What is a New Commercial Enterprise?
A New Commercial Enterprise (NCE) is a business entity established through capital from immigrant investors designed to reap profits and create jobs. An New Commercial Enterprise must generally be formed after November 29, 1990 and lawfully conduct ongoing business. EB5 New Commercial Enterprises (NCEs) that were established on or before November 29, 1990 are qualified for the EB5 Visa Program if any of the following criteria are met.
- The existing business was purchased and restructured or reorganized to form an NCE.
- The business was expanded through EB 5 investment and a 40% growth resulted through a net worth increase or the addition of new employees.
The EB5 Visa Program is an immigration path for foreign nationals and their dependents seeking to obtain US Permanent Residency through investment. Investing in an NCE is one of the key requirements to qualify for the USA EB5 Investor Visa.
How Does an EB-5 New Commercial Enterprise Work?
An EB 5 New Commercial Enterprise is set up through direct investment or through a regional center. A Direct EB-5 New Commercial Enterprise is an investment project that requires the active participation of the EB-5 Visa investor in the management and operation of the business. Direct EB5 Projects must yield jobs directly from the operations of the business itself. A Regional Center is a public or private entity assigned by U.S. Citizenship and Immigration Services (USCIS) to boost economic growth. EB 5 Regional Centers pool funds from multiple immigrant investors to finance commercial projects. Indirect and induced jobs resulting from the positive economic impact of Regional Center Projects are counted towards the job creation requirement of the EB-5 Visa Program.
What are the Requirements for an EB-5 New Commercial Enterprise Investment?
EB5 New Commercial Enterprises must meet key requirements to be qualified projects under the EB-5 Visa Program regardless of the business structure. These requirements are also the main criteria for immigrant investors who wish to gain USA Permanent Resident status.
The EB5 capital investment is cash and all real, personal, or mixed tangible assets of the immigrant investor.
The following are not qualified for EB5 Visa capital investments in a New Commercial Enterprise.
- Assets obtained directly or indirectly from unlawful activities.
- Investment made in exchange for a note, bond, convertible debt, obligation, or other types of debt contract between the immigrant investor and EB 5 NCE.
- Capital invested with a guaranteed rate of return from the EB-5 New Commercial Enterprise.
- Invested capital that is subject to any agreement between the immigrant investor and the EB5 NCE that grants the investor a legal right to repayment, with the exception that the new commercial enterprise can have a buyback option that can be exercised solely at the NCE’s discretion.
The minimum capital investment varies depending on the location of the EB 5 New Commercial Enterprise. Investors in EB-5 New Commercial Enterprises located in Targeted Employment Areas (TEAs) must invest a minimum of $800,000 USD. A Targeted Employment Area (TEA) is located in a rural area or a high unemployment area. Investments in EB5 NCEs located outside a TEA must be at least $1.05 million USD.
The EB-5 NCE is required to create jobs from the investments of immigrant investors. A minimum of 10 full-time permanent jobs must result from the capital of each EB5 Visa investor. Full-time employment means a minimum of 35 working hours per week for each qualified US worker. Qualified U.S. workers are US citizens, lawful permanent residents (LPRs), conditional residents, temporary residents, asylees, refugees, and persons living in the USA under suspension of deportation. The EB 5 Visa investor, their spouses, and their children are not considered in the required minimum job count.
Direct EB-5 New Commercial Enterprises are only able to count the direct full-time employees of the business or its subsidiaries. EB5 New Commercial Enterprises under Regional Centers are able to count direct, indirect, and induced jobs. EB 5 investors in troubled businesses are able to rely on the maintenance of jobs of the existing employees and should not be less than the pre-investment level for at least 2 years. Check our complete guide on EB5 Job Creation rules and requirements.
How to Choose an EB-5 New Commercial Enterprise Project?
Choosing an EB5 New Commercial Enterprise Project requires conducting due diligence. EB 5 Project Due Diligence is the process of evaluating EB 5 NCEs, including their business structures, to help immigrant investors choose the most suitable investment.
Here are the important factors to consider when Choosing an EB5 Project.
- The EB-5 NCE industry. Certain NCEs are preferable for EB5 Visa investments due to their job-creating capacities such as hotels, restaurants, and real estate developments.
- The location of the EB5 NCE. The required minimum investment is based on the location of the EB-5 New Commercial Enterprise.
- The EB 5 Project classification. The management and job creation requirements differ for NCEs under direct and regional center projects.
- The job-creating capacity of the New Commercial Enterprise. The 10 full-time jobs must be created and maintained for at least 2 years after the EB 5 Visa investor puts their capital in the NCE.
