Over the last two decades, foreign nationals have received attention for their entrepreneurial ventures that have contributed to the growth of some of America’s most promising new business sectors. However, despite America’s rich immigrant entrepreneurial history, U.S. immigration laws have rarely kept up with the rate of innovation. Today, U.S. immigration laws are as strict as ever and often serve as impediments to international investment and economic contribution. They seem outdated compared with other nations’ approaches to attract foreign investments.
Two visa categories that are available for many foreign nationals who seek to either start a new business in the U.S. or invest in a preexisting business in the U.S. are the E-2 Treaty Investor visa and the EB-5 Immigrant Visa for Alien Entrepreneur. Both the E-2 and EB-5 are investor visas, the former being a temporary nonimmigrant visa and the latter allowing for permanent residence, and will work for some entrepreneurs who are looking to start and invest in a new business.
The E-2 Treaty Investor Visa is reserved for a qualifying national of an E-2 treaty country who is entering the United States temporarily solely to develop and direct the operations of a bona fide commercial enterprise in which they have made a substantial investment (or are actively in the process of making a substantial investment). While the amount varies depending on the geographic location of the business and the industry, the average investment amount tends to be $100,000 to $200,000. The E-2 visa is also available to certain key employees from the treaty country, such as executives, supervisors, or workers with skills that are essential to the company. The company or principal employer must be at least 50% owned by treaty nationals. Dependents of E-2 visa holders also receive E-2 visas and are eligible for work authorization. Though the E-2 visa is a temporary visa, it can be renewed in 2 year increments if there is a demonstrated need for doing so.
The EB-5 program in comparison is reserved for immigrant investors and allows the investor and his or her immediate family members to apply for a green card upon approval into the program. There are three paths to take with the EB-5 visa – Invest $1 million into a new business; invest $500,000 into a government designated EB-5 Regional Center; or invest $500,000 into a business in an area where the unemployment rate exceeds the national average by 150% or the rural population is less than 20,000. Spouses and dependents of EB-5 visa holders are also granted permanent residence.
The good news: The EB-5 visa has no restriction on nationality (unlike the E-2 visas which is restricted to treaty countries). Once the petition has been approved by USCIS, the investor and his or her immediate family members can apply for an immigrant visa and receive their green card. After two years, they can renew the green card (if certain conditions are met) and three years after that, they can apply for U.S. citizenship.
The bad news: Investors must have a minimum investment amount of $500,000.
So how does the EB-5 visa compare with similar visa programs available for entrepreneurs in other countries, for example the United Kingdom or Canada?
|Visa Type||Investment Needed||Length of Visa||Required # of jobs created||Eligible for Immigration?|
|U.S. – E-2||Varies – case by case basis (average $100,000 – $200,000)||2 years – unlimited renewals||n/a||No. However, change of nonimmigrant status possible.|
|U.S. – EB-5||$500,000 – $1,000,000||2 year green card – renewable||10 full time jobs||approved for a green card before emigrating – can apply for citizenship after 5 years|
|U.K. – Tier 1 Entrepreneur Program||£50,000 – £200,000||3 year temporary visa||2 full time jobs||Fast Track option – permanent settlement after 3 years if certain conditions met.|
|U.K. – Tier 1 Investor Program||£1,000,000||3 year temporary visa||No requirement||Fast Track option – permanent settlement after 3 years if certain conditions met.|
|Canada – Immigrant Investor Program
TEMPORARILY HALTED as of July 1, 2012
|C$120,000 – C$800,000||Permanent residence||n/a||Permanent residence – can apply for citizenship after 3 years.|
|Canada – Immigrant Entrepreneur Program
TEMPORARILY HALTED as of July 1, 2011
|Establish or acquire at least 33% equity in a qualifying Canadian business||Permanent residence||1 full time job||Permanent residence – can apply for citizenship after 3 years.|
The most relevant visa category for launching new businesses in the U.K. is the Tier 1 Entrepreneur Program. This program allows an international investor to set up or take over a British business with the infusion of “substantial” capital. The investment can be as little as £50,000 ($76,000 USD) if the funding is provided by a venture capitalist, a government department, or seed competition. Up to 2 business partners can apply for permanent residence based on the investment. The investment must create at least 2 full-time jobs. If the investor does not receive funding from one of the three qualifying entities listed above, the investor can still qualify for the Tier 1 Entrepreneur Program by investing at least £200,000 ($304,000 USD) of his or her own personal capital or assets in the business.
