EB-5 vs. EB-1C

People often confuse the EB-1C visa with the EB-5 category, the visa for immigrant investors, and refer to both visas as “investment visas.” This is not all that surprising, considering that EB-1C and EB-5 visas share common characteristics: both deal with foreign capital and investment, may involve the formation of a new business entity, and potentially result in job creation benefiting U.S. workers.

Despite these general similarities, however, EB-1C and EB-5 visas are considerably different, and making the mistake of applying for one when you should have petitioned for the other could cause significant damage or delay to your immigration plans.

In general terms, the EB-1C category allows international companies to transfer high-level managers or executives working abroad to their U.S. entities in order for them to assume permanent managerial or executive positions. In contrast, the EB-5 category is meant for foreign nationals who have invested or are in the process of investing capital in a new commercial enterprise in the U.S. While the purpose of an EB-1C is to allow companies to cross-fertilize and transfer business practices and commerce, the goal of the EB-5 visa is to stimulate investment and enhance job creation in the U.S. Importantly, there is no capital investment requirement for EB-1C executives, as they work for their petitioning employers, but EB-5 immigrant investors are required to invest their own money.

EB-1C visas are best-suited for those who are in high-level managerial or executive positions in overseas companies that already have U.S. business exposure and are familiar with U.S. business operations. For individuals with limited business experience or for those who do not have a position at a multinational company but who do have considerable financial resources, the EB-5 category is probably the better option. Further, EB-5 may be a good option for foreign nationals who do not want to work under a corporate structure or who do not have the corporate authority to transfer employment locations.

In this article, we review distinctions between the two categories in specific areas.

Business Structure

EB-1C

A qualifying multinational relationship must exist between the U.S. employer and foreign business entity. This relationship involves a company investment from one entity to another; examples of such qualifying relationships include parent companies and subsidiaries or affiliates. The U.S. entity is the petitioner seeking to transfer to the U.S. from a foreign affiliate a high-level alien employee, who is the beneficiary in this category. Additional requirements related to the business in an EB-1C include the criterion that the U.S. entity has been operating for at least one year.

EB-5

The EB-5 category is designed for individual aliens seeking to invest capital in a new business, a troubled business, or a regional center in the U.S. The individual is not required to be associated with any overseas corporation. In an EB-5 case, the individual investor is both petitioner and beneficiary.

Source of Funding and Investment Amount

EB-1C

EB-1C visas generally serve to facilitate or promote commerce between the U.S. and foreign countries. For these applications, while U.S. Citizenship and Immigration Services (USCIS) typically looks into the initial investment between the overseas company and the related U.S. company, there is no strict statutory requirement for the amount of capital that must be invested. If the U.S. entity is a relatively new investment of the overseas parent company, USCIS often requires evidence of a monetary transfer from the overseas company to the U.S. entity. Even though there is no stipulated minimum amount, the amount must be sufficient to cover the costs of the new office. In our experience, we have seen initial EB-1C investments in U.S. subsidiaries of around $100,000.

EB-5

There are strict statutory investment requirements for the EB-5. The petitioning alien’s investment must be at least $1 million in a new commercial enterprise in the U.S.; in some cases, a $500,000 million investment is required. In addition, the petitioning individual must prove through convincing documentary evidence that the money used for the investment was his or her own money derived from a legitimate source. Cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the investor are all acceptable investments for EB-5 purposes. Assets acquired directly or indirectly by unlawful means, such as criminal activities, are unacceptable. In practice, USCIS meticulously reviews the legitimacy of funds.

USCIS Emphasis

EB-1C

In EB-1C cases, USCIS scrutinizes the corporate structure and business operations of the petitioning U.S. entity. Success in EB-1C petitions hinges on the U.S. employer’s corporate structure: it must allow the transferee to assume a high-level position, and not just take on functions involving daily operations or first-line worker supervision. In general, a qualifying business needs to have at least five full-time employees. Further, USCIS reviews the U.S. entity’s business operations to gauge a qualifying level of commensurate revenue. Finally, USCIS looks for the transferee’s position to serve “an essential function” in the organization.

EB-5

For EB-5 cases, USCIS emphasizes the transfer of money; the legitimacy of the source of assets; and whether the investment has created at least 10 full-time employment opportunities for qualifying U.S. workers. If the investment is made in a USCIS-approved regional center, indirect or induced employment opportunities created by the investment may fulfill the job creation requirement. If the investment is made in a troubled business, then direct or preserved jobs satisfy this criterion.

Immigrant Alien’s Position and Role

EB-1C

For the EB-1C category, the position offered to the transferee must have managerial or executive duties: it must involve policy-making, major decision-making, and/or management of other managerial subordinates. Such duties are generally related to corporate structure.

