The Following are EB-5 Frequently Asked Questions.
Please note, these FAQ’s (frequently asked questions) are for informational purposes only and they are not meant to be a substitute for professional legal and/or financial advice. Please consult an immigration business attorney and/or qualified financial expert before choosing any EB-5 investment.
Important: All documents included in any offering documents must be translated into English. The investor must sign the English version of all agreements, government forms, and applications. Also, please consult a licensed immigration attorney if you are serious about investing.
1. How is the EB-5 investment structured?
A Limited Partnership is formed as the basis for the new commercial enterprise requirement. The Limited Partnership is managed by the General Partner of the Limited Partnership. The General Partner is responsible for initiating and managing the EB-5 investments of the partnership. The General Partner is also responsible for the day to day business operations of the partnership as well as working to ensure that the Regional Center is in compliance with all laws and regulations pertaining to the EB-5 Program. The Limited Partners are the Foreign National EB-5 Investors. The General Partner shares in the profit from the Partnership’s business activities as outlined in the Limited Partnership Agreement.
2. What is a Limited Partnership?
A limited partnership is formed by filing a charter with a state government and consists of a general partner and one or more limited partners. The charter details the rights and powers of the limited and general partners, percentages of ownership, and distributions of profits, as well as compensation. The general partner manages the business. The limited partners have limited duties within the partnership and are liable only for the amount of their investment.
A limited partnership combines corporate limited liability with partnership taxation. The charter and the Limited Partnership Agreement detail the rights and powers of the limited and general partners, percentages of ownership, and distributions of profits due to the general partner. In a limited partnership, income is taxed at the partner level, not at the entity level.
3. Must I invest the full $500,000 before I can apply for my Green Card?
Yes, although the law states in the process of investing. In our EB-5 industry, SFM Global has seen denials of these types of cases therefore we require the full amount to be deposited according to the investment documents.
4. How safe is my EB-5 investment?
SFM Global acknowledges no at risk investment can be described as “safe”; however, SFM Global believes we have tried to structure our EB-5 investment loans a safe as possible given the legal requirement that the EB-5 investments are truly “at-risk.”
5. Why would a finder be used for this EB-5 program?
SFM Global uses referral sources, which are commonly called finders, from time to time to assist it in locating prospective EB-5 investors.
6. Does the syndication fee include legal counsel to represent me for my application to USCIS?
No, SFM Global believes that it is important for you to have independent legal counsel representing your interests. A reason for early failure of the EB-5 Program in the 1990’s was the conflict of interest when lawyers represented both EB-5 investors and Regional Centers. We are able to recommend an experienced EB-5 immigration lawyer who can competently handle EB-5 applications; however, you will ultimately choose the attorney who will represent you.
7. How extensive is the paperwork/application process, will I receive help?
The paperwork is very extensive on the business side of the EB-5 transaction however, that is the responsibility of SFM Global. EB-5 investors must provide documentation on source of funds and other personal information to their immigration attorney. You will be provided with a detailed schedule of requirements and a list of documents from your immigration attorney. You and your attorney will also be provided the essential business documents required to file both the I-526 and I-829 petitions from SFM Global and the SFM Global team will cooperate with your attorney throughout the entire application process.
8. Am I still required to hire an immigration attorney?
Yes, SFM Global believes it is important for you to have independent legal counsel representing your interests. The EB-5 application process is complicated and many technical requirements must be met. It is in all parties’ best interest if each party has their own advocate and no conflicts of interest. The partnership documents require each SFM Global investor to be represented by an immigration attorney of their choice.
9. What are the fees in filing for an EB-5 petition, if any?
There are three primary areas with costs/fees associated to them.
SFM Global requires a syndication fee that is part of the total subscription price. The immigration attorney you employ will also charge fees that vary. Part of your due diligence on any regional center should include costs and what is covered in these costs. Be mindful of conflicts of interest, as the least cost may not be the wisest investment.
10. Pre-immigration Tax Planning
Before you become a resident of the United States you may wish to consider ways in which to reduce or eliminate some of the United States income, gift and estate tax consequences which would be applicable to you once you become a United States taxpayer. These objectives may be accomplished through utilizing some common estate planning techniques such as:
11. Who should invest?
Only those individuals who desire to establish permanent residency in the U.S. for themselves and qualified family members. EB-5 investors include people from all walks of life; professionals, business people, persons wanting to facilitate a child’s education, and retirees. Because the EB-5 visa permits employment in the United States, many EB-5 investors become involved in charity or part time work. Simply put, the EB-5 visa gives you the flexibility to do what you want in and out of the USA. If you don’t want to day to day manage a business to achieve a U.S. visa, you should consider EB-5 through an authorized regional center.
