Should You Invest in a Troubled Business to Get an EB-5 Visa? - Plan Fridays

Posted in Immigration by Brent Butler

The author’s views are entirely his or her own and do not represent legal advice or council.

The most well-known routes to getting an EB-5 immigration visa (and thus permanent residence in the U.S.) are investing in a new company or regional center, but there’s actually a third way: investing in a troubled business. But what is that exactly, and is it a good idea? Brent explains in this week’s Plan Friday.

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Video Transcript

 

To explain what a troubled business is, with regards to an EB-5 immigration visa, and whether you should invest in one, I need to start with a little background.

Traditionally, investors seeking an EB-5 visa have to invest $500,000 to $1 million by either directly investing in a new company or putting those funds toward a regional center project. But there’s a third option: invest in a “troubled business.” Rather than close their doors, some struggling U.S. companies take on foreign investment in order to keep operating and turn around their financial losses. This can appeal to investors if the company already has name recognition, a customer base, marketing materials, and so forth. And the appeal for the struggling company is obvious: some much-needed funds that can just maybe help turn business around.

But the foreign investor has to be careful when choosing to invest in a troubled business rather than a regional center project or a new company. These cases are fairly uncommon and come under higher scrutiny from USCIS, which could deny your visa if the business doesn’t qualify as “troubled.” According to Klasko Immigration Law Partners, it’s rare to get your EB-5 visa application approved when you’re buying a troubled business, so proceed with caution. The firm says, “Both anecdotally and based on reported cases, very few purchases of existing businesses have resulted in approved EB-5 petitions.” That’s because you have to meet USCIS’s very specific requirements for a “troubled business,” as well as have detailed tax returns and financial records of the company.

Let’s take a look at exactly what USCIS requires. To qualify as a “troubled” business, USCIS says a company must be at least two years old, have incurred a net loss for 12 or 24 months before the priority date on your form I-526, and have lost a minimum of 20% of the company’s net worth prior to the loss.

If the troubled business has at least 10 qualifying employees, the applicant must preserve these jobs for at least two years. In other words, you can’t lower the employee count below pre-investment levels. If there are fewer than 10 qualifying full-time positions, you have to create additional jobs so that there are 10 total positions saved or created.

As you might expect, there are rules about the jobs you create. They can’t be held by an immediate family member of yours, nor someone with a nonimmigrant visa.

Whether you create or preserve 10 jobs, or a combination of both, they have to be established within two years of when your EB-5 visa application gets approved. USCIS will verify this by looking at your employment documents and payroll records. If your business can’t sustain 10 or more full-time jobs by the end of that conditional period, you’ll lose your provisional green card, so make sure the jobs are sustainable, whether they’re existing or new!

I don’t want to discourage you from investing in a troubled business, but you need to have all the facts. Immigration attorney Julia Roussinova says, “Troubled business applications do get approved, [but] these applications require accounting and financial expertise.” Make sure you work with an experienced immigration attorney and accountant to get all your paperwork in order. In other words, if we were on “Who Wants to Be a Millionaire,” you would use your “phone a friend” lifeline.

Also ask yourself why you want to invest in a struggling company that could potentially go under within two years, jeopardizing your citizenship. Of course, a new company could fail too, but a troubled business may have an unsustainable business model or an outdated approach to a changing industry. Do your due diligence, know your risk tolerance, and be wary of anything that sounds too good to be true.

Disclaimer: The information in this blog post is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your situation. Consult with legal and financial experts before making financial investments.

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Brent Butler is Masterplans’ founder and CEO.

Tagged: PlanFriday, Immigration
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