What should a business owner be responsible for when using EB-5 funds?

Please ensure that you discuss this matter in the presence of an experienced EB-5 immigration attorney. This person must also be a licensed broker-dealer or a migration agent oversees; otherwise, you may violate securities laws. A $500,000 investment must be used for requisite minimum job creation and it may be very difficult for the foreign EB-5 investor to achieve this goal with an existing business investment to qualify for a green card if it is not done correctly.

Be careful! Discuss an experienced EB-5 immigration lawyer.

The fees charged by EB-5 consultants vary because there is no standard fee in the industry. However, the financial fee arrangement suggested by the EB-5 consultant in question is highly unusual and, advisably, should be rejected. Consult an EB-5 attorney prior to entering any unusual fee arrangement of this type, because there are better options in the EB-5 market.

When the U.S. Congress first created the EB-5 visa, it was contemplated that investors would make a $1 million investment directly into an existing U.S. company. It was a few years later that the regional center program was created. Thus, accepting an investor directly into your business as a direct investment is an established practice. Regarding what you will be responsible for, you are responsible for assisting with the preparation of a business plan to be sent to the investor and USCIS. The business plan must demonstrate, to a more likely than not standard, that your business will create at least 10 full-time permanent jobs per investor during the ensuing two years. You have to review your governing agreement for your company to make sure you have issued or authority to issue a tranche of limited-voting securities with a stated preferred return. This governing agreement would be filed with the business plan to USCIS. Two years after the investor&#39s green card is approved, you are required to assist the investors with documentation that demonstrates the creation of the jobs. Your facts raise two issues. The first concerns qualification for a $500,000 investment rather than $1 million. The EB-5 program includes a $500,000 investment option, provided the investment is in a targeted employment area. There are two different qualifications for targeted employment areas investors can either choose to create jobs in a rural area, which can be anywhere outside of a city with a population of 20,000 or more or outside of a metropolitan statistical area, or they can invest in a business in an area with high unemployment (at least 150 percent the national average). The second issue concerns a potential broker-dealer issue arising from compensating the third party with a $50,000 service fee for introducing the investor. Except in very limited circumstances (e.g., if the agent and investor are not in the U.S.), paying a commission or success fee to a finder who is not registered as a broker-dealer violates federal and state securities laws. A company that hires a finder, as well as the company&#39s directors, officers and owners, can be liable to investors and sanctioned by regulators for such violations. Best to discuss with a securities attorney.

Who knows whether legitimate.

Should you make an arrangement with a foreign national to invest $500,000 in your business, you can do so on such terms as you deem commercially feasible. Based upon the $500,000 investment, the EB-5 investor may file an EB-5 investor petition on Form I-526, provided he can establish that your business is located in a targeted employment area (TEA) and, as a result of the investment, you will create an additional 10 jobs for U.S. workers for a period of two years. Whether or not you pay $50,000 for that service and annual interest on the investment would depend upon the terms of the deal. Remember, the investment must be a true investment at-risk and not a straight-out loan. Whether or not the $50,000 is a reasonable service fee would be for you to determine. The $50,000 would have to be an additional cost you would bear outside of the $500,000 invested in the business.

It raises an eyebrow to be sure. It sounds like he wants you to pay him to match you up with an EB-5 investor. Usually, the U.S. business is responsible for spending the money in a manner to create the required jobs and generally remain in business. I would look into this offer very carefully.

The fees to the project are usually paid by the EB-5 investor (in a regional center investment structure). If this is a direct investment, you can negotiate the "referral fee" with the EB-5 consultant. You should do thorough due diligence regarding the consultant and the legitimacy and his ability to deliver the investors.

The $500,000 must be invested in a way that creates 10 new jobs and that is very difficult. Investing in existing business is very difficult unless you in a "troubled business." It is not just the investment but the job creation that is critical. It is possible this person does not know the details of how this program works. It is very specific and carefully regulated, so do more research before you dive in.

Be careful! Does your business qualify as a TEA? If not, a $500,000 investment by the EB-5 investor will not be enough. Do you realize that you need to generate 10 new jobs or prove that the EB-5 investment saved at least 10 jobs that were going to be eliminated? Also, the investment cannot be a fixed-income investment with defined coupon. It could either be an equity investment in your company, which I suppose you don&#39t want, or preferred stock. Preferred stock ranks higher than common stock in the priority of payments otherwise known as the waterfall, but the investor has no voting rights. Preferred shares could have a designated coupon but, unlike fixed-income debt instruments, preferred share coupons are not obligated to be paid by the issuer. As for the service fee, you are asked to pay make sure that the EB-5 consultant is a regulated broker-dealer and has proper security brokerage licenses.

It&#39s not this simple. You are taking on a risk and exposing yourself and business to potential liability. The service fee also sounds shady. Is this "consultant" a licensed broker-dealer? If not, he is breaking securities laws by taking the finders fee, which he is calling a "service" fee.

No, this does not sound legitimate. The service fee is a transactional-based compensation and unless the person is FINRA licensed, this would be prohibited. This is only one of many problems I see with this proposal.

As a business accepting any EB-5 investment, you must utilize that money to create 10-plus full-time, permanent jobs. Without it, the EB-5 investor cannot get the immigration benefits. Service fee of $50,000, I assume is the consultant finders fee, which may not be legal if he is not a licensed investment broker or advisor and he gets paid in U.S. from you. If he is a migration agent only operating overseas, there is an exemption from the SEC regulation, but it is not clear from your short description who this consultant is and what he will do and where. Accepting any investment puts you, the recipient, into an obligation to manage that investment in the best of your abilities so that the investor and you will both achieve the business plan goal. With EB-5 investment, you have to be mindful of the investor&#39s immigration goal as well as his financial goal.

You mean besides possible securities violations for paying commissions to an unregistered broker? A lot of other headaches as well, including ongoing compliance and job reporting duties. EB-5 can be beneficial if done correctly. Doesn&#39t sound like it here.