Can an existing U.S. company’s retained earnings or undistributed capital be the source of funds for an EB-5 investment?
No, an existing U.S. company’s retained earnings or undistributed capital cannot be used to fund an EB5 investment. EB5 immigration laws require an investment of personal funds to be at risk from the EB5 investor’s personal bank account. Retained earnings cannot be counted towards an EB-5 investment because they do not personally belong to the investor. If the EB5 investor has the appropriate ownership interest in the company, and the company makes a distribution to the investor either as salary or dividends, those funds could be used to make an investment. It would not be enough to simply show that a prospective EB5 investor had sufficient retained earnings in a company to fund an EB5 investment. This income must be distributed, all applicable taxes paid, and then reinvested to qualify.
As long as the necessary retained earnings are distributed to the investors personal bank account, these funds can be invested in an unrelated EB5 project or reinvested in the same business. The latter option can also be done with the E2 visa, which is often used as a stepping stone to the EB5 green card. In either case, however, the invested funds must lead to the creation of at least 10 full-time, permanent job positions for U.S. workers. Otherwise, the investment will not qualify under EB5 program regulations.
Using an E2 Visa Business to get an EB5 Visa
The E2 treaty visa allows holders to live and work in the United States as foreign entrepreneurs in exchange for making an investment in a U.S. business. There is no official minimum investment amount for an E2 visa — although most industry experts advise no lower than $100,000. This makes the E2 visa much easier to obtain for many foreign nationals than the EB5 visa. As such, it is often used to gain lawful status in the U.S. and obtain an EB5 visa. E2 investors can convert their E2 to an EB5 in several ways, such as by using their E2 business as a qualifying EB5 investment project. This can be done by either injecting additional capital into the business or, as detailed above, distributing retained earnings to the investor’s own bank account and reinvested in the E2 business.