Purchase Of Existing Business As EB-5 Investment

Published date23 March 2021
Subject MatterCorporate/Commercial Law, Immigration, Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Contracts and Commercial Law, General Immigration, Work Visas
Law FirmKlasko
AuthorMr H. Ronald Klasko

When and under what conditions can the purchase of an existing business qualify an investor for EB-5 purposes? Although the question is rather basic, the answer is rather elusive.

In fact, USCIS has studiously avoided answering this question and has failed to elucidate any standards or guidance which can be used to advise investors. Both anecdotally and based on reported cases, very few purchases of existing businesses have resulted in approved EB-5 petitions.

The purpose of this article is to review and analyze existing law and suggest guideposts for both USCIS and counsel to use in evaluating these cases.

INA § 203(b)(5)(A) provides EB-5 classification to aliens investing the requisite amount of capital in a "new commercial enterprise" that will create full-time employment for 10 US workers. We will evaluate the purchase of an existing business both for its qualification as a "new commercial enterprise" and for its qualification as creating the requisite employment.

8 C.F.R § 204.6(h) creates three possibilities for "establishing a new commercial enterprise:"

  • Create an original business;
  • Purchase an existing business and "simultaneous or subsequent restructuring or reorganization such that a commercial enterprise results;"
  • Expand an existing business such that a 40% increase either in the net worth or the number of employees results.

Is it significant that, although the third option (expansion) in the regulation expressly requires creating full-time employment for 10 qualifying employees, the second option does not have such an express requirement? USCIS apparently does not think so.

The focus of this article is on the second option, which by its very terms does not require a 40% increase in net worth or number of employees.

The purchase of an existing business may be accomplished through the purchase of the assets of the business or the purchase of the stock of the business. However, despite some apparently contradictory adjudications, the purchase of the assets of a business is actually not the purchase of an existing business but rather an investor using the assets of an existing business either to create an original business or to expand the investor's existing business. Therefore, an investor purchasing the assets of an existing business should be able to qualify for EB-5 either if he uses the assets in a new business that employs 10 full-time US workers or if he uses the assets in an existing business that results in a 40% expansion of that...

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