White Paper: Direct EB-5 Investment vs. Regional Center

The United States government provides two options for a foreign investor through the EB-5 Visa program.  These two investment options both require a capital investment of either $900,000 or $1.8 million, depending on whether or not the investment is in a targeted high unemployment area or rural area. However, they do have key differences that are important to understand. The primary difference is how the job creation requirement is calculated.

There are two ways to use the program: one is a direct EB-5 investment, the other is through a regional center EB-5 investment.  Direct EB-5 investment entails the individual setting up their own business where they directly own and operate the company in the United States.  You, the owner, are required to hire 10 full-time employees.  This cannot include contract workers and all employees must be able to work legally in the United States.

This option is usually appealing to an investor that already has an existing company in another country and wants to establish a new commercial enterprise in the United States; or someone who is looking to own and operate their own business through either a sole proprietorship, joint venture, or partnership.  The disadvantage of the direct investment option is that you are not immediately able to immigrate to the United States.  However, you are still responsible for the operations of the company and meeting all the operating regulations and EB-5 requirements, including creating and continuously maintaining the job creation requirement.  Generally, direct EB-5 investments are more suitable for investors who want to have more direct control over their investments and build successful independent businesses.

The most common EB-5 option for investors is through a USCIS-approved regional center. The vast majority of EB-5 investors prefer this investment method because it allows the individual investor to become part of a new commercial enterprise as a passive investor with no daily management responsibilities.

Regional center investment options provide another critical advantage by allowing all direct, indirect, and induced jobs to be counted towards the job creation requirement.

Additionally, regional center investment options provide another critical advantage by allowing all direct, indirect, and induced jobs to be counted towards the job creation requirement.  Meaning, the job count includes a larger scope beyond the direct W-2 employees to also include indirect job creation when the project, for example, makes purchases for goods and services from local firms.  Induced jobs are created due to the economic impact made by the commercial enterprise. For example, employees earn money from the project and in turn, go out and spend money in the local economy which leads to additional induced jobs.

 

Why Job Creation Calculation Matters

Job creation is the key differentiator between the two options.  The direct investor is directly responsible for creating 10 full-time jobs.  These employees are required to be on the investor’s payroll and tax return for the required amount of time.  This can present many challenges for the investor in the final stages of their application approval process.

One example is from immigration attorney Christian Triantaphyllis whose client established a hotel in South Texas. In his initial I-526 petition the client stated he was going to have 12 full-time employees and listed the positions.  The business plan adequately described the jobs and the I-526 petition was approved.  However, the I-829 conditional removal process for a direct investment requires more documentation. After examining the payroll records and W-2 filings, there were in fact 30 employees but only 10 that qualified as direct, full-time employees.  Ultimately, the client was approved because he did meet the minimum requirement, however, their perceived job cushion of 20 employees was not accepted.

Investing through a USCIS-approved regional center lessens your risk for not meeting the job creation requirement.

This is where the key differentiator in job creation lies. Investing through a USCIS-approved regional center lessens your risk for not meeting the job creation requirement.  Part of the designation process requires regional centers to provide USCIS with a detailed business plan and economic model projections on jobs that will be created from the new enterprise. The investor is not just receiving credit for the direct employees as they would in the direct model, they are also receiving credit for the indirect job creation based on an approved economic model.

Because these types of projects typically require a larger financial investment, job creation is also much higher.  For example, based on the economic model methodology, a regional center’s $20 million project in downtown Houston could show the new enterprise will create 300 indirect jobs.  As a result, you have far exceeded the minimum requirement.

Regional Centers work with the investor and their attorneys to provide the required documentation throughout each stage of the application. As a condition of the government requirements, regional center investments require the documented transfer of cash in order to meet their capital investment requirements. The investor does not have to prepare project-specific documentation or employment verification.  Regional centers, such as Houston EB-5, consistently use government-recognized methodologies so there are no surprises in the approval process.

 

Featured Houston EB-5 Investment

Moderno Porcelain Works specializes in the installation of high-quality porcelain surfaces in the residential and commercial markets.  By utilizing Moderno’s proprietary equipment and patent-pending techniques, they are able to fabricate our exclusive line of porcelain on-site, making Moderno the superior choice for porcelain surfacing.

The next step for expanding the global reach of Moderno Porcelain Works is creating three HUBs over the next 12 months with locations in Dallas, Texas, the Tri-state area, Ney York and San Diego, California. Current HUBs include Houston, Texas, Miami, Florida, San Marcos, Texas, and Minneapolis, Minnesota.  Moderno’s long-term expansion includes 60 HUBs over the next five years.

This unique opportunity has presented itself in a thriving market. The Moderno EB-5 program is the only program to include an immediate work permit. Once accepted, you and eligible family members could move to the U.S. in as little as four months.

 

Conclusion

Applying for an EB-5 Visa is an important decision and one that requires a thorough understanding of the process and the options available to foreign nationals.  As a USCIS-approved regional center, Houston EB-5 has a proven track record of successful EB-5 projects.  We encourage any foreign investor interested in obtaining US permanent residency through the EB-5 Visa program to discuss your options with a qualified regional center.




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