I have private investors who would like to invest in my small IT business for their EB-5 applications. Under EB-5 regulations, do I need to prove that it is a “troubled business”? If so, what documents do I need to provide to prove this?
You do not have to show your business is "a troubled business." In actuality, you should try to meet EB-5 requirements in terms of having your investors put down the required amount depending on the location of your business, at least $900,000 or $1.8 million, and providing at least 10 jobs per investor, just to name a few. Advisably, consult an EB-5 attorney to put your plan together and address a host of related issues.
No, you do not need to document or qualify your business as a troubled business unless your business was established before Nov. 29, 1990. The definition of a "new commercial enterprise" (NCE) for EB-5 purposes is that the NCE be established after Nov. 29, 1990 when the EB-5 program was enacted.
A troubled business is just one option for an EB-5 project. There are other ways to structure it. Working with an EB-5 attorney will be the best way to prepare your business for EB-5 investment. Some EB-5 attorneys primarily handle investors, while others also work on projects.
A troubled business is an option only where the company can document its actual 20% loss for the prior 12 or 24 months. You have to show this is a new commercial enterprise that will create 10 new jobs as a result of investing the required amount. It is more complicated for existing businesses.
You must develop a business plan showing you will crate 10 new jobs for U.S. workers and the minimum investment must be $1.8 million unless you can get a determination that your business is located in a targeted economic area, then it is $900,000.
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