The EB-5 investment visa program allows someone who invests a minimum amount of money into a US commercial enterprise or regional center to obtain permanent residence (a “green card”) in the United States.

The investment must take one of two forms — (i) a direct investment into an enterprise and (ii) an indirect investment into an approved regional center. Each of these types of investments has its own requirements as well as its own advantages and drawbacks.

Direct Investment

Two types of direct investments are permissible:

Establishing a brand-new commercial enterprise: An investor can establish a brand-new enterprise, such as a corporation of a limited partnership. The enterprise itself must create at least 10 full-time jobs within “a reasonable time” (typically two years) after it is formed. These 10 employees must be formal W-2 employees of the new enterprise itself, not an affiliated entity.

The investor must also prove that he will be directly engaged in the management of the enterprise, not just a passive investor. The minimum investment is $1.8 million, unless the investment takes place in a TEA (“Targeted Employment Area” — a rural area or an area with high unemployment), in which case the minimum drops to only $900,000.

If the investor is investing between $900,000 and $1.8 million, he must prove that the capital will be invested in a TEA.

Investing in an existing commercial enterprise (established any time after November 29, 1990) and restructuring it into a “new commercial enterprise.” The enterprise will be accepted as “new” if there is at least a 40 percent increase in either the enterprise’s net worth or its number of employees.

If this is established, the 10 new full-time jobs can be jobs that are preserved rather than newly created — in other words, they can be old jobs that would otherwise have been lost.

Regional Center Investment

The US Citizenship and Immigration Services has approved a total of 783 regional centers throughout the United States to absorb EB-5 investments for the benefit of the local economy. Most of these centers are located in Targeted Employment Areas.

Most investors choose to invest indirectly into regional centers rather than investing directly in a new commercial enterprise. The same minimum investment amounts apply, and the regional center will disperse the investment capital to various enterprises.

Cutting Through Red Tape

The relaxed job-creation rules for regional center investments mean that the investor’s burden of proving that his investment will create 10 full-time jobs becomes much easier. A regional center investor does not have to prove that his investment will directly create 10 full-time jobs.

Instead, the 10-job requirement can be met by creating jobs indirectly in enterprises that are affiliated with the regional center. The regional center itself can help document this.

Unlike a direct investment, the investor does not have to prove that he has established a “new commercial enterprise” or its equivalent. Instead, he will act as a passive investor and will not make major decisions except through his voting rights as a shareholder.

Investments are relatively safe, but they typically offer a low return on investment. It is also easier to prove that your investment is located in a Targeted Employment Area, since the regional center has already established this with the USCS.

All in all, the paperwork is considerably simpler when you invest in a regional center rather than investing directly into a new commercial enterprise. Nevertheless, if you seek to invest in a more prosperous area with better economic prospects (not a TEA), your options will be more limited if you invest in a regional center.

Making Up Your Mind

As a general statement, investing in a new commercial enterprise is more suitable if your primary purpose in seeking EB-5 status is to earn money from your business, while investment in a regional center is more suitable if your primary purpose is to secure permanent residence in the United States for yourself and your family.

This is not always the case, however — speak with your immigration lawyer for a full treatment of this issue.

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