Comparison of immigration options for entrepreneurs: EB-5, L-1A/EB-13 business immigration, and EB-11 extraordinary ability
We first began writing on this topic more than 25 years ago. Which is the better immigration route for successful entrepreneurs to take: EB-5, L-1A/EB-13, or EB-11?
As alternatives to the EB-5 program, successful entrepreneurs can consider immigration to the US through 1) employment visa L-1A and immigrant visa EB-13 or 2) the extraordinary ability category (EB-11). We have helped numerous businessmen immigrate through the extraordinary ability classification. In fact, several of those clients approached us originally about EB-5 or had already received an L-1 visa. After an analysis of their credentials, we came to the conclusion that they were good candidates to immigrate via the extraordinary ability category. The benefits of this category vis-à-vis L-1A and EB-5 are manifold: no job offer is required; no investment of $800,000 is required; no need to open and develop a US business; fast processing times (a green card can be acquired in less than one year); and the green card is unconditional. Nevertheless, this category is limited to the elite, the top 1–2% in the field. At this link you can find the criteria used to adjudicate these types of petitions. If you believe you may qualify to immigrate through this extremely stringent category, please feel free to contact us.
Because L-1A/EB-13 is the more realistic option for most businessmen, the balance of this article will focus on the requirements for business immigration; the timeframes; the expenses; and provide a comparison chart between EB-5 Investor Immigration and L-1 Business Immigration.
The L-1A intracompany transferee visa allows executives or managers to transfer from the foreign company to a US subsidiary office or affiliated company to work on a temporary basis. The applicant must have been employed by the foreign company for a minimum of twelve months during the three years immediately preceding the filing of the L-1 visa petition. The applicant must be hired to work as either an executive/manager (L-1A).
There are no limitations on the nature of the business operations. The company can engage in import-export, construction, and service businesses, such as restaurants. The US operations may be different than the activities of the foreign company.
L-1 visas are granted initially for 1) one year, in the event that the American company is a new office, or 2) three years, if the American company has been in active operation for at least one year. L-1A executives and managers may have their status extended up to seven years. Extensions are not automatic: when applying for an extension it is necessary to show that the American company has developed enough to support the need for an executive or manager and that the company is in a financial position to support the L-1 employee. The foreign company must continue to operate throughout the period of the L-1 status.
To qualify as a manager (L-1A), you must:
- Direct or supervise a core function of the organization or department
- Primarily supervise and control the work of other professional or managerial employees
- Have the authority to hire, dismiss, or recommend staff for promotion.
To qualify as an executive (L-1A), you must:
- Direct the management of the organization or a major component or function
- Determine the goals and policies of the organization
- Exercise wide latitude in discretionary decision-making.
The law does not stipulate how many subordinates a person must have to be considered an executive or manager. The law also does not stipulate how many employees the company must have to qualify for an intracompany transfer. Therefore, the interpretation of the terms “executive” and “manager” is nebulous. In general, the more subordinates and the more employees in the company, the more likely USCIS will find that the person is acting as an executive or manager. The company must show that the L-1A beneficiary is not performing the service or making the product of the company, but rather is managing subordinates who are providing the company’s service or making the company’s product. If your company is small or you manage few employees, this is one issue which needs to be discussed with your lawyer.
There are two business immigration options: 1) create a new company in the United States and develop that business; or 2) purchase an existing business.
I. Opening a New Company in the US
To qualify for the L-1 visa, the American company must meet certain requirements: 1) it must have office space sufficient for its first year of operations; 2) it must have a corporate bank account; 3) the corporation must have funds to support itself during initial operations; and 4) evidence, usually in the form of a business plan, to show the type of activity the company will engage in during its first year and how many employees it will hire during that time. The company needs to show that the executive’s services will be needed after the first year, and to do that, the company must hire employees during that time.
The businessman will receive an initial L-1 approval for one year. Before the expiration of the one year, the US company will submit a petition to extend the authorization for two years. In that petition, the company will document its activities over the year; the employees it hired; the taxes it paid. The company must prove that the L-1 visa holder has acted and will continue to act as an executive or manager. This is the issue of most concern to the USCIS — have the past activities of the US company been sufficient to continue to justify the presence of the executive or manager in the future?
While the US company can submit a green card petition at any time after it has been in active operation for at least one year, usually it will wait until after the L-1 extension petition is approved for an additional two years to submit the green card petition.
Below is a very approximate timing chart, subject, of course, to USCIS processing:
|Month 1–2||Open New US Company, US Corporate Bank Account, Lease Office Space, Prepare Business Plan; Gather Documents from Foreign Company; Prepare L-1 Petition|
|Month 2–3||Submit L-1 Petition|
|Month 3–4||Approval of L-1 Petition for One Year; Issuance of L-1 Visa|
|Month 4–14||Development of US Company; Hiring of Employees; Active Operation of Company; Continued Operation of Foreign Company|
|Month 14–15||Submit L-1 Extension; Approval of L-1 Extension for Two Years|
|Month 16||Submit Green Card Petition|
|Month 20–25||Approval of Green Card Petition|
|Month 26–29||Adjustment of Status to US Permanent Resident or Receipt of Immigrant Visa|
The greatest expense is the salary paid to employees. In the US, the average employee earns $2–3,000 a month. Professional employees (those with university degrees working in their specialty) earn significantly more. Starting in Month 4, the company will begin to hire employees. The employees must continue to work through the obtaining of the green card (Month 24–29). US taxes are substantial — taxes paid to social security; medicare; unemployment fund; profit tax. The company will also need to pay rent on the office (or buy an office); retain the services of contractors (accountants, lawyers); and incur other business expenses. The expenses — from start-up to receipt of the green card — can easily exceed $250,000. Perhaps more importantly, the opportunity costs of the substantial time spent by the businessman in developing the business also are valuable.
