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For an EB-5 project, how should I go about setting up a new commercial enterprise as a subsidiary of an already existing enterprise?

Can an existing corporation in the United States set up a new enterprise as its 75%-owned subsidiary and then have an EB-5 investor invest into this new enterprise for a 25% ownership stake in this subsidiary? All 10 jobs will be created in this subsidiary. The existing enterprise will provide the business know-how and necessary assets to help the new enterprise succeed.

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    Answered on

    An approvable EB-5 structure will depend on many factors, including relationships with other businesses. Many different structures can be approvable, but the details will be important as well as the documentation provided to USCIS. Work with EB-5 immigration lawyers who can assist you with this important step.

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    Answered on

    The structure would work for EB-5 investment purposes as long as the 10 jobs are created by the NCE that is established by the EB-5 funds/investment.

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    Your suggestion to set up a new enterprise as a 75%-owned subsidiary and have an EB-5 investor invest into this new enterprise for 25% ownership would work fine. It is important to remember that a "new commercial enterprise" is defined as any commercial enterprise formed after November 29, 1990. If the commercial enterprise is formed before this date, then to fall within the definition of "new", the business must be "restructured" or "expanded". Thus, if the core entity was formed after November 29, 1990, then you do not need to undertake this extra step to restructure. The need to create the subsidiary might be desirable if you want to promote the commercial enterprise in a separate entity. Alternatively, you can create a tranche of non-voting preferred in the established entity so the EB-5 investor does not have more control than the owners of the established business. I hope this is helpful.

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    Answered on

    Setting up a subsidiary of an existing enterprise is very easy to do under the corporate laws of the state where you wish to incorporate. Yes, you may make a direct EB-5 investment for a 25% ownership provided you meet all of the other requirements, including making a $1 Million investment [unless the enterprise is located in a Targeted Economic Area (TEA)] and creating 10 direct jobs for U.S. workers.

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    Answered on

    The business idea is possible and realistic. However, the EB-5 investment criteria must be met as well as the relevant corporate law of the state where the subsidiary will be set up. The percentage is not a significant factor in this respect. Advisably, consult an EB-5 attorney before proceeding further to properly plan the venture.

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    Answered on

    The NCE can be set up as a subsidiary of an already existing company, but the NCE must wholly own the Job Creating Enterprise (JCE) in the direct model to create 10 new jobs, which is critical for the approval of a direct EB-5 investment.

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