I want to open a store and a small clothing factory to sell and make my clothes. I am looking into the possibility of using EB-5 funds. How involved with management and operations of the company do the investors have to be?
It will be important to consider how a new commercial enterprise is structured, and whether EB-5 investors are involved in day-to-day operations or limited to policy formulation and major decisions (such as dissolution or change in business nature). You should work with an experienced team of professionals, which should include an EB-5 immigration attorney and a business counsel.
The investor must be involved in the management of the new commercial enterprise, but the involvement can be either day-to-day managerial responsibility or it can limited to policy formulation.
EB-5 policy requires that the investors must be engaged in management. This can be day-to-day activities or policy formulation. EB-5 counsel should review all documents and your overall infrastructure for compliance with the EB-5 policies.
Involvement of EB-5 investors depends on which investment avenue they choose. Regional center investments are passive, while direct investments are active investments that require the foreign national to maintain a managerial or executive type role.
The regulations for EB-5 investment state that the investor must be actively involved in management of the business. Passive investment, where just giving the money and collecting dividend or interest income, is not sufficient. However, the definition of active involvement could be being part of the day-to-day management to being on the board or directors of the company to limited partnership, which is much more tangential. If the EB-5 investment is for a direct investment where it is more like a partnership where you bring the expertise and the other the money, the involvement of the investor may be more extensive as the investor would want to make sure that his investment is protected. Identifying and establishing a role for the EB-5 investors would be a point of negotiation with potential investors and how you structure your business and prepare the business plan. Work carefully with your business lawyer on this as well as consulting an experienced EB-5 immigration lawyer to structure this well.
The investor must have the rights, powers and duties as typically provided under the Unified Limited Partnership Act or ULPA. These rights, powers and duties can also be structured into a limited liability company. Hence, these duties will generally be sufficient by having high level management or policy making activities
It depends on the EB-5 structure. Direct EB-5 investments would require a lot of involvement. Regional center or pooled direct deals do not have very stringent requirements for investor involvement.
You must develop and direct the business, but this does not mean you cannot hire managers to do some of the day-to-day work.
It depends on the EB-5 model. However, the most recent EB-5 policy memorandum states the investors have to be involved in management.
If you are investing in a regional center your involvement will be limited to your role as a limited partner. You play a largely passive role as an investor.
Not as much as with other immigrant or nonimmigrant investor classifications. Typical scenario for EB-5 investor involvement can be limited to presence on the board of directors. Every day direction and control is not a requirement.
As the EB-5 immigrant Investor, you can be as involved as engaged in the day-to-day operations of the business, or be involved more through policy formation of the company or business.
The regulations require an investor to be involved in the management of the enterprise. In a direct EB-5 project this translates into an executive and management role. In a pooled investment, such as certain regional center projects, the status of a limited partner will satisfy the management requirement. In an LLC or corporation a board position is envisaged.
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