E-2 TREATY INVESTOR:
If a person is a citizen and resident of a country which has an E-2 investor treaty in place with the U.S., he or she may be able to invest in a new or existing business and obtain E-2 status for the investor, spouse and unmarried children under the age of 21. Please note that both citizenship and residence is required. If Pakistan has an E-2treaty with the U.S. but the investor lives in Dubai the E-2 will not be available since the investor must both be a citizen and resident of Pakistan.
Normally, the E-2 investment will be in the range of $200,000 to $300,000 and the business must have at a minimum two or three employees. There are no strict requirements for either the investment amount or the number of employees, but both of these issues will be dictated by the type of business. Furthermore, the investment amount must be traced to its source so that the U.S. government is satisfied the money is not being “laundered” or obtained illegally. The investor must also be able to show that he or she has a source of income apart from the U.S. business to support the investor and his family. In other words, the investor and the family cannot live in the United States solely on the profits from the U.S. business.
The investor must own at least 51% of the U.S. company or as much as 100%. There are some cases where a 50% ownership is permitted but it is better to start with the 51% ownership. Therefore, if the fair market value of an existing business is $500,000, the investor must place $251,000 in cash in the purchase price. If the E-2 investor wishes to own the entire business, then $500,000 would be required. Please note that there are some financing arrangements that are permitted but they are extremely limited. Gifts from parents or other persons will only be allowed if a formal gift transfer is completed and is valid under the law in which the transfer takes place. This may have detrimental tax consequences as well.
If the investor wishes to start a new business in the U.S., the starting point will be a very detailed, professionally created business plan. In addition, substantial steps toward creating the business must also be accomplished before the E-2 application will be filed. Finally, in almost every case it is better to file for the E-2 visa at the U.S. Consulate in the investor’s country rather than changing status in the U.S. The reason for this is simply that if a change of status is obtained first, and the investor subsequently goes home for a visit and therefore needs an E-2 visa from the U.S. Consulate, the change of status is often used by the U.S. Consulate to deny the visa under the very vague “preconceived intent” rule which can be applied to the case. Furthermore, if a visa is obtained from the U.S. Consulate initially, the investor can extend his or her status for two years every time there is an entry into the U.S. with that visa. Therefore, no extensions need to be filed with the Immigration Service. And, finally, if the consulate has initially approved the E-2 visa from the beginning of the case, it is much more likely that subsequent E-2 visas will be issued. E-2 status does not lead to permanent residence but it is available as long as the investor owns the initial business or a qualifying subsequent business. In some ways, the perpetual nature of the E-2 visa and status gives it many of the qualities of permanent residence. However, note that the children of the investor will “age out” if they turn 21 years of age or get married.
L-1A INTRACOMPANY TRANSFERS FOR SMALL COMPANIES
The L-1A Manager and Executive visacategory can be used for small company investors. The law requires that there are two businesses, one outside the U.S. and one inside the U.S., which have “common control.” This generally means that the same person or persons owns the majority of both the foreign company and the U.S. company. In fact, the foreign company itself can own a majority of the U.S. company.
Once the common ownership is established, the “investors” must establish that they have invested around $200,000 to $300,000 and have either created or maintained two or three jobs, at least initially. During the first year of L-1 status, referred to as the “start-up” year, the U.S. company is given substantial leeway in terms of the investment and number of employees. However, since an L-1A extension petition must be filed after the first year, the U.S. company must show that it has substantially increased the amount of investment and the number of employees. If the business in the U.S. is a new business, a professionally created business plan would have been created for the first L-1A petition and will need to be followed for the L-1A petition extension. In most situations, the Immigration Service and the U.S. Consulates will not approve L-1 petitions or visas for less than five employees and generally demand 8-10 employees for approval. The L-1A manager or executive status is available for a total of seven years in the U.S. After the seven years, if permanent residence has not been obtained or the L-1A manager or executive has not changed status to that of an E-2, he or she will be forced to leave the United States for at least one year.
In addition to the requirements above, the L-1A manager or executive must prove that he or she has worked for the foreign company for at least one year prior to filing the initial L-1A petition. This “employment” includes simply owning the foreign business.
The L-1A manager or executive category does lead to permanent residence through the EB-1 manager or executive category. However, the Immigration Service will not approve the EB-1 petition unless the U.S. company has a substantial number of employees which means 15 to 20 at a minimum. This is an issue which is continually fought with the Immigration Service and it is becoming increasingly clear that it will not consider EB-1 permanent residence petitions unless the U.S. company is in the15 to 20 employee range with two or three managers. Therefore, if the ultimate goal of the L1-A process is to obtain permanent residence, the “investor” must be willing to expand the business over the seven years of L1-A status until 15 to 20 employees are employed and the permanent residence process can be initiated.
EB-5 REGIONAL CENTER INVESTOR:
There are essentially two types of EB-5 investors which are the “individual investor” and the regional center investor. For historical reasons, the “individual investor” is not utilized at this time and it is unlikely the Immigration Service will change its perception of that category. Therefore, the only EB-5 option we have is to invest in a regional center.
A regional center is a business created by others which specializes in a particular type of business or activity. This can include anything which creates jobs either directly or indirectly and also creates a profit. There are dozens and dozens of regional centers which have been created throughout the United States. All of them can be “googled” to find out what they do, how they do it, who the principals are, what kind of return on investment they have as well as the number of people who have obtained permanent residence through that regional center. Therefore, the best thing to do is to research the regional center that the investor will be most interested in. Please note that the investor has no involvement with the business whatsoever and the investment amount is not a loan. The regional center has no obligation to return the money and if there are funds given to the investor they will only be as a result of the company making a profit.
If the EB-5 investor invests in a regional center, he or she then has a right to apply for permanent residence based on that investment. If the investment is approved, the investor receives permanent residence on a conditional basis for two years, including a spouse and any children under the age of 21 who are not married. Two years after the conditional permanent residence is granted, the investor and his or her family will again petition the Immigration Service, this time for the removal of conditions. Assuming that the regional center is still “in business”, even if it is not making a profit, the conditions will be removed and “permanent” permanent residence will be granted.
As with all of the investment categories under U.S. immigration law, Tidwell, Swaim prides itself on handling the complexities, legal requirements and business decisions which are required for a successful case. We have partnerships with law firms and data collection companies to assist us in either establishing a new regional center or assisting investors who wish to apply for permanent residence through an existing regional center. Finally, although the EB-5 regional center investment can be either $1,000,000 or $500,000, the most successful investments, from a financial and immigration standpoint, are the $1,000,000 investments. There are a limited number of $500,000 EB-5 regional centers which have been successful but they must be investigated very carefully to ensure that they will remain in business long enough to remove the conditions from the permanent residence.