A number of key terms are defined EB-5 Reform and Integrity Act of 2022 (“RIA”). Herein we explain the terms “Affiliated Job-Creating Entity,” “Job-Creating Entity,” and “New Commercial Enterprise.” Understanding these definitions is essential for both investors and businesses involved in the EB-5 program.
1. New Commercial Enterprise
A New Commercial Enterprise refers to a for-profit organization formed in the U.S. for the purpose of conducting lawful business activities and is receiving investment capital from foreign investors to participate in the EB-5 Program. This could include a wide variety of business structures, such as sole proprietorships, partnerships, registered companies, and others. The New Commercial Enterprise may be publicly or privately owned and receives capital investments from foreign investors.
2. Job-Creating Entity
A Job-Creating Entity is any organization that is formed in the United States to conduct lawful business activities, regardless of the legal structure, similar to a New Commercial Enterprise. The Job-Creating Entity is the entity that is in most instances responsible for the creation of jobs, often through receiving and utilizing capital investment from foreign investors participating in the Regional Center program. In some structures, the Job-Creating Entity and the New Commercial Enterprise is the same entity. In most structures, the Job-Creating Entity is receiving the investment capital from the New Commercial Enterprise in the form of a loan or a direct equity investment.
3. Affiliated Job-Creating Entity
A company that is owned, run, or controlled by individuals associated with the new business endeavor or an EB-5 Regional Center is considered an “Affiliated Job-Creating Entity”. A company falls under this category if it has ties to the people who control the business or Regional Center. Understanding the roles and relationships between these entities helps investors identify where funds are flowing, job creation responsibilities, and risks, and ensures that their investment plans comply with EB-5 regulations.
There can be many permutations of an EB-5 structure but most will have one or all of these entities involved.
This is part of a series on the EB-5 Reform and Integrity Act of 2022. To read more in this series, click here.