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Comparing Direct v. Regional Center EB-5 Investment

by Hamid R. Kashani, Attorney at Law
Nov 07, 2018 (last modified Feb 25, 2019)

There are some major differences between EB-5 direct investment and regional center investment.

  1. Business Control. If you invest in a regional center, you will be a passive investor in the business, most likely without much control on how your funds are managed or how the business operates. With direct investment, however, you will have an active role in your business and can direct the operation of the business. Topic image for Comparing Direct v. Regional Center EB-5 Investment
  2. Business Know-How. In a regional center, assuming you select a credible one, the business is operated by professional officers and staff who most likely will be intimately familiar with the operation of business in their industry in the United States.  With direct investment, you must either operate the business on your own instincts, likely without intimate familiarity with the business environment in the United States, or retain the services of a business advisor. According to the Small Business Administration, 30% of new businesses fail during the first year of operation, 50% during the first five years, and 66% during the first 10 years, and 75% during the first 15 years.  (but not necessarily those with a business advisor)
  3. Counting Number of Jobs Created. Regional centers are allowed to count direct jobs, indirect jobs, and induced jobs towards the number of jobs that they create on behalf of their investors. With direct investment, you are only allowed to count the direct jobs toward the number of the required jobs.  See Job Classifications for EB-5 Investment.
  4. Investment Capital. Regional centers generally require cash for investment.  With direct investment, you would be able to contribute some of your investment in form of equipment, inventory, or other tangible property.
  5. Documentation. When you invest in a regional center, the regional center will provide you with substantial documentations that you may submit to the USCIS in connection with your petitions. With direct investment, you, your accountant, and your attorney must prepare extensive documentation to present to the USCIS.
  6. Administrative Fees. Most regional centers charge an administrative fee of $50,000 to $100,000. This is in addition to the funds that you would be required to invest and will never be returned to you. With direct investment, you do not need to pay an administrative fee, but you will have expenses for organizing your business, including legal fees for business organization and applicable fees for business advisors.

Remember, it is your responsibility to carefully examine and research various business opportunities, secure business information and marketing and sales research data, consult business and financial advisors, and make an informed decision before placing your funds at risk. Note that attorneys are neither qualified nor allowed to provide financial advice. Your attorney’s duty is to represent you in light of your instructions.

Related Topics:

EB-5 Regional Center Investment

EB-5 Direct Investment

 

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