited partners under the Uniform Limited Partnership Act,” this will be considered sufficient engagement in the business.

If you are considering a Direct Investment to obtain an EB-5 Visa, please don’t hesitate to contact us. The Law Offices of Vaughan de Kirby has a team of experienced EB-5 lawyers who want to help. Call us today at (415) 221-2800. 

Vaughan de Kirby
California Immigration Attorney

EB-5 Regional Center Program Ends 12/08/17

Congress has extended the current Regional Center program to December 8th, 2017, at which time it will sunset unless extended. We anticipate future legislation that will call for an increased investment amount and more stringent requirements. For this reason, we recommend to our clients that they take action under the current law if at all possible.

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