The U.S. EB-5 Investor Visa Program grants permanent residence to applicants in exchange for a specific amount of capital invested into the U.S. economy that results in the creation of 10 jobs for qualifying Americans. There are two main options for investments: 1) Regional Center investment, or 2) Direct individual investment. This article will discuss the differences between the two as well as outline their benefits.
What is a Regional Center?
A Regional Center is an organization designated by the U.S. government that sponsors capital investment projects for EB-5 applicants’ investment funds. Regional Centers are located in areas of high unemployment (known as Targeted Employment Areas) or rural areas, and are pre-approved by the government in order to promote economic growth within its geographical boundary.
When a foreign national chooses to invest in a Regional Center located in a TEA, the investment requirement is US$500,000. The job-creation requirement of creating 10 full-time jobs within two years of petition approval can be satisfied through both direct and indirect job creation. An indirect job is one that is created as a result of a Regional Center’s distribution of investments to affiliated or associated commercial enterprises. As a Regional Center is designated and pre-approved by the US Citizenship and Immigration Services (USCIS), investors can rest assured that the job-creation requirement will be met and will not have to personally investigate or conduct analysis for the purpose of completing the visa petition. The Regional Center is responsible for showing that 10 full-time jobs were created for each investment of US$500,000.
Further, a Regional Center investor is not required to work in the business. The investor can therefore reside anywhere chosen in the U.S. without having to remain close to the Regional Center invested in. The individual is also not subject to loss greater than the investment of US$500,000.
What is a direct individual investment?
The direct individual investment option requires the EB-5 applicant to invest directly into a new enterprise rather than through an intermediary (a Regional Center). If the enterprise is established in a non-TEA, the minimum investment required is US$1 million.
With the direct investment method, investors themselves must prove that their investment directly created 10 full-time jobs within the first two years of their petition approval. A direct job must be created from within the new enterprise as opposed to being a collateral result of the investment in a Regional Center.
The investor must also be directly involved in the management and running of the enterprise and must therefore reside close to the invested business. The investor is liable depending on the structure of the business organization. For instance, the investor would be subject to the business’ liability for an unincorporated general partnership.
So which is better?
Although there are fewer burdens with a Regional Center investment, it may not be for everyone. For those who are looking to start their own business, a direct investment would be the better option. This would allow the investor to have control over their business operation as well as their investment. New enterprises tend to have a higher probability of success when located in non-TEAs, or in other words, areas with favorable economic conditions. Therefore, investors who have the objective of maximizing their business profits will likely find better options outside the designated poor-performing regions. Foreign nationals who wish to expand their business operations to the U.S. can do so through a direct individual investment. However, the feasibility of the new enterprise creating 10 full-time jobs for qualifying workers within the first two years must be carefully considered.
On the other hand, foreign nationals who are looking for a more passive investment option should look to Regional Centers. Building an enterprise requires significant time and business experience, both of which are eliminated with a Regional Center investment. Regional Center investors also have more freedom of mobility, seeing as how they are not bound to the location of their business, as is the case for direct investors.
Although a Regional Center investment may seem like the less cumbersome option, due diligence is an absolute necessity. Interested investors must conduct thorough research on available Regional Centers, look into their qualifications, experience, records of success with previous EB-5 applicants, and job-creation fulfillment.
A summary of the key differences between the two investment options is outlined in the table below:
| Regional Center | Direct Individual Investment | |
| Minimum Investment | 500,000 USD | 1,000,000 USD |
| Location | Designated Targeted Employment Area | Anywhere in the U.S. |
| Business management | None | Active management and operation of enterprise |
| Business control | None | Full control of business |
| Investor Mobility | Anywhere in the U.S. | Close to established enterprise |
| Job creation requirement | 10 full-time jobs, both direct and indirect | 10 full-time jobs, direct only |
| Job creation petition filing | The Regional Center | The Investor |
| Better option for | Passive investors | Entrepreneurs |
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