Investor Webinar

Immigration Options for Foreign Investors

Eric Riess / Tiffany Baldwin

Visas

• Nonimmigrant (temporary)– E-2: Treaty Investors

• Permanent Residence (aka Greencard) visa– Employment-based Preference

E-2 Eligibility Requirements

• The investor is a national of a treaty country;

• The purpose is to develop and direct the operations of an enterprise, such as a franchise, in which the individual has substantially invested; and

• The investor must have more than 50% percent ownership of the investment.

Ownership & Nationality

• Ownership may be as:– an individual proprietor,– majority partner, or – majority corporate shareholder.

• Investor must possess the nationality of the treaty country (60+ nations with treaties)– Nationality of a business is determined by the nationality of the

individual owners of that business.

• Investor must have control of the US business by owning at least 50 percent of the enterprise.

What is a “substantial” investment?

• “Substantial investment”: – Sufficient funds to ensure a financial

commitment to the successful operation.– No minimum dollar amount to qualify.

“Proportionality Test”

• Compares the total amount invested in the enterprise with the cost of establishing a viable enterprise

• Inverted sliding scale –– Smaller business = higher percentage of investment– Large business = lower percentage of qualifying

investment.

General Guidelines

In general, a franchisee will have a substantial investment if:• Cost = $100K - $500K and investment is at least 75%• Cost = $500K - $1M and investment is at least 60%• Cost = $1M - $3M and investment is at least 50%

Source of Investment Funds

The investor must have • Possession and control of the capital and funds invested.• Acquired the funds from lawful sources.• Any loans used as the E-2 investment to be secured by

the investor’s personal assets. • The funds and assets to be invested must be committed

to the investment, and the commitment must be real and irrevocable.

Viable Business

• Enterprise must have started operating or be close to the start of actual business operations,

• Mere intent to invest or possession of uncommitted funds in a bank account does not satisfy the E-2 visa requirements.

Viable Business

• Enterprise must produce some service or commodity.

• Enterprise cannot be a paper organization or an idle speculative investment held for potential appreciation in value

• Must be a commercial, for-profit enterprise.

Nonmarginal Business

• No minimum business size specified

• Cannot be solely for the purpose of earning a living.

• Even if investment is substantial, no E-2 if the investment will return only enough income to provide a living for the investor and family.

Nonmarginal Business

• If the income derived from the enterprise exceeds what is necessary to support the investor and family, then the business is sufficiently large.

• If it does not, then look at the economic impact of the business. – significant economic contribution such as employing

US workers. – projected profit should be realized within five years

from the start of business operations.

Employees

Certain employees may also obtain E-2s if:• Principal E-2 investor personally operates the enterprise,

or • Employee and principal investor share the same

nationality.• Employee coming to the U.S. for work in an executive or

managerial capacity or as an essential skilled worker.

Spouse & Children

• E-2s available to E-2 investor’s spouse and children, regardless of nationality

• Children must be unmarried and under 21• Spouses may apply for an employment authorization

document– Open employment: work anywhere– Start his or her own business – Full-time or part-time.

• Spouse and children may attend school under the dependent E-2.

EB-5 Permanent Residence

• Does not require the investor to manage the day-to-day affairs of a business.

• Can invest in an existing business or a new business.

• More than one person may invest in the same business.

• Investor may be a minority owner of the business.

EB-5 Permanent Residence

Investors eligible by : • Creating a business; • Investing $1,000,000 ($500,000 in certain

targeted areas); and• Create at least 10 full-time jobs for U.S. workers.

Business Creation

Investor must establish a new commercial enterprise by: • Creating an original business; • Restructure or reorganize an existing business thus

creating a new commercial enterprise;• Expanding an existing business by 140%; or• Reviving a “troubled business” that has lost 20% of its

net worth

Investment

Investment in the new commercial enterprise must be:

– at least $1,000,000, or – least $500,000 where the investment is being made in

a "targeted employment area,“:• An area with an unemployment of at least 150% of

the national average rate or • A rural area as designated by OMB.

Investment

Investment by EB-5 application must be:• At risk in the commercial enterprise,• Fully committed, and• Immediately available.

Investment defined as “capital”: cash and cash equivalents, equipment, inventory, and other tangible property.

Source of Funds

• Loans:– Must be secured by assets owned by the investor;– Investor must be personally and primarily liable, and– Assets of the new commercial enterprise cannot be

used to secure any of the indebtedness.

Source of Funds

• Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) not permitted– Must document the "path of funds" from source to

investment – Must document a "pattern of income” that could

account for attaining the capital

Job Creation

• New commercial enterprise will benefit the United States economy by: – Employing 10 or more U.S. workers full-time; or – With regard to “troubled businesses”, maintain the

number of existing employees at no less than the pre-investment level for a period of at least two years.

“Engaging” in the Enterprise

• Investor must “engage” in the new commercial enterprise which requires:– More than a purely passive role– Involvement in the management, either by:

• day-to-day managerial control or• policy formulation.

• Corporate officer or board member = engaging

Multiple Investors

• Two or more individuals may join to make a single new commercial enterprise to be used for EB-5, provided that:– Each petitioning investor has invested/is investing the required

amount; – The creation of at least 10 qualifying full-time jobs may be

attributable to each investor;– The source(s) of all capital invested is (are) identified; and – All invested capital has been derived by lawful means.

Multiple Investors

• A multi-owner new commercial enterprise may also be used for EB-5 even when some owners of the enterprise are not seeking classification.

Conditional Grant of LPR

• EB-5 investors receive a conditional “greencard” valid for two years.

• At the end of the 2-year period, must file to remove the conditions by showing that:– their money was "at risk" during the two-year period,– The requisite jobs have been created.

QUESTIONS?

Eric:

[email protected]

(314) 345-4723

Tiffany:

[email protected]

(314) 516-2617

Blog:immigrationchronicle.wordpress.com

Twitter: @tlbaldwinlaw