Tier 1’s £200,000 investment minimum is certainly a more favorable number than the EB-5’s $500,000 investment minimum. Furthermore, the U.S. EB-5 program does not emphasize an option to have the qualifying investment funded by a venture capitalist, government department, or seed competition. Likewise, only the investor himself is eligible to receive permanent residence – there is no joint partners rule like in the U.K. However, the EB-5 program provides permanent residence status to the investor and his or her family up front. Conversely, the Tier 1 Entrepreneur Program grants a three year temporary visa to the investor unless he or she meets the U.K. Fast Track requirements  for permanent residence.
The U.K. also offers an investment based program similar to the American E-2 visa: The Tier 1 Investor Program allows individuals to qualify for a visa if they invest at least £1,000,000 ($1.58 million USD) in a U.K. regulated financial institution. An investor may also qualify for the Tier 1 Investor Program if he or she owns personal assets worth at least £2,000,000 ($3.16 million USD) and has at least £1,000,000 ($1.58 million USD) under his or her control held in a U.K. regulated financial institution which has been loaned by a U.K. regulated financial institution. One key difference between the E-2 visa and the Tier 1 Investor Program is that the E-2 investor must invest in a commercial enterprise such that the funds are “at risk,” meaning that the funds are exposed to partial or total loss. Conversely, the Tier 1 Investor Program allows the investor to simply deposit money into a U.K. regulated bank.
Turning now to Canada’s visa regulations, the country’s Immigrant Investor Program and Immigrant Entrepreneur Program are two options open for internationals seeking to start businesses or invest into companies in the U.S.’s northern neighbor.
Unlike the U.S., Canada implements a point based system for internationals – relevant work experience, education level, age, and language ability are factors that will contribute to a person’s eligibility to immigrate based on their investment. Both programs grant the applicant permanent residence status which allows them to apply for citizenship after only three years.
To qualify for the Immigrant Investor Program, the investor must have a personal net worth of at least C$1,600,000 and make a minimum investment of C$800,000 in the Canadian government. The funds are transferred to CIC to allow the government to use the funds to create jobs and encourage business growth. CIC will return the investment in full, without interest, after 5 years and 3 month from the date of the transfer of funds. In an alternative option, the investor can make a one-off, nonrefundable payment of C$120,000 to CIC and be given permanent resident status. One qualifier is that the investor must have at least two years of business management experience.
The second visa type is the Immigrant Entrepreneur Program, for which investors need to establish or acquire at least 33% equity in a qualifying Canadian business that the investor will actively manage. The investment must create at least one new job for a Canadian citizen or permanent resident. The investor must have a personal net worth of at least C$300,000 and have qualifying business experience to manage the business.
That being said, these two investment based options in Canada are currently on indefinite hold due to the backlog of applications, making the Canadian program unviable. The U.S. EB-5 Program does not show any signs of being halted, and it has been in continual use since it was passed by Congress in 1990.
The biggest hurdle to have more internationals start businesses in the U.S. has been the required minimum investment in a company. An internet startup can be bootstrapped and can require far less than the required minimum investment of $ 100,000 – also, many internet startups don’t require 10 or more employees – at least not in the first year. Those are some of the reasons why there is a push for a special class of “entrepreneur” visas in the U.S. which would allow startups to enter the country with less rigid requirements. However the good news is that Comprehensive Immigration Reform seems like it is going to happen sooner rather than later. There is momentum in Congress to have new immigration laws passed in the 2013 calendar year. These rules are likely to positively affect the current regulations governing investment based immigration programs. By 2014, there could very well be an entirely new system of rules that may make it easier for foreign entrepreneurs to come to the U.S. on investment type visas.
The EB-5 program’s requirement of the creation of 10 full time jobs for all three of its investment options may be an issue for some EB-5 projects, making the project selection process important. Provided that the job creation is established, the EB-5 program in the United States allows for a more immediate path to permanent residence than the U.K. immigration system. And, because the Canadian program is on hold, the EB-5 program is still a fairly immediate option for permanent relocation through investment.
There is an additional variety of subtleties and nuances that distinguish the U.S. EB-5 program from the investment based programs in the U.K. and Canada. Establishing and documenting the source of the investment funds is required in all three countries. However, issues of timing, procedures, and papering vary considerably. Consulting with an attorney who specializes in U.S., Canadian, or U.K. immigration law is recommended. It is equally important for all interested investors to conduct proper due diligence on all financial opportunities.