- BrandMuscle, Inc.
- Merger with an affiliate of The Riverside Company
- Seatrade International Co., Inc.
- Stock sale to American Holdco, Inc.
- RKW SE
- Purchase of capital stock of Danafilms from founder and ESOP
New Immigration Path for Foreign Entrepreneurs
January 20, 2017
The U.S. Citizenship & Immigration Service (USCIS) published a new rule this week, on January 17, 2017, announcing a new immigration option for foreign entrepreneurs. Effective July 17, 2017, eligible foreign entrepreneurs can be admitted up to 5 years to start and work at their own U.S. businesses under this new “parole” category. Applicants can be granted up to 2.5 years initially, and can apply to extend the parole for an additional 2.5 years, for a total of 5 years. Up to three entrepreneurs can apply for parole per U.S. start-up.
There are several criteria that the entrepreneur must satisfy to obtain the initial parole, including showing that: (1) s/he owns at least 10% of the new U.S. business, (2) the U.S. business was formed in the last 5 years, (3) s/he will have an active and central role in the operations and future growth of the new business, (4) the U.S. business is the recipient of either at least $250,000 in U.S. capital investment, or at least $100,000 in government funding, (5) the business will provide a significant public benefit to the U.S and has potential for rapid business growth and job creation, and (6) the household income of the entrepreneur is greater than 400% of the Federal poverty guideline.
To determine whether the foreign national is well-positioned to operate and grow the business, the USCIS may look at factors such as: (1) letters from governmental agencies, investors, or business associations explaining that the foreign national has the knowledge, skill, and experience to grow the business, (2) news articles indicating that the applicant received significant attention and recognition in the field, (3) whether the applicant or entity participated in, or is participating in, a reputable and established incubator or accelerator, (4) the applicants’ experiential and educational background (including any prior successes in operating start-ups), and (5) any intellectual property obtained as a result of the applicant’s expertise.
For the extension, the entrepreneur must show the same general categories of criteria (except that his/her ownership can decrease to 5%) and, in addition, show that it achieved at least one of the following during the initial parole period: (1) the business received an additional $500,000 in U.S. investments or government funding, (2) the business reached at least $500,000 in annual revenue generated in the U.S., with an average annualized revenue growth of at least 20%, or (3) the business created at least 5 full-time jobs for U.S. workers.
Spouses can apply for work authorization once they enter the U.S., allowing them to work anywhere in any capacity in the U.S., including opening their own businesses or working for the spouse’s business.
This new immigration route is designed to increase entrepreneurship, innovation and job creation in the U.S. The USCIS estimates that about 2,940 foreign entrepreneurs will avail themselves of this new immigration path in the first year, and that 3,234 spouses will obtain work authorization and enter the US workforce. This benefits both the foreign entrepreneur and his/her family, and also the U.S. economy with job creation and an influx of capital into the economy. The USCIS estimates that, based on where foreign nationals own the most shares of new businesses in the U.S., the most likely sectors to be actively involved in this new parole category will be health care, professional, scientific, and technical services, manufacturing, and management.
Risks and Uncertainties
This new path will open doors for many foreign entrepreneurs. But, there are risks and uncertainties. The parole is granted at the U.S. officer’s discretion at the land or air border. Although the entrepreneur submits a form (and supporting documentation) with the USCIS in advance, and applies at the border with the approved application, the border officer still has discretion to decide whether and for how long to the admit the foreign national and his/her family. So, families could potentially be turned away and asked to leave the country right at the airport. And, if this happens, it will be after the foreign national already established a U.S. business and secured the required funding, putting the foreign national, U.S. business, and investors in a tough position.
Also, in order to apply for the parole, the U.S. business must already be operating, and the funding must already be secured. That is difficult to do when the foreign entrepreneur may not have a visa to be in the U.S. to establish and operate the business before the parole application.
In addition, investors may be hesitant to give the funding without any assurance that the parole will be granted. It is circular - the funding is needed to start the business and apply for the parole. But, many investors may be hesitant to give the funding before the parole is granted, allowing the business to operate and earn a return on their investment.
Further, there is no path to a greencard through this new parole category. After the 5 years expires, the entrepreneur must leave the U.S. or switch to a temporary visa or greencard. However, there are not many visa or greencard options available to foreign entrepreneurs (hence the need for this new parole category). Depending on the structure and ownership of the new entity, they may be able to apply for an H-1B, L-1, or O-1 visa, or have their employers sponsor them for greencards. But, after spending years of effort and money in operating their new businesses, entrepreneurs may be left in the lurch with few or no options to continue to stay and run their businesses.
There is a new Presidential administration starting this week, which inherently leads to uncertainties. It is unknown as to how President-Elect Trump and his administration will impact this and other immigration rules.
Report Material Changes & Apply for Travel Authorization
If granted, the parolee/foreign entrepreneur will only be allowed work for the business specified in the application, and material changes to that must be reported to the USCIS. This new parole category does not permit international travel. Parolees must apply for Advance Parole to allow for international travel during the parole period.
Ultimately, this new parole category is a step forward in recognizing the value of foreign entrepreneurship in the U.S. and the need to create immigration paths to attract and retain foreign entrepreneurs. But there remains some practical wrinkles to be ironed out.
If you have any questions about this or any other business immigration-related topic, please contact Berin S. Romagnolo.
This Alert is provided for information purposes only, and does not constitute legal advice. According to Mass. SJC Rule 3:07, this material may be considered advertising. ©2017. Posternak Blankstein & Lund LLP. All rights reserved.