The Nature of the New Commercial Enterprise
By Joseph P. Whalen (September 4, 2013)
To be clear from the start, there are four basic avenues to explore when
contemplating an EB-5 investment, plus one oddball approach that combines 2 of
them, for a total of five. In other words, EB-5 business ventures come in five (5)
“possibilities”, “varieties”, or “flavors”, not just one (1), two (2), three (3), or even
four (4), but five (5) “possibilities”, “varieties”, or “flavors”. So, if we compare EB-5
to ice cream, EB-5 is not limited to chocolate, or vanilla, or strawberry, no my
friends, we are not even talking about “Neapolitan”, instead we are talking about
“Rocky Road”! Sometimes a VERY Rocky Road.
One can “create” a truly “new” commercial enterprise and “create new jobs”;
“rescue” or “preserve” a “troubled business” and thus “preserve jobs”; “expand” an
existing business that is ready to expand and increase the number of jobs so as to
meet the minimum of ten (10) per EB-5 investor and nets an end result of
expanding by 40% in terms of either number of jobs or net worth of that business;
totally “restructure” or “reorganize” an existing business (which may be stable but
has plateaued) such that something truly different and thereby “new” emerges; or
combine a “rescue” operation with an “expansion” taking into account the
combination of requirements (I know it can be done because it has been done).
WOW! Where to start?
I suggest starting at the beginning. Learn all you can about the options available.
Learn their differences. Learn how they might overlap. Learn how a
combination might actually increase your statutory and regulatory requirements
(not to worry, like I said, it has already been done successfully). Bottom line is:
DO NOT proceed uninformed or “willy-nilly”; instead DO take the time to learn
how EB-5 works in practical terms. The next step is to create a doable plan and
try your darndest to stick to it! If you can poke holes in your own plan upfront
before embarking on a pointless journey the better off you will be. If you can poke
holes in your plan, USCIS can poke even more holes in it. Take the time to find and
repair the flaws in a given plan. In other words, find and fix those holes
yourself instead of running the risk of approaching USCIS with any
petition based on a flawed Business Plan.
Per the AAO, from the non-precedent found at JUN122013_01K1610 as footnote
The regulation at 8 C.F.R. § 204.6(g)(1) requires an individual investor to identify the sources
of all capital invested and to demonstrate that all invested capital has been derived by lawful
means when filing an I-526 petition for classification as an alien entrepreneur.
The same is true for the Matter of Ho-Compliant Business Plan, it too is truly only
needed for an actual/real I-526 or an EXEMPLAR I-526 filed as an I-924
Amendment. So, just know that at some point whether it is a task left to a
“Regional Center” or the individual “Direct” or “Stand-Alone” investor; or
“Non-Regional Center group”; a Matter of Ho-Compliant Business Plan WILL
usually be required.
Look directly to the implementing regulations at 8 CFR 204.6(j):
(4) Job creation
(i) General. To show that a new commercial enterprise will create not fewer than ten
(10) full-time positions for qualifying employees, the petition must be
(A) Documentation consisting of photocopies of relevant tax records,
Form I-9, or other similar documents for ten (10) qualifying employees, if
such employees have already been hired following the establishment of
the new commercial enterprise; or
(B) A copy of a comprehensive business plan showing that, due to the
nature and projected size of the new commercial enterprise, the need for not
fewer than ten (10) qualifying employees will result, including approximate
dates, within the next two years, and when such employees will be hired.
(ii) Troubled business. To show that a new commercial enterprise which has been
established through a capital investment in a troubled business meets the statutory
employment creation requirement, the petition must be accompanied by evidence
that the number of existing employees is being or will be maintained at no less than
the pre-investment level for a period of at least two years. Photocopies of tax
records, Forms I-9, or other relevant documents for the qualifying employees and a
comprehensive business plan shall be submitted in support of the petition.
(iii) Immigrant Investor Pilot Program. To show that the new commercial enterprise
located within a regional center approved for participation in the Immigrant Investor
Pilot Program meets the statutory employment creation requirement, the petition
must be accompanied by evidence that the investment will create full-time positions
for not fewer than 10 persons either directly or indirectly through revenues
generated from increased exports resulting from the Pilot Program. Such evidence1
may be demonstrated by reasonable methodologies including those set forth in2
paragraph (m)(3) of this section.
The export “requirement” was made optional by a statutory amendment, the regulations
have not kept pace with change.
2 This now commonly referred to as an Economic Impact Report or Analysis. However, it
too is based on a comprehensive Business Plan!
In a 1998 Precedent Decision, AAO fully discussed and described a Business Plan
(BP), its, usefulness, and it’s basic components. I know that many readers have
seen this blurb before but for the uninitiated, I am going to toss it out there again.
All RC investors and MOST “Stand-Alone” investors will eventually need a
compliant BP. Here is what Matter of Ho, 22 I&N Dec.206 (AAO 1998) has to say
about the necessary part of the plan:
“.............................................................................To be “comprehensive,”
a business plan must be sufficiently detailed to permit the Service [now USCIS] to
draw reasonable inferences about the job-creation potential. Mere conclusory
assertions do not enable the Service to determine whether the job-creation
projections are any more reliable than hopeful speculation.
A comprehensive business plan as contemplated by the regulations
should contain, at a minimum, a description of the business, its products
and/or services, and its objectives. The plan should contain a market
analysis, including the names of competing businesses and their relative
strengths and weaknesses, a comparison of the competition’s products
and pricing structures, and a description of the target market/prospective
customers of the new commercial enterprise. The plan should list the
required permits and licenses obtained. If applicable, it should describe
the manufacturing or production process, the materials required, and the
supply sources. The plan should detail any contracts executed for the
supply of materials and/or the distribution of products. It should discuss
the marketing strategy of the business, including pricing, advertising, and
servicing. The plan should set forth the business’s organizational structure
and its personnel’s experience. It should explain the business’s
staffing requirements and contain a timetable for hiring, as well as job
descriptions for all positions. It should contain sales, cost, and income
projections and detail the bases therefor.FN4 Most importantly, the business
plan must be credible.
Certainly no astute investor would place half a million or a million
dollars into a business that he had not thoroughly researched. Creating a
comprehensive business plan as described above is normal practice for
any business[person] seeking to operate a viable business.” Ho at 213.3
The Service recognizes that each business is different and will require
different information in its business plan. These guidelines, therefore, are not
That’s my two-cents, for now.
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3 It is businessman in the original 1998 decision. I am just being PC here.