The primary risk is that the US company does not develop sufficiently during its first year of operation, leading to a refusal by the USCIS in either extending the L-1 or granting a green card. The other primary risk relates to the unpredictability of USCIS and the US Embassy in adjudicating these petitions and issuing visas. Notwithstanding its public pronouncements, USCIS does not appreciate “small business”; it has tightened its interpretation of the terms of “executive” and “manager”. Sometimes, a consular official can act arbitrarily in referring a petition back to USCIS for revocation. Even if an L-1 extension petition is approved by USCIS, there is no guarantee that the green card petition will be approved, although the criteria for approval are identical.
II. Purchasing an Existing Business
If the entrepreneur decides that it would be easier to purchase an existing business, he must locate an appropriate US company to be purchased. The ideal company would 1) be in existence for more than one year; 2) have numerous employees on the payroll, including professional employees; and 3) would be profitable (based on tax returns). After purchasing the company, it will submit a petition to USCIS requesting authorization to employ the businessman as an executive or manager. USCIS should grant an L-1 approval for 3 years. After the petition is approved, the US company will then submit a green card petition on behalf of the businessman.
The approximate timing:
|Month 1–3||Search for, locate appropriate US business; purchase business; prepare business plan; gather documents from foreign company; prepare L-1 petition|
|Month 4||Submit L-1 Petition|
|Month 5–6||L-1 Petition Approved for three years and L-1 Visa Issued|
|Month 7||Submit Green Card Petition|
|Month 11–14||Green Card Petition Approved|
|Month 14–17||Adjustment of Status or Immigrant Visa Issued|
The primary expense will be the purchase of the existing US business. Because the company must be large enough to support the hiring of the businessman, such companies will rarely cost less than $200,000. After the purchase has been finalized, the company will continue to incur expenses through the adjustment of status or issuance of immigrant visa. (Presumably, the company will be in a position to cover the expenses with the revenues it earns.)
The stakes are much higher because the existing US business must be purchased before even filing for the visa. The initial outlay (>$200,000) does not guarantee that a visa will be issued or that a green card will be approved. The same issues of US Government unpredictability and arbitrariness can also come into play.
As can be seen, the L-1A/EB-13 process presents immigration opportunities, but is fraught with risks. Below is a comparison of the EB-5 and L-1A/EB-13 processes.
Comparison of EB-5 and L-1/EB-13
|Timing||14–29 Months||24–36 Months (but can greatly vary); new law allows those in the US to remain in the United States during the pendency of the I-526 petition and obtain work/travel authorization during that time|
|Approval Rates||Initial L-1A — 75–85%; Extensions/EB-13 for Owner-Operator situations — USCIS does not keep such statistics; greatly dependent on success of US company
60–90%, depending on strength of source of fund documentation
|Status||Permanent Resident||Conditional Permanent Resident — condition removed in 2 years (USCIS Statistic: >95% of EB-5 conditional permanent residents have condition removed)|
|Role of Businessman in Developing the US Company||Active — finding a company to purchase or finding an office, opening a corporate bank account, hiring employees and contractors, and operating the company (e.g., negotiating and concluding contracts, participating in exhibitions, etc…)||Passive. No day-to-day management responsibility.|
|Sum of Investment||Nonrefundable expenses (salaries, rent, taxes, marketing, contractors): Approximately $200,000–$300,000||Investment: $800,000 (plus administrative expenses), usually $800,000 returned in 5–6 years (although no guarantee)|
|Limits on Where Can Live||Must be based near where US company is located until receive green card||None|
|Limits on Where Can Work||Can only work in the L-1 sponsoring company||None|
|Limits on Who Can Qualify||Only businessman or employee who has worked for at least one year in a foreign company and who will be transferred to a qualifying company to work in the US||Any individual (18 or older) who can prove the lawful source of funds: the funds can be an inheritance, a gift (e.g., from a parent or relative), a court settlement, sale of real estate, salary, dividends, capital gains.|
|Must Foreign Company Continue to Operate During Process?||Yes||Not applicable. Does not need to retain ties to home country|
|Do Inadmissibility Criteria Apply?||Yes||Yes|
|English language required||No, but helpful in operating US company||No|
|Spouse||Automatically qualifies for visa L-2 and immigration; Can work on L-2 visa (obtains employment authorization document)||Automatically included in family|
|Children||Children under 21 qualify for L-2 and green card; must be included in petition for green card by age of 21; children can study on L-2||Children <21 qualify to immigrate as dependents|
|Naturalization (US passport, able to immigrate parents quickly)||5 years after obtaining a green card||5 years after obtaining conditional green card|
As can be seen, there are significant differences between the routes to immigration. Please contact us to discuss your options.