12. How is my limited partner interest protected?
Every Limited Partnership is formed in various states throughout the U.S. Each state has rules the Limited Partnership must abide by. The Certificate of Limited Partnership must be recorded with the state the Limited Partnership is formed in as a public record. The Certificate refers to a Schedule A of the limited partnership agreement, which lists the names and percentage interests of the limited partners. Investors are protected by various states’ Limited Partnership Acts and the Uniform Commercial Code, and other state laws as well as federal and state courts. As in most investments there is a risk of total loss and part of the EB-5 regulations require the investment to be fully at risk. However, SFM GLOBAL works hard at its mission to structure EB-5 investments in a manner that minimizes the risk to the client while still meeting the EB-5 law’s “at risk” requirement as well as the shared goal of achieving an EB-5 Visa. SFM GLOBAL requires borrowers to identify sources of revenue for the repayment of the loan. SFM GLOBAL may also require recourse in default of loans, such as a larger default interest rate.
13. What is meant by qualifying investment “capital?”
The regulations define capital as cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the alien entrepreneur. A debt to fund the investment will qualify as capital only when the alien entrepreneur is primarily and personally liable for the indebtedness, the debt structure is commercially acceptable and the EB-5 investment cannot be pledged in any way to secure the debt. An investor may also acquire the required amount of capital via a gift.
14. When may the investor exit the investment?
The anticipated duration of each SFM Global limited partnership is dependent upon invested funds. Typically our EB-5 investment loans are 7 (seven) years. However, depending on the operations of the Partnership, it could be shorter or longer. The actual partnership agreement is 10 (ten) years with options to terminate early when all investments are complete. SFM Global investments are loan based versus equity based. By this we mean there is nothing that has to be sold by the Limited Partners in order to exit the partnership. We believe this structure provides a greater assurance when determining the point at which the limited partners should be able to exit the investment. Remember, in an equity based investment all of the EB-5 investors will be exiting the investment at or about the same time. This mass exodus can dramatically affect not only the ability to sell the equity interest be it ownership in a hotel, resort, farm, commercial building etc., but also the value of the equity shares because all of the limited partners will be selling an identical ownership interest at or about the same time. A loan based investment avoids these pitfalls because there is nothing to sell in order to exit the partnership. Once all the EB-5 loan based investments are repaid and the investors vote to liquidate the partnership, the respective capital accounts and shared retained earnings and capital gain will be distributed to each limited partner and the partnership will be terminated.
15. Ways in which a foreign national investor may meet the EB-5 requirements?
A. Create a new commercial enterprise
i. The law requires the investor-petitioner to invest in a new commercial enterprise. The enterprise must be “new,” i.e., established after November 29, 1990, the date the law was enacted.
ii. However, an investor’s contribution of capital to an existing business that was formed prior to November 29, 1990 may be acceptable in three situations.
i. This usually requires a substantial reorganization or restructure of the existing business. The USCIS has stated, however, that the mere change in ownership, cosmetic changes to the decor of the business site and implementation of a new marketing strategy are insufficient changes to constitute establishment of a new commercial enterprise. On the other hand, a complete transformation of the nature of the business is likely to be considered sufficient.
C. Expand by 40%
i. An investor may invest and expand an existing business, resulting either in an increase of at least forty percent in the net worth of the business or in the number of employees in the business. The USCIS may require evidence in the form of income tax returns, audited financial statements, and employment tax returns. Any of the above described investments must be in a “commercial” enterprise. Any for-profit entity formed for the ongoing conduct of lawful business may serve as a commercial enterprise. This includes sole proprietorships, partnerships (whether limited or general), holding companies, joint ventures, corporations, business trusts, or other entities publicly or privately owned. This definition includes a holding company and its wholly-owned subsidiaries, if each subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. However, the term new commercial enterprise does not include noncommercial activity such as owning a personal residence.
D. Invest in a troubled business
I. The investor may invest in a troubled business this is an existing business and the business must have lost 20% of its net worth in the last 12 or 24 months of operation.
Troubled Business/Saving Jobs
Special rules govern investments in a “troubled” business. A troubled business is one that has been in existence for at least two years, has incurred a net equity loss of 20% for accounting purposes during the twelve or twenty four month period before the petition was filed, and the loss for such period is at least equal to twenty percent of the business’s net worth before the loss. If the petition is based on investment in a troubled business, the investor is not required to create ten new jobs. Instead, the petition may be based on proof that the business will save American jobs thus the proof required will be that the target investment will maintain or increase the number of existing employees during the conditional status period.
The above discusses what will be approved as a new commercial enterprise, however all the other requirements such as TEA determination, ten new jobs created and all the other requirements under the EB-5 program must be met.
