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What is the difference between Regional Center and a direct investment?

What is the difference between Regional Center and a direct investment? What are the pros and cons of each. Can the EB-5 investor be limited in the legal exposure/management of the project, such as is often the case defined by being a limited partner in an indirect EB-5 investment through a Regional Center?

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    Shahzad Q Qadri

    RC Creator
    Answered on

    This is a loaded question. However the major differences is that in a RC investment you can take advantage of the indirect job creation while in a direct investment you have to create 10 full time jobs. Additionally, in a RC you do not have to be actively involved in the business in a direct investment you have too.

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    Albert Lewis

    Immigration Attorney
    Answered on

    The direct investor is an entrepreneur in his or her own business having invested minimally $500,000 in areas designated with high unemployment , otherwise $1,000,000 . He ro she enters the U.S. as conditional lawful permanent residents (LPR). Conditional LPR status expires in two years. A direct investment requires that the LPR entrepreneur run the business himself or herself. Within 2 years the business needs to provide 10 full-time jobs to persons other than family. Profit needs to support the entrepreneur''s family. The entrepreneur is liable to the extent of business organization. Example: If the business is incorporated, the entrepreneur is protected so long as the corporate veil is kept in tact. In an unincorporated business, such as a general partnership, the entrepreneur is generally subject to the business''s liability. Generally, but there are some variations, if 10 full-time jobs are not created, the condition is not removed and the entrepreneur ceases to have status in the U.S.. There are certain exceptions to expiration of status, but planning should not rely upon an exception. Answer: By contrast a Regional Center is usually a partnership which invests $500,000 in a project that, within 2 years, will provide 10 jobs for each $500 invested. The investor is generally the limited partner and the project is managed by being the general partner. The limited partner generally participates as a Board member but is not expected, otherwise, to work in the business. The limited partner is not subject to loss greater than his or her investment. The limited partner enters the U.S. as conditional lawful permanent residents (LPR) with authorization to work and travel inherent in LPS status. In two years, the Regional Center is responsible for showing that 10 full-time jobs were created by the investment project for each $500 invested. To meet the 10 full-time job requirement, the Regional Center is allowed to count, not only, jobs directly created by the project buy may also count jobs indirectly created as a result of the project. In short: 1) A direct investor is an entrepreneur desiring to build his or her own business. A Regional Center is a U.S. government approved organization, usually a partnership, established to conduct a project. An investor in a Regional Center is primarily a passive investor. 2) The amount of investment in a Regional Center project is firm at $500,000. An entrepreneur may be required to invest $1,000,000 or more. 3) The Regional Center may count both jobs directly created by the project as well as jobs indirectly created in the vicinity as a result of the project. The direct investor must create 10 jobs in his business. It is possible to satisfy the above stated requirements in ways particular to the business and investment made. In both the investment must be at risk and the source of the investment must be lawful. Please contact me for more specific details on your potential investment. If you see difficulties, please state them as they may not be insurmountable.

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    Roberto Ortiz

    Immigration Attorney
    Answered on

    The answer to your question will be better answered in a telephonic conversation. Please let me know when you will be interested in speaking with me. Thank you.

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    Julia Roussinova

    Immigration Attorney
    Answered on

    It is recommended that you contact an immigration attorney to discuss the specifics of each EB-5 program in detail and determine what works best in your specific situation. Do not hesitate to contact our office should you have questions.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    The major difference between investing through a regional center vs. direct investment for EB-5 purposes is that for when you invest through a Regional Center, you may meet the job creation requirement of 10 f/t hires by calculating indirect jobs created, instead of only counting the direct hires to meet the requirements. Bottom line is both forms of investment have risks and advantages, but doing thorough due diligence is the key to a successful outcome regardless of which option you take. Good luck.

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    Lei Jiang

    Immigration Attorney
    Answered on

    The main difference is that a regional center can utilize indirect job creation while a direct investment cannot. Moreover, direct investments normally require more involvement from investors.

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    Jinhee Wilde

    Immigration Attorney
    Answered on

    The Regional Center has been approved/designated to do certain business in a particular location (region) by the USCIS. The key difference is that Regional Center could use the indirect job creation to show that its business has created the number of jobs required for the EB-5 investments they received. You may live and work anywhere in the U.S. and do not have to actually run any business with the Regional Center. Direct investment, however, you must own and operate the business and only the direct hired employees/positions of the business could counted to show the job creation backed by W-2s and I-9 reports. Both forms of business requires $1 million or $500,000 if the business is in TEA (targeted employment area).

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    Darren Silver

    Immigration Attorney
    Answered on

    One significant difference is that a Regional Center may utilize a formula to identify job creation. A Direct EB-5 MUST create 10 direct jobs.

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    Ed Beshara

    Immigration Attorney
    Answered on

    A Direct EB-5 project is when an investor usually invests in their own business, become an equity owner and I involved in the management of the new commercial enterprise, and direct jobs have to be created. While,the EB-5 Regional Center project is when the investor invests in a new commercial enterprise and becomes an equity owner, may be involved in the management but in this case the jobs can de indirect. In addition, the investors may invest in a LLP which will then loan the funds to the job creating entity. The investor is only an owner of the LLP (new commercial entity) and not the job creating entity, in which indirect jobs are created.

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    Daniel P Hanlon

    Immigration Attorney
    Answered on

    The principal difference is that an investment in a Regional Center can be the basis for an Eb-5 approval without a showing of the creation of 10 jobs for US workers directly resulting from the investment. This is because the USCIS, in approving the RC, has accepted that each investor''s contribution to the RC will indirectly create 10 jobs in the local economic area. There are also many more subtle differences between the two types of investments. I would recommend that you consult a qualified immigration specialist for a full understanding of these.

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    Clem Turner

    Securities Attorney
    Answered on

    Simply speaking, from an EB-5 perspective, Regional Center projects get credit for direct, indirect and induced job creation. Direct projects only get credit for direct jobs. Some people believe this makes Regional Center projects safer, however each project must be considered on its own terms. Regardless, it certainly allows Regional Centers to raise more in EB-5 Financing. The cons of Regional Center projects are that Regional Centers add an additional 9-12 months of USCIS processing time (if you file your own Regional Center application) and if you "borrow" an existing Regional Center, you will have to pay them a fee of some kind (fees vary). It is possible to structure a direct investment which limits the liability of the EB-5 Investors, however you should retain qualified corporate counsel (like my firm) to assist with this process.

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    Christian Schmidt

    Immigration Attorney
    Answered on

    Investing into a Regional Center requires a lower investment, does not require active management of the enterprise, and allows indirect employment of US workers to account for the required creation of new employment.

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    Michael A Harris

    Immigration Attorney
    Answered on

    One of the principal differences is that a Regional Center (RC) can count both direct and indirect/induced jobs based on a reasonable job creation methodology. A direct or non-RC investment can only count the direct jobs created at the enterprise where funds are invested. As well, an RC investment can be made into a different corporate entity which does not actually created the jobs, via the loan-based model that is popular in EB-5 investments. The legal exposure that you would face in a direct versus RC investment should be discussed with your corporate attorney. For further discussion of the types of management role you need to have under the EB-5 program, you should discuss this further with an immigration attorney.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    A regional center is merely a vehicle that permits indirect job counts for projects within its geographical boundary.

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