“America is another name for opportunity.” This is how Ralph Waldo Emerson described American culture, and the quote illustrates why foreign-born workers and entrepreneurs come to the U.S. each year to “make it.” According to Vivek Wadha, Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University, 25.3 percent of the technology and engineering companies started in the U.S. from 1995 to 2005 were either founded or co-founded by immigrants.
The International Finance Corporation of the World Bank Group ranked the U.S. 8th out of 183 countries on ease of starting a business in its 2010 Doing Business study. However, while the report factors in procedures, time, cost and paid-in minimum capital for starting a business in its ranking, it doesn’t account for the immigration process qualification.
Depending on your business plan, the amount of time you need to remain in the U.S. and your potential contribution to the U.S. economy, your immigration options will vary. To help lay out the options for foreign-born entrepreneurs and share some industry tips, I’ve teamed up with Robert C. Meltzer, CEO of VISANOW, an online global immigration services provider.
Setting your Business Foundation
Before you are ready to launch your new business, you may need to conduct research, meet with potential business partners, scope out locations, and investigate investment opportunities. If you are a citizen or foreign national from one of the 36 countries participating in the Visa Waiver Program (VWP) -- such as Germany, Singapore and Australia -- you can stay in the U.S. up to 90 days without having to first obtain a visa.
If you need to stay in the U.S. longer than three months or you are from a country that is not part of the VWP, you can apply for a non-immigrant (temporary) B-1 visa. A B-1 visa will give you a six-month stay (renewable for six additional months) and is valid for up to one year. As a B-1 holder, your family (spouse and children under 21) can accompany you to the U.S. with a B-2 visa, but neither you nor any family members will be allowed to be able to legally work in the U.S. A short stay in the U.S. can help start the planning process and set the foundation for your future business.
Becoming a Temporary Investor
If you plan to establish a business or invest in a business in the U.S. and don’t plan to seek citizenship, you may be eligible for the E-2 Treaty Investor-Visa. The E-2 is available to foreign nationals of countries that have a treaty of trade or commerce with the U.S., such as Japan, Taiwan, the U.K. and the Philippines. Foreign nationals from these countries must possess a concrete business plan/investment project.
More specifically, the foreign national investor must control the funds invested (the investment must be at risk in the commercial sense), come to the U.S. to develop and manage the business, and create 10 or more full-time jobs (family members do not count). While specific academic credentials aren’t a requirement, a foreign national must have a connection or expertise related to their specific business investment.
There is no standard or set amount that a foreign national must invest, but the investment must be substantial enough to generate significantly more income than needed to cover the operating costs and livelihood for you and your family (and have a significant economic impact in the U.S.). As a rule of thumb, the larger the investment, the better. Furthermore, you cannot use money from a loan unless it’s a personal asset (i.e. loans secured with the assets of the investment enterprise are not allowed).
E-2s are initially valid for up to two years and are renewable indefinitely in two-year increments with no limits on the number of extensions. Basically, an E-2 is valid as long as the foreign national is active within the company. In comparison, the H-1B specialty worker, the most popular employment visa, is limited to six years and the L-1A intercompany transferee is limited to seven years for executives and managers. Furthermore, your family can come to the U.S. with you on an E-2 visa, and unlike many other visas, your spouse is able to work legally. Successful E-2 businesses include franchises, import-export companies, real estate management companies, retail stores, salons, restaurants and construction companies.
Investing for Citizenship
If you plan to invest in or establish a business, and ultimately want to stay in the U.S. long-term or seek U.S. citizenship, you may be eligible for the EB-5 Immigrant Investor visa. The EB-5 is similar to the E-2 visa, but is an employment-based green card with 10,000 visas available annually. While specific academic credentials or an entrepreneurial background aren’t required, an EB-5 holder must be involved in the day-to-day process and/or directly manage the business (for example, a board member). Furthermore, unlike the E-2, the investment required for an EB-5 is very specific; the EB-5 is all about capital or the amount of money you are able to invest in the U.S. to benefit the economy. You can attain an EB-5 by either creating a new business or investing in a troubled business.
To create a new business, foreign national entrepreneurs can invest a minimum of $1 million (again the investment must be at risk) or invest $500,000 if the business is located in a targeted employment area or “an area that has experienced high unemployment of at least 150 percent of the national average” to create at least ten full-time jobs for U.S. citizens (again, family members do not count towards your job count). If you choose to invest in a troubled business, the business must have existed for at least two years prior to your investment.
The business is considered “troubled” if it has incurred a net loss of at least or equal to twenty percent of the business’ net worth (based on generally accepted accounting principles) for the twelve to twenty-four month period before your investment. Additionally, you must maintain the minimum number of jobs at the pre-investment level for a period of at least two years. The amount of investment required for a troubled business is the same as that needed to invest in a new business ($1,000,000 or $500,000 in a targeted employment area).
EB-5s are granted conditional green cards, a temporary green card valid for two years instead of 10 years. To remove the conditional terms on the green card, you will need to prove that you’ve created the necessary jobs and that your business is profitable via tax returns, audited financial statements, and other business documents.
Waiting for StartUp Relief on the Horizon
According to Wadha, the majority of entrepreneurs do not come to the U.S. with the intent of starting a business or making an investment. Wadha’s research showed that “52.3 percent of immigrant founders initially came to the United States primarily for higher education and 39.8 percent entered the country because of a job opportunity, 5.5 percent came for family reasons, and only 1.6 percent came to start a business.”
Thus, over 50 percent of the foreign nationals on a U.S. student visa will need a company to sponsor their work permit upon graduation, but if these students want to start a business there is no company to sponsor them. Because of this immigration gap, these entrepreneurs tend to leave the U.S. after school and pursue expanding opportunities in their home countries. Enter the StartUp Visa—although still a Congressional bill, it calls for a new immigrant category EB-6 and is designed to address this gap and the challenge of “brain drain.”
The EB-6 capital and job creation requirements are less stringent than the EB-5 category. To be eligible, foreign national entrepreneurs would have to raise the following funding: $250,000 in venture capital from a U.S.-based firm, $100,000 in American angel investor, or $100,000 in angel investment from legal permanent immigrants living in the U.S. Furthermore, the EB-6 only calls for the creation of a minimum of five jobs in targeted employment areas.
After two years, if an entrepreneur can show that their business idea has created five jobs and generated at least $1 million in revenue or $1 million in additional capital, they would be eligible for a green card. Unlike the current EB-5 category, the foreign national wouldn’t have to invest any money of their own funding; essentially all that is needed is a good startup concept that can attract investors.
If you are thinking of starting a business in the next few years, the StartUp Visa may become reality in the near future as the U.S. tackles comprehensive immigration reform to fix its current immigration system, including how to harbor innovation and retain highly-skills immigrants. The U.S. economy is dependent upon entrepreneurship and innovation to maintain its global position as a world leader. If you are an immigrant entrepreneur trying to start a business in the U.S., you should consult an attorney to determine which visa/investment option would be best for you before breaking ground.
My collaborator in this posting, Robert C. Meltzer, esquire, has over 24 years of experience in immigration law and is the founder and CEO of VISANOW, an online global immigration and visa service provider. As a startup itself, VISANOW is offering all AMEX Open Forum members a complimentary consultation. Contact email@example.com to set an appointment. You can also use VISANOW’s extensive collection of immigration resources.
*Disclosure: Garage Technology Ventures invested in VISANOW.