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Does investing in an existing entity qualify for EB5?

If using EB5 investor capital to buy an existing hotel, does this qualify for job creation? If not, what will be the best way to structure the acquisition in order to satisfy EB5 requirements? I have read that if assuming an existing entity then EB5 does not qualify unless the property is able to increase NOI or expand business. But what if a new LLC entity is created and used to buy the asset, does that qualify for EB5 requirements?

Answers

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    Reza Rahbaran

    Immigration Attorney
    Answered on

    Unless the hotel qualifies as a "troubled business" 10 new jobs must be added. Simply transferring the business to a new LLC does not make the business a new business. However, if you are shutting down the hotel for a complete remodel and renovation and re-opening a new hotel, this may qualify.

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    Shahzad Q Qadri

    RC Creator
    Answered on

    Unfortunately, there is no straight forward answer to this question. The short answer is that it may. However, the transaction will need to be structured in a way that supports and fulfills the obligations of the EB-5 program. This will require a thorough analysis of the investment vehicle and job creation. Also please understand that there is a distinction between the EB-5 program and EB-5 RC Program.

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    Julia Roussinova

    Immigration Attorney
    Answered on

    If the hotel was formed before 11/29/1990, you can invest and either (1) restructure or reorganize it, thus creating a new commercial enterprise (simply changing the legal form of the business does not satisfy the EB-5 requirement), or (2) expand it by increasing it''s net worth by at least 40% or the number of employees (this could require you to create more than 10 new jobs to qualify for a EB-5 visa). It is also important to know if the hotel is in TEA to qualify you for the reduced investment of $500,000. You should consult an immigration attorney to review and analyze the specifics of the contemplated transaction before investing. Simply creating an LLC to buy the hotel will not help you.

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    Roberto Ortiz

    Immigration Attorney
    Answered on

    The law requires that if you buy an existing business, you must increase either the net worth or the number of employees by 40%. The fact that you create a new LLC and that new LLC buys the assets will not help you qualify under the law.

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    Matthew Furness

    Immigration Attorney
    Answered on

    No, investing in an existing hotel in and of itself does not meet EB-5 requirements for job creation. There are a number of factors to consider such as whether the hotel business is construed as a "New Commercial Enterprise" under the Immigration and Nationality Act as well as whether the EB-5 capital would create 10 new jobs per investor which is also required under the INA. The answer to your question could also vary depending upon whether you are investing EB-5 capital through a Regional Center. You would only be required to establish a "new LLC entity" if the existing hotel business is not construed as a "new commercial enterprise" under the INA. If so, you would be required to show evidence of substantial "restructuring or reorganizing". USCIS will look to see if there are real changes in the hotel operation, business structure, and other aspects indicative of a new business (i.e. change in hotel management company, change of hotel franchise brand, change from an INC to an LLC, etc.). Assuming that you are not a Regional Center, the EB-5 investment must also create 10 new jobs per investor. One exception may be if the hotel business was construed as a "troubled business". When acquiring a "troubled business", EB-5 investors are only required to preserve existing jobs rather than create new employment.

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    Jeffrey E Campion

    Immigration Attorney
    Answered on

    EB5 investor capital to buy an existing hotel will not qualify for job creation if you are not doing anything to create new jobs. The challenge is that if it is not a troubled business, you have to show how your investment will create 10 new jobs.

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    Jinhee Wilde

    Immigration Attorney
    Answered on

    The key issue of EB-5 investment is creating 10 plus full-time jobs or preserving them if the business is failing. Thus, in your scenario, it would depend on the circumstances of whether the existing hotel is doing well and if yes, will your purchase lead to growth of the business to increase the jobs by at least 10 employees for every Eb-5 investor? If the hotel is currently failing, then preserving the jobs for those employees could be considered. If the hotel is closed and you will open a new one, then you must create 10 plus jobs for each investor. Also, please find out if the hotel is in TEA (targeted employment area) where there is higher than national average unemployment. If yes and you could obtain a government agency verification of this, the EB-5 investment amount may only require $500,000 instead of $1 million.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    The EB-5 investment must be in a new commercial enterprise, which is defined as one that was established after November 29, 1990. If the existing entity was established prior to that date, it can qualify only under the expansion or restructuring provisions. If you create a new LLC and buy an existing property that started doing business before 11/29/1990, you still have to show either expansion or restructuring.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    Yes. The rules list various ways a commercial enterprise may qualify for EB-5, including 1) buying and reorganizing an existing company; or 2) investing in an existing business without reorganizing if the infusion of capital results in substantial change in the existing business consisting of at least 40% increase in net worth or number of employees, or both.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    No, unless it is a troubled business, you have to create new jobs. You need a connection between the investment and new job creation.

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