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How can I use money generated from an E-2 business to apply for EB-5?

I invested $400,000 in an E-2 business three years ago. The business has successfully generated a profit of $100,000 and created eight jobs. If I can create two more jobs, can I invest this $100,000 back into the E-2 business and convert it to an EB-5-qualified entity? Would there be any issue considering the actual investment from my own pocket is only the original $400,000?

Answers

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    Julia Roussinova

    Immigration Attorney
    Answered on

    It is possible to qualify an E-2 investment for EB-5. Please keep in mind each program has a different set of requirements. First, you need to determine if the enterprise is principally doing business in the targeted employment area, so that the $500,000 investment is sufficient. Otherwise, the investment must be $1 million under current law. Your investment must also create at least 10 full-time positions (at least 35 hours a week). You cannot use retained earnings unless you pay them out to yourself, such as dividends or distribution, pay income tax on it and then use it as part of EB-5 funds. Careful planning is necessary to convert E-2 to EB-5. Consult an experienced EB-5 immigration attorney for further details.

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    Dale Schwartz

    Immigration Attorney
    Answered on

    What you suggest can be successful if it is done carefully to comply with USCIS regulations. I have successfully done a number of similarly structured deals. We can discuss if you call me at the number below.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    Yes, you can. But it must be well-planned for accounting purposes. For example, the profit generated of $100,000 cannot be simply added to make it appear that $500,000 has been invested. In fact, the $100,000 profit is just "net earnings" from the investment of $400,000. Unless you first pay it to yourself and also deduct/pay taxes due for the earnings, the $100,000 earnings remain in the business and they cannot be simply added to the $400,000 to create the assumption that you have now invested $500,000 in the business. Advisably, to address the intricacies involved in this situation, work with your attorney and accountant for proper accounting analysis of your profit and the entire investment plan for EB-5.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    Using E-2 investment funds to qualify or partially qualify toward EB-5 is allowed under the current immigration laws. In fact, it makes sense to do so. In order to make your scenario work, however, you would have withdraw the $100,000 profit (retained earnings does not qualify for EB-5 purposes), pay taxes on the income, and reinvest the $100,000 into the business to create the additional required jobs. Keep in mind that your business must be principally doing business in a targeted employment area (TEA), it must create at least 10 full-time positions within two years (you can get credit for the eight jobs already created, assuming they are full-time positions), and meet the other EB-5 requirements. An experienced EB-5 practitioner can help you with the revised business plan and making sure that your E-2 can successfully be converted into an EB-5 case.

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    Lynne Feldman

    Immigration Attorney
    Answered on

    No, that can work.

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    Blake Harrison

    Immigration Attorney
    Answered on

    The full $500,000 investment needs to be from your personal assets. The $100,000 would need to be distributed from the company to you and then you can re-invest it into the business to qualify under the EB-5 program.

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    Vaughan de Kirby

    Immigration Attorney
    Answered on

    This may indeed be possible. However, you should consult with your investment immigration attorney before taking any action.

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    Belma Chinchoy

    Immigration Attorney
    Answered on

    You have to pay yourself the profits from the business and then invest it into the company.

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    Marko Issever

    EB-5 Broker Dealer
    Answered on

    There are a couple of things you need to be careful about. Perhaps the most important one is source of funds. The EB-5 source of funds burden of proof is way more onerous than that of the E-2 visa. If originally when you invested the $400,000 in your E-2 business, the source of funds work was not as extensive, you might have issues. Please work with your immigration attorney, and first and foremost make sure that the $400,000 you used for the E-2 business could pass the EB-5 source of funds test. If that is the case, you can certainly use the profits you made in the business to fund the remaining amount of required investment. Whether the remaining required amount of investment is $ 100,000 to round the total investment to $500,000 or $600,000 to round the total investment to $ 1 million depends on TEA qualification status of your business.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    Yes, you cannot use retained earnings. However, if you take the profits out, pay taxes and subsequently re-invest, there is some chance it may go through. If there is another independent source of income for you to use to invest, that is still best. Even if you secure a mortgage on your own property, that can work.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    For EB-5 purposes, the EB-5 investor must personally invest the minimum capital. If the E-2 business is 100 percent owned by you, then the profits from the business may be used as earned/derived income for you to invest for EB-5 purposes. You need to clearly show the legal source of funds for the $400,000 as well.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    Retained earnings cannot be a new source of EB-5 funds; needs to be personal funds. Using the previous $400,000 toward EB-5, as long as that was also personal funds, it would be OK. It comes down to the details, so I would be interested in learning more about it!

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    Charles Foster

    Immigration Attorney
    Answered on

    Yes, one may make a direct EB-5 investment based upon an E-2 investment to date of $400,000, provided you can show a lawful source of funds even if it were initially invested into an E-2 non-immigrant visa. Furthermore, if in the interim you have earned $100,000 and you invest it additionally so that you now have a total investment of $500,000, and you can establish that your enterprise is located in a targeted employment rea (TEA), and that you are in the process of creating 10 jobs, including the eight that have been created, you should be able to have your EB-5 investor petition on Form I-526 approved.

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