The International Entrepreneur Rule: Cutting Through The Hype
March 29, 2017
This January, the United States Citizenship and Immigration Services (USCIS) publicized a new regulation that is intended to encourage foreign entrepreneurs “to create and develop start-up entities in the United States, which are expected to facilitate research and development in the country, create jobs for U.S. workers and otherwise benefit the U.S. economy through increased business activity, innovation, and dynamism (82 Fed. Reg. 5238-5289. January 17, 2017)." The applicant under this status must play a key role in the business, and it cannot be a mere passive investment.
This regulation will allow foreign entrepreneurs to establish start-up companies in the United States. It will have an initial validity period of 30 months, with the possibility of extension for an additional 30 months. This rule will be effective on July 17, 2017. Like many immigration programs, there are benefits and limitations.
Entrepreneurs from any country can qualify under the new rule, unlike the E-1 and E-2 investor visas, which exclude large economies such as Brazil, China, and India, among others. There is no annual cap on the number of entrepreneurs, unlike the EB-5 program, whose annual cap is so oversubscribed nationals of China are effectively excluded unless they are willing to wait three to four years for investor status.
Like the E-1, E-2 and EB-5 visas, the foreign entrepreneur will be able to bring his or her spouse or children to the United States and they will be eligible for employment authorization.
The entrepreneur status allows up to three foreign entrepreneurs to enter the United States to run the same start-up company. Unlike the E-visa programs, these entrepreneurs can be from different countries. Each applicant must own at least 10% interest in the company.
The applicant must show that the company has received a minimum of $250,000 from an established U.S. individual or institutional investor. The investment must come from a “qualified investor” which is defined as:
A U.S. individual or entity that has made a total of at least $600,000 in investments into start-ups within the five-year period immediately preceding the parole application – and – at least two of the start-ups in which the investment was made each created a minimum of five full-time jobs for U.S. workers.
In the alternative, the applicant must show that the company has received a minimum of $100,000 from a federal, state or local government agency that typically provides funding support for the purpose of innovation, promotion of economic growth, research and development, or job creation.
If the company has only received a portion of the amount of funds required by the rule, then the applicant must show that the company would provide a “significant public benefit” to the United States as a whole.
Most importantly, USCIS can terminate the entrepreneur status at any time for any reason, and if they do so there is no appeal process. The most anticipated reasons would be fraud or a significant change to the business.
It is also important to note that this status does not lead to permanent residence. Unlike the EB-5 program, there is no green card waiting for the investor after the required amount has been invested and the jobs have been created.
If you have a start-up company that has been created within the past five years, you may be able to apply for entrepreneur status.
For questions, comments or additional information, please contact a member of the Firm's Immigration Practice Group.