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Regional Center EB-5 Investments: How Involved Must Investors Be?

Regional Center EB-5 Investments: How Involved Must Investors Be?

The EB-5 Immigrant Investor Program offers foreign nationals a chance to start a new life in the United States in exchange for a qualifying EB-5 investment in a new commercial enterprise (NCE). EB-5 investors hail from all around the world and come from various backgrounds and walks of life, so a one-size-fits-all solution doesn’t accommodate everyone’s needs. Fortunately, the EB-5 program offers a degree of flexibility to those considering making an EB5 investment. Namely, investors have the choice of investing directly in an NCE or investing indirectly via an EB-5 regional center.

Regardless of the path, everyone who pursues an EB-5 investment must fulfill the same requirements to be eligible for the coveted permanent resident status the program offers. One such requirement is involvement in the NCE in which one is investing. This requirement isn’t a major obstacle for most direct investors, who choose the route specifically to exercise more managerial control over their EB-5 investment capital. For those who invest through a regional center, however—and the majority of EB-5 investors do—the requirement can be daunting, as they may not have the time, desire, or experience to carry out substantial managerial work. Luckily, their managerial obligations are significantly lighter.

Managerial Duties in EB-5 Regional Center Investments

Though some investors may be interested in earning a return on their EB-5 investment, most EB-5 participants pursue the program solely for the green card benefit. For many, permanent resident status in the United States means a brighter, safer, more stable future for themselves and their family and is worth more than money. This leads to a significant proportion of EB-5 investors who either don’t want to, or cannot, participate in the day-to-day management of the NCE.

EB-5 regional centers are aware of EB-5 investors’ motivations, and most employ a structure specifically designed to circumnavigate this “active involvement” requirement. Most regional center projects are structured such that the investors sign on as limited partners, endowing them with certain rights, powers, and duties. While investors are then required to vote on pertinent business matters and policy decisions, this setup absolves them of the need to engage with daily managerial tasks.

More Freedom for Investors

Besides escaping the need for grueling daily management work, the limited partnership structure offers numerous benefits for EB-5 investors. With a minimal managerial obligation to the NCE, investors can pursue their own employment, education, or other endeavors in the United States, allowing them to structure their life how they envision it. In a similar vein, the setup allows investors to make an EB-5 investment in a suitable project anywhere in the United States while living in an entirely different state. For example, an EB-5 participant could invest in a Georgia EB-5 project but settle down in Massachusetts.

Before signing a contract with an EB-5 regional center, an investor should carefully read the terms and conditions and consult with a qualified EB-5 immigration attorney to ensure the agreement will satisfy the managerial involvement requirement of the EB-5 program. Failure to demonstrate sufficient involvement in the EB5 investment on the I-526 petition could result in denial, so this step is not to be overlooked.