16. What are the obligations of the investor to participate in the investment?
Under the regulations, the investor must be “active” in the management of the EB-5 investment. The investor must engage in the management of the new commercial enterprise, either through day-to-day managerial control or through policy formulation. However, the regulations do specifically allow that an investor will qualify as “active” as a “limited partner” as defined in the Revised Uniform Limited Partnership Act. As a limited partner, the limited partner will be required to vote on certain options, such as liquidation of the partnership. The SFM Global Investment Visa Program meets all the regulatory requirements by enrolling the investor in the investment as a limited partner. This role allows the investor to engage in his or her own business with limited participation in the EB-5 limited partnership activities. Additionally, this structure allows the investor to live where he or she pleases, and gives him or her the option to enter and exit the United States without any obligation to actively manage the EB-5 investment. Most importantly, the limited partner, like the corporate shareholder is only liable to the enterprise to the extent of the agreed-upon investment. This business structure protects the investor allows limited participation and is accepted by the USCIS.
17. What is meant by “net assets”?
An investor’s net assets, or net worth, can be determined from a simple calculation: the combined value of all things owned, minus the combined value of all liabilities (debts). The assets may be from any legal source, anywhere in the world:
(Naturally, funds that come from such sources as smuggling, the sale of illegal drugs or any illegal activity are not allowable.)
Verification of assets and the sources of those assets will be required. It will not be necessary to document or reveal all assets, but only enough to meet the requirements of the USCIS and the Program.
18. Once I put my money in a SFM GLOBAL EB-5 investment partnership what do I receive for my investment?
Each investor who is admitted to the SFM Global Limited Partnership is provided with a certificate of Limited Partnership. They become a limited partner with all the rights granted by the Limited Partnership Agreement and are protected by the various State and Federal Laws. The investor is a percentage owner of the partnership and a capital account is established for each investor. The investor is entitled to a percentage of the profits of the Limited Partnership as discussed in the Limited Partnership Agreement. Additionally, each Limited Partner is granted access to the secure portion of SFM Global’s website where they can monitor the activities of the partnership and their own individual capital account. Each SFM Global investor receives the hard work, experience and dedication of the entire SFM Global team. Remember we are only a phone call or an email away for any questions you may have.
19. Will SFM GLOBAL help me with filing my immigration petition?
SFM Global Regional Center do not file any immigration petitions; however, SFM Global will work hand in hand with your immigration attorney. SFM Global requires all investors to secure their own independent legal counsel to file the immigration paperwork and complete the applications for an EB-5 investor visa. SFM Global is the business side of this complex process. SFM Global will provide documents in support of the investor’s I-526 and I-829 petitions to the attorney of the investor’s choice. SFM Global will assist your counsel in providing information on the EB-5 investment and the regional center. SFM Global will provide supporting documentation for all of the business side of the EB-5 process and will assist the investors’ legal counsel.
EB-5 Frequently Asked Questions Continued:
20. What is the likelihood of the investor getting the basic return of his/her original investment?
SFM GLOBAL investments are made with developers, public private partnerships or with development arms of well-known companies whereby each entity has identified a number of sources of revenue as ways to repay our investments. EB-5 investments are required to be “at risk” investments. No Regional Center is allowed to guarantee the return of investors’ funds. The USCIS has been very clear on this issue; the funds must be at risk. On the other hand there is no requirement that the funds be invested foolishly. SFM Global structures investments that are compliant with the rules and guidelines of the USCIS that also afford the investor high likelihood of a full return of their capital contribution. SFM Global investments are loan based infrastructure investments that have a multitude of revenue and/or collateral pledges. In a loan based investment the Limited Partners have nothing that needs to be sold. Equity investments have to worry about market trends and how certain segments of the economy can impact the “Fair Market Value” of their ownership interest.
We cannot guarantee that investors’ funds are 100% safe but we can tell you that we believe that the SFM Global investment structure has a low risk profile and the very good likelihood of achieving the investor’s Green Card, preserving the original capital contribution and achieving some sort of a rate of return to the investor.
21. What is the likelihood of the investor realizing a profit in this investment?
The day to day expenses of our investments are capped such that the interest rates charged to the investment targets are at least one percentage point higher than the cap on day to day expenses thus, the projected rate of return is 1% per year to the partnership.
22. Are any countries excluded from eligibility for the EB-5 Visa program?
Residents of only a few countries are excluded (e.g., North Korea and others.) In most cases, however, if the applicant is able to leave the excluded country and has the necessary capital to qualify under the program, legal counsel will be able to help the applicant qualify for visa approval. Consult your immigration attorney to determine if your home country is precluded from this visa program.
23. What can disqualify a potential EB-5 investor from participating?
There are very few disqualifying or exclusionary events under the law. A criminal record involving crimes of moral turpitude is disqualifying, unless it can be proven that the crime was political in nature or occurred over twenty years prior to the application. A few major medical problems might also exclude an applicant, but for the most part this can be avoided if it can be proven that the applicant will be supported by others and therefore avoid being a recipient of government medical assistance. Applicants should seek advice of their immigration legal counsel to determine what waivers may be available for eligibility.
