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Foreign investors represent a huge pool of potential franchisees as the US immigration policies encourage certain types of foreign investors to invest in the US by offering investor class visa opportunities; namely the EB-5 Immigrant Investor Program and E-2 Treaty Investing. These immigrant visa programs offer legal permanent residence with no immigration constraints on ability to work within the US. The investor, his or her spouse and children under the age of 21 can live, work and go to school in the US with no work restrictions and no employer sponsorship requirements. More on the visa program:
1. EB-5 Immigrant Investor Program
To stimulate domestic investment, this program allows an investor(s) to obtain permanent status by creating a minimum number of jobs and investing significant capital in the US marketplace. After 2 years, if the immigrant can demonstrate that he/she met the EB5 program requirements, the investor and his/her qualified family members receive legal permanent resident status. This is one of the most attractive investor program for foreign franchise applicants.
EB5 Visa Program Requirements:
- The investor must invest in a new commercial enterprise in the United States; and
- Invest capitol of at least $1.0 million; and
- Plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers within 2 years.
There are exceptions and opportunities for the foreign investor to qualify with lower capital investment such as $500,000 or lower number of jobs particularly in areas with high unemployment rates and/or rural areas.
Although this program can be expensive and time consuming, it is extremely attractive to foreign investors as it gives them an opportunity to invest in the US marketplace and bring their whole family to the US eventually settling here as permanent residence with no restrictions.
The timeline and expense creates an uncertainty which may pose a problem for the Franchise Systems granting exclusive rights and designated areas to prospective franchisees who may not be admitted to the US on time. A viable alternative to the EB-5 is the E-2 Treaty Investors Non-Immigrant Visa program.
2. E2 Treaty Investors
This is a very popular program amongst foreign investors interested in becoming franchisees but it is a Non-Immigrant Visa. All individuals of another country with whom the US has a treaty of commerce have the opportunity to come to the US by applying for a renewable two-year visa if they invest capital in a US business. The initial stay is for 2 years maximum with extensions in increments of 2 years.
E2 Program Requirements:
- Investor must be from a national of a country with which the United States maintains a treaty of commerce and navigation; and
- Have invested or be actively in the process of investing, a substantial amount of capital in a bona fide enterprise in the United States; and
- Be seeking admission to the US solely to develop and direct the investment enterprise (this can be shown by showing at least 50% ownership of the enterprise or possession of operational control through a managerial position or other corporate device); and
- Must invest $100,000 minimum of their own funds
Potential investors and franchisees prefer the E-2 Visa Program as it is a much faster application process, requires less investment and avoids being classified as a legal permanent residence for taxation purpose.
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