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Investor Nationality
The E-2 rules require the U.S. business to be majority owned
by nationals of the treaty country of the visa applicant. For example, a majority French-owned U.S. software company takes
in U.S. venture capital (“VC”) resulting in 60 percent U.S.
ownership. The E-2 visa for a French national working there
becomes void as the enterprise is no longer majority French
owned. Thus, to avoid such an event, advance planning for
another non-immigrant visa (such as H-1B) or permanent resident status is needed. One option, to avoid the E-2 enterprise
losing its treaty nationality when taking in the American VC, is
to use a convertible note, which is debt and does not change the
company’s ownership until the note converts to equity.
Management
E-2 visa holders must work at the enterprise for which the
visa is issued. The visa applicant may be an owner, executive,
manager or person with essential skills about the company’s
processes, technology, products and/or business methods.
E-2 essential knowledge employees need not have worked for
the company’s overseas operations, but experience with the
company’s products and/or services helps prove the employee’s
essentiality. While the FAM says such employees, when applying for an E-2 visa, should demonstrate they will be replaced
by U.S. workers, this is not often required by American consuls
in Europe. However, a company primarily staffed by E-2 visa
holders may face this issue.
An EB-5 green card is available to investors of all nationalities. The foreign investor can own a small percentage of a U.S.owned company. While China-born are accorded EB-5 visas,
they face a longer wait for a visa due to quota “retrogression.”
This happened because there are more Chinese EB-5 investors
than there are visas available.7
EB-5 investors can work anywhere, attend school or enjoy
retirement, so long as while they are a conditional resident, they
are at least a limited partner or director of the new commercial
enterprise in which they invest.
Processing Times
While times vary, E-2 visas are usually issued by American
consuls in about six weeks. Currently Stockholm is processing
in 60 days; Vancouver in about two weeks; and London in
about four weeks.
EB-5 green cards on average take about 20 months to reach
conditional resident approval (about 14 months for the I-526 petition and four-six months for the immigrant visa). The current
wait for China-born EB-5 investors is two to three years or more
depending on when petitions were filed. Once a RC’s first I-526
is approved, often recently filed I-526s are also granted, which
may significantly reduce immigration time, assuming retrogression for a Chinese immigrant does not delay the visa issuance.
Job Creation
American Consuls expect E-2 businesses to create U.S.
employment consistent with the needs of the business.8 An
E-2 business plan needs to show some employee growth, but
there is neither a mandated amount nor a time constraint. E-2
enterprises may also sponsor managers and essential skilled
employees with the same nationality as the company’s owners
for E-2s and other non-immigrant visas that are not nationality
specific, such as the H-1B visa.
On the other hand, EB-5 investors must create 10 full-time,
permanent jobs not including the investor and temporary visa
holders.9 For a “direct” EB-5 investment, the jobs must be created
at the business in which the capital is invested (which issues the
employee W-2s). EB-5 regional center investors are permitted to
create direct or indirect jobs as measured by an economic model
(i.e., RIMS II or IMPLAN) supported by proof of the capital
spent on hard costs to build the project and its stabilized revenue.
At the latest, USCIS policy requires the jobs to be created within
one year after filing the petition to remove conditional resident
status (Form I-829). USCIS also requires there to be a nexus
between the jobs created and capital invested.10
8
Visa Validity
Most E-2 visas are issued for up to five years, but reciprocity
agreements between some countries mandate shorter terms. For
example, the American consul in Sweden issues two-year visas;
Mexico issues one year visas; Thailand issues six month visas.
E-2 visas can be extended for the duration of the U.S. business
operation. A stay of two years will be granted each time the E-2
visa holder enters the United States.11
EB-5 green cards start with a two-year conditional resident
status. Between 21-24 months after that, provided the jobs are
created and investment maintained, investors may apply for full
permanent resident status.
Dependents
An E-2 visa holder’s spouse may also obtain an E-2 visa
and a work permit. Children may receive E-2 visas, but upon
turning 21 must depart the U.S. or change status, usually to a
temporary student visa.
The EB-5 green card application process permits the spouse
and children under 21 to immigrate to the U.S. with the principal investor.
Business Failure
If the business enterprise fails, both E-2 and EB-5 conditional
resident investors lose their status. Possibly, if the EB-5 investment created the needed jobs and then fails, there is an argument
that this is all that is needed, particularly for investors in regional
centers. After the EB-5 conditional resident status becomes
permanent, the investor need not maintain the investment.
E-2 to EB-5
What about transitioning from an E-2 visa to an EB-5? After
admission as an E-2, some can increase their investment in their
E-2 ente rprise to $500,000 or $1 million and prove their capital
will create 10 jobs and apply for an EB-5 green card. However,
“retained earnings” cannot be used to reach the investment
amount. Also, E-2 investments must be thoroughly analyzed to
prove lawful source of funds, that the investment was a personal
one, not made by the investor’s overseas corporation, and to
satisfy other EB-5 criteria. Some may choose to make a separate
investment for the EB-5 green card.
Continued on page 10
EB5 INVESTORS MAGAZINE