24. Can I apply if I am currently out-of-status (i.e., I live in the United States, but do not have a current visa)?
Out-of-status nationals are no longer permitted to apply for permanent residency from within the United States. “Out-of-status” means the individual stayed in the United States longer than their authorized period of stay. Your Visa should be valid at the time of entry to the United States but the Form I-94 should be extended if the individuals need to stay more than the I-94 period. However, if they have filed any petitions or applications that lead to Green Cards, such as immigration petitions (through employment or family) or labor certifications during 245(i) benefit period by January 17, 1998 or April 30, 2001, they may file their applications to adjust status in the United States with the penalty of $1,000, which applies to applicants over 17 years old.
If the out-of status nationals do not have 245(i) cases, they must return to their country of origin and apply through the United States Embassy there. However, depending on the out-of-status period, they may be banned to obtain United States visa and entry to the United States for certain periods of time from the departure date. Applicants should seek advice of their immigration legal counsel.
25. What information and documentation are required for an EB-5 investment?
A potential EB-5 visa applicant must prepare complete biographical information for the principal and each eligible member of the family. The principal applicant must prove the source of the investment funds. A resume with copies of college diplomas and other educational certificates, if applicable, should be included. Business licenses, brochures about the business and other information about the applicant’s business are also beneficial. Any memberships in professional organizations should be documented. Unless the investor inherited the funds, the investor should be presented as a successful professional or businessperson with a business, financial or family history that explains the accumulation of financial net worth that is presented in the financial information. Provide as much documentation as possible that pertains to the career and achievements of the principal Investor. Source of Funds: Funds for the investment must come from a lawful source. Lawful sources of funds include: profits from the sales of a property, stocks or bonds, profits from business, business transactions, gifts, and inheritances. To prove the source of investment funds, USCIS typically requires five years of tax returns, five years of bank records, proof of ownership in any businesses, financial statements for each business and business licenses. The idea is to present a track record of an honest course of dealing. If the principal applicant’s EB-5 investment capital came from a specific transaction, such as sale of a house, inheritance or gift, you must prove the transaction occurred, by providing an official document, such as a closing statement or contract or other official documents. This is not a comprehensive list. Other documents may be required and vary on a case-by-case basis.
26. What precautions are taken to monitor job creation by the regional center?
Each regional center is different; however, this is a very important question to ask. SFM Global investments involve indirect job creation only which are created at the time the monies are spent. Each individual project in an investment has a time frame for completion. The time frames fall within the period of time for job creation required by the USCIS. Some of our projects have fund control agreements whereby funds are controlled and released as specific bills are requested to be paid. Additionally, we make periodic trips to each investment site and we get regular reports from each borrower, the reports are posted in the investor section of our website. SFM Global builds in the loan agreement failure to produce documents of spending is a default under the loan agreement.
27. What steps are taken if the requisite job creation has not occurred?
If a regional center cannot prove the requisite jobs, the EB-5 investors are put in removal proceedings. In SFM Global, under the RIMS II economic model, SFM Global investments need only show that the monies are spent and therefore the indirect jobs are created. SFM Global gathers all spending records on a project and commissions a new job report based on actual spending. This is empirical evidence the jobs were created. As stated in Question 4 we monitor all projects and obtain documentation of completed projects.
28. Does the SFM GLOBAL Regional Center contact the foreign national directly, or can the referring attorney maintain all contact with the foreign national?
Foreign nationals may contact SFM Global directly and we will provide as much information as we can; however, SFM Global insists each investor retains their own immigration attorney. We work hand in hand with your immigration attorney. However, once an investor chooses SFM Global and becomes a limited partner SFM GLOBAL will have and encourages contact. SFM Global has worked with attorneys from all regions of the world.
29. What if I want to manage my own business?
If you want to manage your own business, consider an L-1 Visa (Non-Immigrant Intra-company Transferee), E-2 Visa (Non-Immigrant Treaty Investor), or EB-5 Alien Entrepreneur Investment by investing $1,000,000 into your own business which you control, and are responsible for creating the necessary ten new direct jobs within a new enterprise. If your goal is to have a Green Card and not to actively manage a business, it is more often cheaper and/or more convenient and possibly with much less risk to utilize a structured investment program in the Regional Center EB-5 category rather than to start and maintain your own business. Additionally, the EB-5 becomes permanent whereas L-1, E2 and others are not and children may have to leave at age 21.
30. Where can I find a copy of the relevant EB-5 law and regulations to review?
Please go to the USCIS web site. A link to immigrant investment visa information is available at this address www.uscis.gov. You will see a link to “Laws” near the top center of the USCIS home page.
31. What are the basic requirements for a person who wants to make an EB-5 investment, is there an age limit?
There are no statutory age requirements; Only financially, you should be an "accredited investor".