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The Entrepreneurial Spirit – Still Not Alive in Our Immigration System

Murali Bashyam

A few days ago, an owner of a multinational company approached us about obtaining U.S. permanent residency.  This person has a successful company in another country, and that company now has a subsidiary in the U.S.  The U.S. company is growing and hiring U.S. workers.

The owner, who also manages both businesses but currently resides in another country, now wants to live in the U.S.  He wants to reside in the U.S. and help his U.S. subsidiary grow even faster.

Under U.S. immigration laws, this should be no problem, right?

Not so fast.  Let’s review his options.

Can his own company in the U.S. sponsor him for permanent residency through the PERM labor certification process?

No.

For a company to sponsor an employee through the PERM process, they must advertise the position to see if there are available U.S. workers for the job.  Therefore, a legitimate job opening mus exist.

In this situation, since the person has a substantial ownership interest in the U.S. company, the Department of Labor (DOL) will deem that a legitimate job opportunity does not exist.  Basically, the company and the ‘employee’ are one in the same.

What about the Employment-Based One Category (EB-1) for Multinational Executives and Managers?  He is an Executive and Manager of a Multinational company, so this category should work, right?

Maybe, but it depends on how both the companies are structured from an ownership standpoint.

The U.S. Citizenship and Immigration Service (USCIS) has been applying the Neufeld Memo’s definition of the employer-employee relationship to these types cases as well. In order for a company to sponsor a multinational manager or executive, it must prove that an employer-employee relationship exists and the employer has to the right to fire the employee.  If the employee also holds a significant ownership interest in the US company, the USCIS position is that the employer-employee relationship might not exist.  Therefore, therefore it’s important to seek counsel to structure the two companies the right way from an ownership standpoint.

Having said that, the EB-1C category for Multinational Executives and Managers is the best category to explore for these types of individuals.

How about the Employment-Based Five (EB-5) category for foreign investors?  Since the owner of this company is also investing in it, this should work, right?

It depends.

This category requires the foreign investor to invest 1.8 million U.S. Dollars (USD) (or $900,000 in a rural area) of his/her own cash (no loans) in a company that creates 10 full-time jobs (5 full-time if in a rural area) for U.S. workers. This investment amount increased as recently as late last year.

Unfortunately, this individual does not meet the 1.8 million USD threshold.  His U.S. subsidiary, however, will likely have 10 U.S. workers within the next year.  But since the monetary investment in the U.S. company isn’t even close to 1.8 million USD, this category won’t work right now.  However, that doesn’t prevent investor/entrepreneur from investing more money in the enterprise in the future and applying for the EB-5 category.

What are his other options?

 He does not qualify under the EB-1 Extraordinary Ability or Employment-Based Two (EB-2) National Interest Waiver categories either.  Those categories are for people who have reached the top of their fields.  In the business category, has this individual reached the level of a Bill Gates or Warren Buffett?  Not yet.  But even if the person hasn’t reached the level of Gates or Buffett, accomplished serial entrepreneurs can still explore these categories for residency.

Can he apply for the E-2 (Treaty-Investor) visa?

If he is a national of India or China, two of the nations in the world that have the most graduates with STEM degrees, he would not be eligible for this benefit. The E-2 (Treaty-Investor) visa is given to individuals who have made a “substantial” investment in a new or operating business in the U.S.  It is based upon treaties we hold with the applicants’ country. Surprisingly, the U.S. does not have a Treaty with India or China, so its citizens are not eligible for an E-2 investor visa.    Therefore, Indian and Chinese nationals cannot use the E-2 visa to start businesses in the U.S. and create jobs.

Anything else?

What we have here is a U.S. immigration policy that makes it difficult for this individual, an entrepreneur who created a U.S. subsidiary of his foreign company, invests in the U.S. and creates U.S. jobs, from immigrating to the U.S. as a permanent resident.  In a time when we have high unemployment and a weak economy, is this the immigration policy that our government should endorse?

No.  But unfortunately, it does.

The lack of options for foreign national entrepreneurs, particularly those from India and China, is yet another example of the serious need for immigration reform in the United States. According to New American Fortune 500 in 2019: Top American Companies and Their Immigrant Roots (July 2019), The Partnership for a New American Economy found that:

44.6 percent, or 223 companies, in the Fortune 500 were founded by immigrants or their children. Of those companies, 101 were founded directly by foreign-born individuals while another 122 were founded by the children of immigrants […] In fiscal year 2018, the 223 New American companies on the 2019 Fortune 500 list brought in $6.1 trillion in revenue.

Indian and Chinese entrepreneurs play an important role in founding companies and creating jobs in the U.S.  Yet these entrepreneurs are not able to immigrate to the US directly in order to start their businesses.  They have to find sponsorship through other means – usually an employer, or sometimes a family member. Only later were they able to develop the companies that create U.S. jobs.

It’s a win-win situation, and a clear indication that immigrant business people and entrepreneurs are highly beneficial to the U.S. Unfortunately, the U.S. is missing out on even more impressive numbers, because there is not a simple, effective business immigration law allowing foreign nationals from India, China and other countries to come to the US to start and invest in a new business.

The Partnership for a New American Economy’s 2019 report concluded with the statement:

The New American Fortune 500 is only one example of how immigrants and their children create American jobs and drive our economy. Medium and small businesses are also vital to the U.S. economy, employing many more millions at neighborhood stores, restaurants, professional services, and other local businesses. Immigrants have a significant role to play here, with nearly 3.2 million immigrants running their own businesses. Data from 2017 also shows that immigrants continue to be more likely to be entrepreneurs than their U.S.-born counterparts. This increased propensity for business creation among immigrants is crucial for the U.S economy, as research shows that nearly all net job growth in the United States is attributed to new firms and startups.

This blog post was originally released in 2011. In almost 9 years not much has changed in regards to these immigration regulations. The U.S. economy continues to lose out on entrepreneurial opportunities brought into the country by foreign-born business people. Our government should encourage foreign entrepreneurship and investment in the U.S., not prevent it and send it elsewhere.  As a country we need to change our immigration policies in these areas, and the time to do it is now.

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