An Old Investment Immigration Strategy Becomes New Again

In recent months we have seen the EB-5 Regional Center quota for Chinese nationals slow down significantly and it will soon be unavailable. Since there are so few EB-5 immigrant visas available each year, it would not be surprising if other countries have the same problem in the future. However, there are almost always other immigration options for any situation and the investment area is no different. Prior to the creation of the EB-5 Regional Centers by Congress in 2003, most investors obtained permanent residence in the U.S., including Chinese nationals, through a process which begins with an L-1 non-immigrant visa and ultimately ends with permanent residence (the ”green card”). In order to see the difference in the two investment strategies, I have provided a brief summary below. Please note that the critical difference between the two investment strategies is the fact that the investor must own a business outside the U.S.

For the EB-5 Regional Center immigrant visas, the investor would simply invest either $500,000 or, more commonly, $1,000,000 in the regional center.  The investor would have no involvement in the operation of the business and no control over the investment. However, the regional center is pre-approved by the Immigration Service for the grant of conditional permanent residence for two years and ultimately permanent residence after the two year conditional period.

The more traditional investment strategy requires much more involvement from the investor but also much less in the amount of investment. In fact most of these U.S. companies start with investments around $200,000 to $300,000.

The case begins with the creation of a U.S. corporation or partnership in which the foreign investor must control at least 50% of the U.S. company. In addition, the foreign investor must control at least 50% of a foreign company. There are many different variations on the issue of “control” which can include different individuals and different entities but basically the idea is that both the foreign company and the U.S. company have “common control”.

The investor is then “transferred” from the foreign company into the United States to work for the U.S. company. This type of manager or executive L-1 visa can be valid up to seven years, and will require at least two extensions to get to the maximum of seven years.

During this seven year period, the investor is also allowed to apply for permanent residence based on the same requirements which exist for the L—1 non-immigrant visa. The major difference between the L-1 and the permanent residence is the green card case requires a substantially higher number of employees and managers.

In the regional center option, the investor is not concerned with the number of employees which the U.S. company may have because that issue has already been addressed with the Immigration Service and approved. However, for the older L-1 to permanent residence process, the number of employees is extremely important. The L-1 initially does not require any employees for the first year but after that there must be enough U.S. employees to have at least one U.S. manager if not more. More importantly, in order to apply for permanent residence, the U.S. company must have somewhere in the neighborhood of 15 employees and two or three managers. Also note that the U.S. company can consist of several different business entities such as three or four restaurants, and all of those employees are counted in the aggregate as employees of the L-1 company. There also is a relationship between the number of employees in the foreign company and the number of employees required in the U.S. company. For example, if the foreign company has 400 or 500 employees, the U.S. company normally will require fewer employees to qualify. By the same token, if the foreign company only has four or five employees, the U.S. company will be required to have 20 or 30 employees to safely pass the requirements for permanent residence.

Although the EB-5 Regional Center remains a very viable and useful tool to obtain permanent residence for certain investors, it is important to remember that there are other investment strategies available to gain permanent residence in the U.S. without investing a million dollars and without the concern of running out of immigrant visas through the EB-5 quota.

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