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Can an EB-5 investment be used to start a company and acquire other businesses that will create new jobs?

Yes, new jobs created by business acquisitions can satisfy the EB-5 program’s employment creation requirements, but only in certain circumstances. The jobs must be actual new positions, and the acquired businesses must be wholly owned subsidiaries of the new commercial enterprise (NCE). Moreover, if the EB-5 investment is made at the lower amount for targeted employment area (TEA) projects, the subsidiaries of the NCE must all be located within the same TEA as the parent company. Due to the complex nature of such an investment and business strategy, it would be best for an EB-5 investor to consult with corporate and immigration counsel before proceeding.

The regulations governing project structure in the EB-5 investment program are numerous and can be complicated. Additionally, potential EB-5 investors should note that regional center-sponsored and direct investment projects are structured differently. In regional center-sponsored projects, the NCE and the job-creating entity (JCE) are separate. The NCE is usually structured as a new partnership entity that allows EB-5 investors to subscribe as limited partners. Once the NCE receives the EB-5 investment capital, it will then invest in the JCE, which is responsible for creating at least 10 jobs per EB-5 investor.

In contrast, the NCE and the JCE in direct EB-5 investment projects must be the same—the NCE will create the required EB-5 jobs. Direct EB-5 investments are not made through the intermediacy of a regional center; rather, the EB-5 capital is given directly to the NCE. Direct investors are allowed to invest in a wholly owned subsidiary of a parent company, which would be considered the NCE. In this arrangement, the subsidiary that received the EB-5 investment would have to generate the needed employment.

Since complying with the above regulations can be challenging, an immigration attorney’s counsel will be invaluable throughout the entire EB-5 investment process. Before making an EB-5 investment, foreign nationals should retain an immigration attorney with ample experience.