EB5 Investment Options
An EB-5 visa—also known as an investment visa—has become very popular among wealthy individuals and their family members who seek to get permanent residency and green cards or United States citizenship through a substantial investment in a commercial enterprise.
In 1990, the U.S. Citizenship and Immigration Service (USCIS) created the EB-5 program to promote economic growth within the U.S. with new job creation. The EB-5 immigrant visa has changed through the EB-5 Reform and Integrity Act into a program that specifically helps foreign investors and their family members to obtain permanent residency in the United States through the job-creating investment process.
EB-5 investors should conduct due diligence on the two different EB-5 investments: regional center investments and direct investments. Both visa investment options can be funded using wages, business profits, individual gifts, and other means. Proof of these funds, such as tax returns and business documents, will be required for each type of funding used.
Source: https://www.imidaily.com/intelligence/eb-5-special-how-the-2022-program…
Direct Investment
While most EB-5 investors choose to invest through regional centers, there is a smaller percentage that chooses to invest through direct investment. EB-5 investors who invest through a direct investment will be legally required to place their investment capital into a commercial enterprise that creates at minimum 10 new full-time direct jobs per investor. This investment can be made alone or with a group of investors. However, each investor is responsible for the creation of 10 full-time jobs.
These full-time jobs must be able to sustain at least 35 working hours per week, and the position must last for at least two full years. A commercial enterprise can be organized in several ways, such as a joint venture, sole proprietorship, limited liability company, or partnership. The minimum investment amount is $800,000 if the location of the new commercial enterprise or an existing company is in a targeted employment area (TEA); if it is not located in a TEA, the minimum investment amount jumps to $1,050,000.
Regional Centers
A large percentage of EB-5 investors seeking an EB-5 visa have a preference for the regional center program option for their capital investment. Investing in EB-5 projects that are sponsored by USCIS-approved EB-5 regional centers count all indirect, direct, and induced jobs that are created from the EB-5 investment project.
EB-5 investors prefer the method of job calculation that goes along with regional centers. This method often results in additional jobs being made available per investor and significantly lowers the immigration risk for all involved EB-5 investors. Similar to direct investment, $800,000 is the minimum qualifying investment if the location of the new commercial enterprise is in a TEA. If the project is not in a TEA, it is $1,050,000. Similar to the direct investment method, an equity investment towards a new commercial enterprise created through a regional center can be organized in several ways.
Regional Center versus Direct EB-5 Investment
For most EB-5 visa investors, deciding on the financial risk of investing through regional centers or a direct investment is a relatively easy decision.
Most often, direct investment is the preferred method by foreign investors to create and run a commercial enterprise of their own in the U.S. These EB-5 investors wish to have more control of their investments with the hopes of building a successful business. Among direct EB-5 investors, a common goal is to eventually expand the operations of their own business into the U.S. and increase profits.
Oftentimes, this means an investor plans to invest in a business-friendly urban area that could potentially qualify as a targeted employment area due to the rate of local unemployment. Unfortunately, most foreign investors are not looking at rural areas to start new commercial enterprises, even though a rural area would instantly qualify as a TEA. If an EB-5 investor chooses not to build their business in a TEA location, their investment will be $1,050,000 rather than $800,000. Typically, investors who prefer to operate independently and have more control of the investments find that direct EB-5 investments make more sense for them.
By far, the method of EB-5 equity investment into the regional center is the most popular because each EB-5 visa investor is allowed to take part in a new commercial enterprise with as little to no responsibilities as daily management. Regional center investments pool multiple EB-5 investors who together make an investment towards a new commercial enterprise or into real estate projects.
Since the capital in a regional center project oftentimes is a minimal portion of the capital of the total project, this approach of pooled investment usually results in potential security for the EB-5 visa investors, providing over the per investor requirement of 10 jobs. This potential security reduces an EB-5 investor’s stress. Whereas those who choose a direct investment, have a personal responsibility to meet the per-investor-required 10 jobs.
Differences in Investor Filing Processes for Regional Center versus Direct Investments
The visa application process for submitting immigration applications is different for EB-5 investors between a regional center investment and a direct investment.
An EB-5 investor who seeks to make a direct investment is able to submit their visa application on their own. Therefore, direct EB-5 visa investors are generally responsible for gathering all supporting documentation for any investment of commercial enterprises.
An EB-5 investor seeking permanent resident status through a regional center investment will have to work with the regional centers to correctly prepare and obtain the required documentation for the project in which the equity investment was selected.
EB-5 investors who work with regional centers are not required to prepare any documentation that is project-specific because all required project documentation has been assembled and completed by the regional center.