Using Business Profits As EB-5 Source of Funds

Posted on Jun 26, 2024 by Rakesh Patel and Jacqueline Trevino

One of the key challenges for EB-5 investors is identifying investment funds. Many focus on personal earned income, gifts, or loans; however, another viable option is to use profits from an existing business the investor owns. 

EB-5 Investment Requirements

Investors must invest $800,000 or $1.05 million, depending on whether the project is in a Targeted Employment Area (TEA). Additionally, the investment must create at least ten full-time jobs for U.S. citizens or green card holders. 

Using Business Profits

Investors who own a profitable business can use those profits as a source of funds for their EB-5 investment. Business owners typically maintain meticulous records, including financial statements, tax returns, profit and loss statements, and other documentation. These records can not only demonstrate the source of funds but also provide a clear path of how the profits were generated and accumulated over time. 

Investors utilizing business profits for EB-5 investments should ensure that such profits are taken out of the business as their personal income, profit shares, or dividends first, to ensure they are personal funds before investing into the EB-5 project. This is necessary because EB-5 investments must be made by the investor directly, rather than through any business they may own.  



Documenting Business Formation

The investor must also provide a detailed explanation and supporting documentation regarding the formation of their business, including evidence of the initial funds used for its inception.  

While using business profits can be advantageous, investors should also consult with tax professionals to understand the tax implications of withdrawing business profits for EB-5 investment purposes. 

Avoiding Speculative Funds

Investors participating in the EB-5 program cannot use projected funds or anticipated revenues that the EB-5 business is expected to generate in the future as a source of investment capital. This ensures the investment is based on verifiable and tangible financial sources rather than speculative future earnings. 

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