When purchasing an existing business as part of an EB-5 investment, understanding how to allocate funds properly is crucial for meeting the program’s requirements. A key question often comes up when investing. That is, Can my investment that I paid to buy a business count towards the EB-5 investment? Here’s what you need to know.
Key Requirements for EB-5 Investment Funds
Investment Amount: The full EB-5 investment amount of $1,050,000 (or $800,000 in a Targeted Employment Area) must be held by the EB-5 business. This means the business must have access to the entire investment amount to create the required 10 full-time jobs. There must be a link between the investment and job creation.
Funds Availability: Funds transferred directly to the seller of the business do not count toward the EB-5 investment amount. The purpose of the EB-5 program is job creation so the Government requires a link. They conclude that when the funds are given to the seller, this does not have anything to do with job creation. As such, the government will discount any funds not related to job creation from the investment total. This includes:
- Professional or administrative fees.
- Funds transferred directly to the seller for purchasing the business.
Proper Fund Allocation
To ensure compliance, the invested funds should first be committed to the EB-5 company responsible for job creation. This can be demonstrated by:
Committing Funds to the Business:
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- The EB-5 applicant should transfer the investment funds to the EB-5 business entity. As such, if the investor is buying into the business and invests the money in the business rather than giving the money to the seller, this could count towards the investment.
By structuring the investment in this manner, you ensure that the full amount is available for job creation, thus meeting USCIS requirements.
To understand the full requirements for EB-5 investment and ensure your funds are allocated correctly, utilize our free resources and book a consultation with our experienced team.
