How can investment funds be utilized for an EB-5 project?
I have $1,000.000.00 to invest through the EB-5 program. I seek to partner with an established U.S. business person
who has a successful track record with a U.S. franchise such as a dunkin donuts or a home health services provider. How must I account for the $1,000,000.00 or allocate the investment to qualify for EB-5? For example, can the business establish a reserve fund with my investment to pay the salaries of employees, can monies be allocated to my U.S. partner as a fee for his services and participation? Thank you
Investing in a franchise is not an issue for EB-5 purposes. The funds can be used to pay salaries and business expenses. However, the funds cannot be placed in a reserve fund. As per EB-5 requirements, the capital (funds) must be at risk.
This is a difficult question and one would have to review the structure to determine the best way. Generally you cannot use the funds as reserve, it has to be invested and at risk. You can certainly invest in a franchise.
In a direct investment you will need to show that your funds were invested in a new commercial enterprise, and that the entity created 10 direct full time and permanent jobs. Each investment is fact specific to the type of business and should be discussed in detail with an experienced EB-5 immigration attorney prior to the investment being made to ensure the proper nexus between investment and job creation exists as well as all other regulatory requirements are satisfied.
In order to qualify for EB-5, funds must be at risk and committed to the enterprise for job-creation purposes. This does not mean that every penny has to go to employee salaries, but there must be nexus between the expenditure of the funds and job creation. In other words, you should not create the jobs first, then invest the money. While it is the new commercial enterprise that must create the employment, the USCIS is looking for a showing of how the funds will be spent and when exactly will the expenditure of these funds result in job creation. The closer the nexus you can show, the better off you will be. Payment to a U.S. partner for fees may not have a close enough nexus to job creation to qualify. Of course, you should retain an experienced EB-5 immigration attorney.
Philip H Teplen
The funds should be invested into a qualifying new entity for business purposes as per a business plan. I suggest you contact us or any experienced attorney to assist you in a proper structure as well as other qualifying factors.
The investment fund should be used for corporate purposes, such as the payroll and operating the business, not as service fee for your partner.