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What qualifies as new commercial enterprise/troubled business?

My understanding is that the EB-5 law requires investment of capital in a "new commercial enterprise" - defined as a business that was established AFTER Nov. 29, 1990. An EB-5 investor wants to put $1 million into an EXISTING business established AFTER Nov. 29, 1990 so that it can expand with respect to physical scale and in sales. The planned expansion is expected to create at least 12 new jobs. Is this acceptable even if the business was not a "troubled business" to begin with? What qualifies as new commercial enterprise/troubled business?

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    Answered on

    The immigrant investor can invest in an existing business, regardless of when that business was first created, provided that the existing business is restructured or reorganized such that a new commercial enterprise results. "Substantial change" in the net worth or number of employees results from the investment of capital would be necessary for it to qualify as a new commercial enterprise. "Substantial change" is defined as follows: 40 percent increase either in the net worth, or in the number of employees, so that the new net worth or a number of employees amounts to at least 140 percent of the pre-expansion net worth or number of employees.

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    Answered on

    Your description appears to meet EB-5 petition requirements in terms of funding and required number of jobs. However, be meticulous in the way this is planned and do the due diligence to ensure that the facts are correct and any related petition is approvable. Advisably, consult an EB-5 attorney with regards to this enterprise, particularly to determine how you want to classify the business. This is because there is a difference in how businesses are classified as either new commercial enterprises or troubled businesses.

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    Answered on

    If the business was formed before Nov. 29, 1990, it is not considered "new" unless there has been a substantial change, meaning a 40 percent increase in either the net worth or the number of employees. The investor still must make the minimum financial investment required.

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    Answered on

    If the business that has been in existence for at least two years, has incurred a net loss for accounting purposes during the 12 or 24 month period prior to the priority date the application is filed and the loss for such period is at least equal to 20 percent of the troubled business''s net worth prior to such loss, and the business employs at least 10 full-time legal U.S. workers and can be expected to maintain at least that employment over the next few years, then a person who invests $1 million in such a business or $500,000 if in a targeted employment area, then they should qualify for an EB-5 green card under the current troubled business rules. These rules, and the amounts will likely change very soon.

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