How To Get EB-5 Success When Investing In A Troubled Business

One of the ways that foreign investors can get an EB-5 Visa is through investing in what is known as a “troubled business.” Though this method is somewhat less popular, it does have one particular draw: Investors can not only help the US economy by creating jobs, they can also help save jobs that would otherwise be lost if the business were to fail. This aspect adds a human element that some investors may find especially attractive.

USCIS Definition

According to USCIS there are two defining characteristics of a troubled business. One is that it has been in operation for at least two years and two, that it has an annual loss of at least 20% of the company’s net worth at some point over the 2 years prior to filing an I-526.

For example, if the net worth of a business is $100,000 and it has suffered a loss of $20,000 per year in one of the 2 years prior to filing an EB-5 petition, then such a business will qualify as “troubled” for investment visa purposes.

Investment and Job Creating Requirements

Despite the fact that the business is fully formed at the time you would be taking it over, investors are still required to invest the full required amount. EB-5 investors must invest $1,000,000 in their business, or $500,000 if the business is located in a targeted employment area (TEA).

While the requirements for investment capital are very clear, the job creation requirements for a troubled business are slightly confusing. Previously, it was thought that simply preserving the jobs that existed pre-investment would be sufficient to satisfy the job creation requirement, even if the number of jobs was less than ten, but this notion has since come under scrutiny and has subsequently been discredited.  In a combination of provisions and memorandums, the USCIS has since made it clear that in order to satisfy requirements, the total number of jobs created and/or preserved must add up to ten.  

When investing in a troubled business, you must create and/or preserve a total number of ten jobs. For instance, if a troubled business currently has five employees, the new investor will have to preserve these jobs, and hire an additional five people. If the troubled business already has ten employees, then only these jobs need to be preserved and no new people need to be hired.

Buying a troubled business for your EB-5 Direct Investment can be a highly complex process. The attorneys here at Law Offices of Vaughan de Kirby want to give you the guidance you need. Contact us today at 415-221-2345, or check out one of our informational books.