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E-2 to EB-5: The Journey from Visa to Green Card


The EB-5 Reform and Integrity Act of 2022 brought many changes to the EB-5 program. For the latest information, please click here.

This is the 2nd of a trilogy of blogs addressing the E-2 visa option post the November 21 change in EB5 investment amount. Following the publication of the 3 blogs, we will host a webinar on this subject. The date will be published on

As discussed in my last blog, the combination of increased investment amount, increased processing time and quota backlogs for EB-5 has made the E-2 visa a popular alternative for investors seeking to migrate to the U.S. However, even though the E-2 visa is an end goal for many investors, a significant number wish to use the E-2 visa as a steppingstone toward ultimate permanent resident status in the U.S. We have pursued this strategy successfully for many of our E-2 clients; however, the road is paved with many potential potholes. In this 2nd of a trilogy of blog will shine a light on these potholes.

Assuming the E-2 client does not have an alternative means of applying for a green card (family, diversity lottery, extraordinary ability, performing a critical national interest), the E-2 is faced with evaluating employment-based options. The most common employment-based option is EB-2 or EB-3 based upon a PERM labor certification application. However, this option is unavailable for most E-2 investors since the U.S. Department of Labor precludes labor certification for applicants who have a significant ownership interest in the employer. The EB-1C multinational manager option may exist for some E-2s, but generally only if the U.S. business has common ownership with the overseas business which the investor managed for at least one year and the U.S. business is sizable enough that the foreign national will be able to prove that he will be spending most of his time managing other managers, other supervisors and/or other professionals. In our experience, this is not the optimal option for most of our E-2 clients.

The green card option of choice for most E-2 visa holders is EB-5. Although an EB-5 regional center application is certainly an option, most E-2s pursue direct EB-5 based on the same business that was the basis for the approval of the E-2 visa.

The amount invested for the E-2 can be used as a “down payment” toward the EB-5. However, after November 20, 2019, the much higher EB-5 investment requirement means that the down payment is a smaller percentage of the total required investment than previously.

Assuming the plan – – or even the possibility – – is that the E-2 investment will ultimately lead to EB-5, at least two key EB-5 issues must be kept in mind at the time of the E-2 application. Even though source of funds documentation requirements are significantly more lenient for E-2 than EB-5, if EB-5 is the ultimate goal, it is prudent to over document the source of funds at the E-2 stage since it may be difficult to document the source of funds of the original E-2 investment many years later.

Another EB-5 concept that must be kept in mind at the time of the E-2 application is targeted employment area (TEA). Although not relevant for E-2, the E-2 investor may be hoping to apply for EB-5 at the $900,000 TEA level sometime in the future. If that is the case, all investment amounts, from the original E-2 investment to all subsequent investments that ultimately total $900,000, must have been invested at a time when the geographical area qualified as a TEA. This can be extremely difficult to prove many years later. Therefore, it is best to have documentation available at the time of the E-2 application that the geographical area of the investment qualified as a TEA at the time of investment.

Another issue to keep in mind at the time of the E-2 application is documentation of full-time employees. If the E-2 investment is based on a new business, all employment records should be meticulously maintained and retained. If the E-2 is based on acquisition of an existing business, it is necessary to document how many full-time employees were employed prior to the E-2 investment since EB-5 will require proof of adding 10 additional full-time employees.

Since many EB-5 applications are based on businesses that do not have 10 full-time employees – – or 10 additional full-time employees – – at the time of filing the I-526 petition, the business plan is a critical document. Although the business plan is an important document for the E-2, it is not subject to the stricter EB-5 requirements for a Matter of Ho-compliant business plan. However, if EB-5 is likely or possibly on the horizon, it may make sense to have a Matter of Ho-compliant business plan as part of the E-2 application.

In addition to documenting lawful source of the investment funds for EB-5, a number of other issues need to be part of the investment planning process. For example, E-2 investment can come from a company which is owned in large part or even totally by the E-2 applicant. However, the EB-5 investment must be a personal investment. This may impact the structuring of the E-2 application.

What if the E-2 investment enterprise has been very successful? Even though the original investment amount was, say, $300,000, the business is now worth over $1 million. Can retained earnings be the source of the EB-5 investment? The answer is in the negative, which means that the E-2 client must consider withdrawing the profits of the business as a dividend or otherwise and then reinvesting as new cash into the business. There are two potential problems with this strategy. One is that it is likely to generate a taxable event. Second, although the author believes that this strategy is fully compliant with EB-5 law, the USCIS position is not completely clear.

While on the subject of withdrawing money from the business, two other issues must be kept in mind. There is a difference between withdrawal of the investment amount and withdrawal of profits. The former is not acceptable if the investor wants to use the investment amount as part of his EB-5 investment. The latter does not affect the EB-5 investment. We regularly work with companies’ accountants in structuring such withdrawals, including partnership K-1s, to make sure that the withdrawals do not create a problem at the time of the EB-5 adjudication.

Another related issue is if the investor takes a salary from the E-2 business. There is certainly nothing wrong with this. However, if the investor’s salary is exorbitant, it could be considered a withdrawal of the investment. For this reason, we generally advise keeping the salary within the DOL-sanctioned prevailing wage level to counteract any possible challenges.

There are many other issues to confront in this complex journey from E-2 to EB-5.  For example, a payment to the prior owner of a business to acquire 50% or more of an existing business may be perfectly fine to qualify for E-2. However, there is some indication that USCIS does not consider it a qualifying investment for EB-5.

Another area where the USCIS position is unclear is whether the final investment to reach $900,000 or $1.8 million must be followed by additional jobs. In other words, what if the investor created 10 jobs based upon an investment of $600,000 and subsequently adds $300,000 to reach the $900,000 TEA threshold but does not add any additional jobs? It is the author’s belief that this qualifies for direct EB-5, and we have successfully prepared applications based upon this type of factual scenario. However, the USCIS position on this issue also has never been clarified.

In summary, the E-2 visa holder can use the E-2 investment and the E-2 business as a vehicle for obtaining U.S. permanent resident status. However, the process requires significant advance planning in order to avoid the many potholes along the road.

The material contained in this article does not constitute direct legal advice and is for informational purposes only.  An attorney-client relationship is not presumed or intended by receipt or review of this presentation.  The information provided should never replace informed counsel when specific immigration-related guidance is needed.

© 2020 Klasko Immigration Law Partners, LLP.  All rights reserved. Information may not be reproduced, displayed, modified or distributed without the express prior written permission of Klasko Immigration Law Partners, LLP.  For permission, contact

  • EB-5 Immigration

    The Klasko EB-5 immigration attorney team is adept at navigating the complex investor visa program. EB-5 is a multi-year process to obtaining a US green card and you need an experienced attorney with you every step of the way.

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