Issues that an investor should consider when deciding to invest through direct investment or through a Regional Center

Regional Centers are institutions that allow immigrant-investors to invest through a fund that is used to sponsor an EB-5 project. In contrast, a direct investment requires the immigrant-investor to directly invest in his or her own business In both cases, it is the immigrant-investor’s responsibility to ensure that investment is put towards a sound business or project.

Deciding between those two types of EB-5 investments can be confusing. The following questions and answers provide the immigrant-investor with initial guidance:

Does the immigrant-investor want to be involved in the business ?

If the immigrant-investor wants direct control of the US business then he or she should choose the direct investment option. In a direct investment, the immigrant- investor must demonstrate active involvement in the business. This can be shown by managing the business on a daily basis, or by retaining a position that allows the immigrant-investor to make policy decisions about the business. In a direct investment, the foreign applicant must typically be main investor in the project. Therefore, this kind of investment entails higher risks for the immigrant-investor in terms of legal liability and payment of U.S. taxes. For example, direct investment in partnership (an unincorporated business) would make the immigrant- investor subject to the business’ liability.

In the situation where the immigrant-investor does not want to run his or her own business, a Regional Center would be more appropriate. In the Regional Center model, the investment goes indirectly through a fund that finances an EB-5 project. Generally, the EB-5 project groups multiple immigrant investors for the same project. This option has the added advantage of granting the immigrant-investor the flexibility of living and working anywhere in the U.S. without running the business he or she invested in.

How much must the immigrant-investor invest in the business?

The same amount of investment is required for an EB-5 regardless of whether the investment is made directly or through a Regional Center.

A foreign applicant must invest $500,000 or more if the investment is within a Targeted Employment Area (TEA) or rural area. If it is outside a TEA or not in a rural area, an investment of $1,000,000 or more is required. A TEA is a high-unemployed area.

The investor should consider the location carefully to determine the amount of the investment. The quality of the investment is likely to decline even if investing a low amount is always more attractive.

An investor willing to make an indirect investment should try to identify a Regional Center that offers TEA projects. There are several advantages to this. First, U.S. Citizenship and Immigration Services (USCIS) has already approved the Regional Center to create business in a particular region. Additionally, Regional Centers provide immigrant-investors with projects that require the lower investment amount, and provide them with financial updates.

What kind of business qualifies for EB-5?

Any type of legal business or industry may qualify under the EB-5 regulations. Examples include a corporation, business trust, limited liability company, general or limited partnership, holding company, joint venture, or other "profit" public or private entity. However, it is not possible to invest in a non-profit organization.

The investor must carefully select a business that satisfies the EB-5 job creation requirement of creating 10 hired positions. This requirement is easily satisfied by the Regional Center because it usually undergoes very large projects. The Regional Center is responsible for showing that 10 full-time jobs were created by the investment project for each $500,000 invested. Whereas EB-5 direct investments must create 10 direct hired positions in the business, which must be supported by documentation such as W-2s and I-9 reports, the Regional Center may use indirect and direct job creation to show that its business has created the necessary number of jobs.

Is the immigration process timing affected by type of investment?

Yes, the processing time is affected by the kind of investment sought. In a direct investment, the processing time is 2 to 6 months. On the other hand, Regional Center projects take longer to process because the projects are larger and more complicated.

Where an investment is made through a Regional Center, the first immigrant-investor of the project should expect a processing time between 12 to 16 months for the adjudication of the temporary 2 year Legal Permanent Residence Card (Green Card). The process for the remaining investors is usually faster because the project has already been approved.