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Understanding Employee Qualifications for Direct EB-5 Investments

Understanding Employee Qualifications for Direct EB-5 Investments

All investors appreciate the necessity of analyzing and assessing financial opportunities. It is crucial to inspect every possible aspect of an investment to ensure that all potential risks are factored in. When evaluating an EB-5 investment, even more scrutiny and due diligence is demanded of the prudent investor.

EB-5 Direct Investment Opportunity

Foreign nationals desirous of U.S. citizenship have logically latched on to the EB-5 Program as perhaps the best avenue for gaining residency in the United States. Recent years have demonstrated the declining numbers of other types of U.S. visas, especially the H1-B Work Visa, leaving the EB-5 Visa highly attractive and viable for many immigrants.

Properly titled the EB-5 Immigrant Investor Program, this visa encourages immigration through the means of investments in the American economy. Specifically, this program requires foreign investors to commit $1,000,000 (certain circumstances can drop this to $500,000) to a commercial enterprise with an eye to creating a minimum of 10 new jobs within 2 years of starting the business. In exchange for such a deep commitment, the EB-5 investor will earn permanent residency for themselves, their spouse, and all dependent children under age 21.

Regional Centers vs. Direct Investments

EB-5 applicants are offered two choices for investment: direct investment or regional center investment. The difference between the two is significant and must be understood by the investor before proceeding.

A regional center investment is a pooled fund of money that is professionally managed. Investors have no say in the daily operations; they are considered passive investors who are looking to professional managers to meet the goal of creating at least 10 new jobs per investor. Since some regional centers will raise funds from as many as 1,000 individual investors, they are typically working with hundreds of millions of dollars or more. Their investments often include large hotels, hospitals and other health facilities, and shopping centers.

Regional center investors do not look for spectacular returns on their funds, but rather hope for a conservative return of 2% to 3% per year with preservation of original capital as a top priority. An additional benefit that accrues to a regional center investor is that documentation proving the creation of 10 new jobs is provided by the regional center, which is the key to citizenship for the investor’s family.

In a direct investment, a foreign national decides to start her or his own business and retains direct and complete control over the daily operations and long-term goals. As most entrepreneurs know, the upside potential of one’s own business is significantly higher than what a passive investment can offer. This makes sense, as the entrepreneur is actively involved in the business on a regular basis. Often, a business owner will take a small paycheck while working long hours in the early stages of a new business, in exchange for a higher return in the back end.

Understanding New Hires for Direct Investments

Investors choosing the entrepreneurial route for their EB-5 investment must understand the nuances concerning what will qualify as a new job. Since their goal is the creation of at least 10 new jobs, and since attaining U.S. citizenship is dependent upon that goal, the smart entrepreneur will carefully study the rules explaining which jobs count towards that total. Because the business owner must accomplish this within the first 2 years of operation, advance preparation and knowledge is strongly recommended.

Equally challenging is learning and following American laws concerning the hiring and firing of employees. As a direct business owner, the entrepreneur is obligated to adhere to all laws concerning employees, including understanding their rights and knowing what information an employer can and cannot ask of their employees.

Of primary importance is to understand that the business owner and any immediate family members may work for the new commercial enterprise, but none of them can be used in the total employee count of 10 that must be reached in two years, as they are not yet U.S. citizens. Similarly, while any other employee who is not a U.S. citizen or does not enjoy temporary residency in the U.S. may be hired, they are not included in the total employee count needed to meet the EB-5 requirements.

While an employer is not allowed to ask about the citizenship status of an employee, this restriction can be overcome for EB-5 investors by requesting all employees submit proof of citizenship or immigration status. This will help the employer avoid possible discrimination suits while also determining which job applicants qualify for the 10-job requirement.

The following persons qualify for the 10-job obligation:

  • S. citizens
  • Permanent residents
  • Temporary residents, including asylum seekers, refugees, and aliens living in the US under deportation suspension

Other people may or may not meet the requirements set by EB-5, so any applications from persons other than those listed above need careful examination.

How I9 Documentation Works

I9 documentation must be provided by any person wishing to gain employment. The most common identification asked for, and given by the potential employee, is a driver’s license and a Social Security card. If a person provides a valid and current driver’s license (or state ID) and a Social Security card, you can be assured that they will count towards the 10-job requirement.

While these are the most customary forms of identification and proof of ability to work, other types of IDs are also acceptable under federal law. In some cases, these IDs may indicate that a person was not born in the U.S. but can provide the necessary proof of their approval to work in the U.S.

Because I9 documentation may not deliver indisputable proof of the ability to work in the U.S., and because employers must be careful when asking questions that may flout the rule of law or invade the rights or privacy of job applicants, EB-5 direct investors can include on job applications for their company questions concerning citizenship and immigration status. It is not considered as discriminatory if all employment applications are asking the same information of possible employees.

For reference purposes, EB-5 employers are encouraged to study and understand the I-9 documentation requirements as listed on the USCIS website.

Extra Obligations for EB-5 Employers

If proper care is not taken in collecting the information necessary to prove the hiring of 10 or more qualified employees, the EB-5 employer will not earn the U.S. citizenship they spent so much money on and worked so hard to earn.

In addition to the burden of meeting the 10-job requirement, all other laws affecting employers and business owners must be known and followed. As any American business owner knows, legal and equitable treatment of employees demands thorough knowledge of the laws governing employees and their rights. Many employers have been sued for trespassing on the rights or privacy of their employees. Mistreatment or illegal actions against an employee can be a costly mistake. For an EB-5 employer, such an error can also cost the entire family their chance at American citizenship.

Interested EB-5 investors should not be discouraged by the additional obligations placed upon them. Most EB-5 direct investors look to trusted and experienced EB-5 advisors to guide them through the application process and to assist in the documentation of the successful hiring of 10 or more employees to their new commercial enterprise. Successful EB-5 investors in the past are now running profitable businesses in America that pay their way as new American citizens, thanks to the help of qualified EB-5 counselors.

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