EB-5

The EB-5 category does not require an employment offer or a sponsoring employer. However, in a new business enterprise or troubled business, the immigrant investor must be involved in the daily management of the company. Acceptable positions for an investor include corporate officer or board member. If an investor is applying under the regional center program, he or she does not need to be involved in day-to-day management of the business, and isn’t required to reside in or close to the area of investment.

Individual Qualifications

EB-1C

A transferee in the EB-1C category must have worked in a managerial or executive-level position for the related overseas company continually for at least one year of the three years prior to the petition’s filing. There are no minimum educational or experience requirements, but the transferee must be reasonably qualified to hold the high-level position.

EB-5

The EB-5 has no educational or experience requirements. In fact, neither investment experience nor any specific technical skill set is needed.

The Petitioner and Beneficiary

EB-1C

An EB-1C is an employer-sponsored petition; the qualified U.S. entity is the petitioner, and the alien manager or executive is the beneficiary. To apply, the employer files Form I-140.

EB-5

For EB-5s, the individual alien investor is the petitioner; there is no sponsoring employer. To apply, the alien files Form I-526

Required Documentation

EB-1C

For EB-1C applications, in addition to Form I-140, the employer submits the following:

  • Statement describing the job duties of the transferee’s managerial or executive position
  • Evidence of a qualifying business relationship between the U.S. entity and foreign affiliate
  • Among additional supporting evidence required from both the U.S. entity and foreign affiliate are (for the full list, refer here):

    -Articles of incorporation or association

    -Financial documents, such as tax returns, bank statements, and major business contracts

    -Description of the company’s organizational structure

The alien transferee is required to submit evidence proving his or her qualifications to hold the offered position.

EB-5

For EB-5 applications, in addition to Form I-526, the alien investor submits the following:

  • Documentation proving the investment has been or will be made
  • Documentation demonstrating the lawful source of the capital

    -Evidence demonstrating lawfully gained capital includes sales contracts, bank statements, stock certificates, etc.

  • Evidence of the existence of the new commercial enterprise (e.g., business organization documents)

Further, the investor must produce evidence showing that the commercial enterprise has led to the creation of at least 10 full-time jobs for qualifying U.S. workers. If the new enterprise has already hired employees, the investor can submit associated Form I-9 and tax records. If no employees have been hired, the investor can submit a business plan demonstrating that 10 U.S. workers will be hired within two years’ time.

Requirements for the U.S. Company

EB-1C

The key to success in EB-1C cases is proving that the petitioning U.S. entity has established a corporate structure that allows the transferee to act in a high-level managerial or executive function, not just in daily operations. Accordingly, although no specific statutory requirement exists, a business structure that includes a minimum of five full-time employees is generally needed. In addition, the U.S. entity should partake in substantial business operations with commensurate revenue.

EB-5

Proving that the investment created no fewer than 10 full-time jobs for qualifying U.S. workers is the essential “company” requirement for EB-5 visas. If a regional center was the recipient of the investment, then indirect or induced job opportunities can fulfill the job creation requirement. If the investment was made in a troubled business, then direct or preserved jobs will satisfy this criterion.

Permanent vs. Conditional Green Card

EB-1C

Once an EB-1C petition is approved, the transferee and his or her immediate family members are eligible to adjust status if they are already in the U.S., or to apply for an immigrant visa at a U.S. consulate abroad. After receiving visas and entering the U.S., or after adjusting status, they will receive permanent green cards, without any conditions.

EB-5

In contrast, beneficiaries of the EB-5 category undergo a conditional green card period. Once an I-526 petition is approved, the investor may undergo consular processing for an immigrant visa or adjust status, but the resultant permanent resident status is conditional for a period of two years. Note, however, that conditional green cards confer the same rights during this period as do permanent unconditional green cards.

In order to eliminate the conditions on permanent resident status, alien investors (as well as their family members) must request removal within the 90 days preceding expiration of the conditional green card. To this end, they file Form I-829, Petition by Entrepreneur to Remove Conditions on Permanent Resident Status. At this time, investors are required to submit evidence proving they’ve met all EB-5 requirements.

While the I-829 application is pending, investors retain valid status and are allowed to travel. If the request to remove green card conditions is denied, conditional resident status is terminated. If the request is approved, investors and their family members receive permanent unconditional green cards.

Processing Timeframes

Compared to the EB-1C application process, petitioning for an EB-5 visa might take longer and involve more uncertainty, not least because of the conditional nature of alien investors’ status. Ultimately, though, if the investment program is stable, unconditional permanent residency is standard for the majority of EB-5 cases.

Our Thoughts

Since both EB-1C and EB-5 visas involve complicated business and legal issues, we urge companies and individuals interested in these categories to seek advice from experienced immigration attorneys at the beginning of the process to avoid unnecessary mishaps or mistakes.

For more detailed information about the EB-5 visa, refer to the following links:

Updated 06/09/2017