- The return on investment from the EB-5 NCE. Investors should look into the history of EB-5 Project Developers and Regional Centers in terms of capital repayment.
- The repayment terms. The EB5 capital investment must remain with the NCE for at least 2 years or until the filing of Form I-829 (Petition by Investor to Remove Conditions on Permanent Resident Status).
- The capital stack. Capital stack refers to the types of capital or funding invested in the EB-5 Project. The different types of investment in a capital stack have different levels of risks and returns and also vary depending on the business structure of the EB 5 New Commercial Enterprise.
- The exit strategy. The EB 5 exit strategy is the plan that outlines how financial assets will be liquidated or tangible financial assets will be sold when specified conditions have been fulfilled or exceeded.
What is the Best EB-5 New Commercial Enterprise to Invest In?
The best EB-5 New Commercial Enterprise Projects for immigrant investors are the restaurant, hotel, real estate, and biotechnology industries. These EB5 Projects are the ideal NCEs for completing the program’s job requirements for permanent residency. Our page on the Best EB5 Projects contains more information to help you choose the most suitable EB5 business to invest in.
Is a Non-Profit Organization a Qualified EB-5 New Commercial Enterprise?
No, a Non-Profit Organization (NPO) is not appropriate for EB 5 as New Commercial Enterprises must involve “for-profit” activities. A Non-Profit Organization (NPO) is typically involved in charitable, educational, religious, or artistic activities and profits are not distributed to the owners but go back to the organization. Restructuring the NPO to include for-profit activities can be done with the help of professionals such as an EB-5 Visa Attorney, EB-5 Economist, and financial advisor to qualify for the EB 5 Program.
Does a Subchapter S Corporation Work for an EB-5 New Commerical Enterprise?
No, a Subchapter S Corporation (S Corp) will not work for an EB5 NCE since this type of business structure does not allow ownership from foreign investors. A Subchapter S Corporation is a variation of a C-corp with the benefits of partnership taxation and limited liability protection. Consider other business structures such as a C-corporation, limited liability company, or limited liability partnership for your EB 5 NCE.
Can a Troubled Business Qualify as an EB-5 New Commercial Investment?
Yes, investing in a troubled business is a qualified New Commercial Enterprise for EB-5. A troubled business is a commercial entity that has been established for at least 2 years and has experienced a net loss during the 12 to 24 months preceding the immigrant investor’s EB-5 petition priority date. The loss must be at least 25% of the troubled business’ net worth before the loss.
Do I Need to Include the Business Structure of the EB-5 New Commercial Enterprise in My Business Plan?
Yes, the business structure and analysis of the NCE you invested in must be specified and explained in your EB5 Business Plan. A Business Plan for an EB-5 Visa investment is an important document submitted together with your Form I-526 (Immigrant Petition by Standalone Investor)/ Form I-526E (Immigrant Petition by Regional Center Investor). Your Business Plan for EB5 Visa demonstrates your capacity to invest the required minimum capital which yields jobs for US workers. A sound Business Plan that fits the EB 5 Program requirements increases your chances of obtaining a Green Card for US permanent residency.
Which Visa Holders are Eligible to Invest in an EB-5 New Commercial Enterprise?
Certain Nonimmigrant US Visa holders who are present in the United States are eligible to invest in an EB5 New Commerical Enterprise to obtain Permanent Residency (Green Card). A nonimmigrant visa is a stamp on the passport of foreign nationals that allows temporary residence in the US. Nonimmigrant visas with dual intent in particular are able to apply for the EB-5 Immigrant Visa without violating the conditions of their visa. Dual intent allows certain nonimmigrant visa holders to apply for US Permanent Residence legally.
Here are examples of dual intent nonimmigrant visa holders that are qualified to invest in an EB 5 NCE Project.
- H-1B Visa for specialty occupation workers.
- L-1 Visa for intracompany transferee managers and executives of global companies.
- O-1 Visa for individuals with extraordinary abilities and achievements in sciences, arts, education, business, or athletics.
- E-2 Visa for foreign investors from countries with treaties of commerce and navigation with the US.
Is an EB-5 New Commercial Enterprise Investment Risky?
Yes, the investment in a New Commercial Enterprise must be at risk for you to qualify for the EB 5 Visa as per U.S. Citizenship and Immigration Services (USCIS). The EB-5 NCE Project Investment must remain at risk until the I-829 petition filing to demonstrate that you meet the job creation and minimum investment requirements of the EB 5 Program. An at-risk EB-5 NCE investment means that the capital is subject to both gains and losses within the required period of investment.