Most prospective EB-5 investors understand that they must make an investment of at least $800,000 into a project or business that leads to the creation of at least 10 jobs. However, investors do not always have a clear understanding of the mechanics involved in making a successful EB-5 investment.
Thank you for reading this post, don't forget to subscribe!An EB-5 investment made through a USCIS-approved regional center will feature two entities that will be of significant importance to the investor. The first entity is called the New Commercial Enterprise (NCE) and the second is the Job Creating Enterprise (JCE).
What are these entities and what role do they play in the EB-5 process?
New Commercial Enterprise (NCE):
The NCE is a company that is established to engage in a for-profit business in the U.S. that is designed to benefit the economy by creating jobs and capital investment. The NCE is the entity that receives the EB-5 investors’ capital and is responsible for utilizing the funds for the project. It must meet the following criteria: The NCE is often set up as a Limited Liability Corporation (LLC) in which the regional center serves as the managing member.
- New: The NCE must be established after November 29, 1990, or must be a pre-existing business that has been significantly restructured or expanded.
- Commercial: The NCE must be involved in a for-profit business.
- Investment: It must use the capital raised from EB-5 investors for the intended development or business expansion, creating jobs in the process.
The NCE typically raises funds through EB-5 investors and is responsible for ensuring that the project is executed in a manner that creates the required number of jobs and meets other regulatory obligations. The NCE is also responsible for the transfer of the EB-5 investment funds from the NCE to the JCE.
Job Creating Enterprise (JCE):
The JCE refers to the entity or operational business that directly creates jobs as part of the EB-5 investment project. The JCE is often the business that operates the day-to-day activities of the project, like a new hotel development. This is where the EB-5 investment funds are deployed to create direct employment opportunities.
The primary role of the JCE is to successfully execute the project so that the jobs are created directly through the project and are counted towards meeting the EB-5 job creation requirements. The JCE is responsible for overseeing construction, hiring workers, operating the business, and generating the required number of jobs.
How the NCE and JCE Work Together:
The NCE and JCE are interconnected but distinct entities. In a typical EB-5 Regional Center project, the NCE serves as the investment vehicle, and the JCE is the entity that develops the project, directly hires employees, and runs the business operations. Here is how they work together:
- Fundraising: The NCE raises capital from EB-5 investors, typically pooling their investments into a larger fund that is then used for the project.
- Investment Flow: The NCE invests the pooled funds into the JCE, which uses them to fund the operational or development activities that generate jobs. This could be for the construction of a building, the purchase of equipment, or the operational costs of a business. This flow of funds is typically governed by a loan agreement between that NCE and JCE.
- Job Creation: The JCE directly creates the required number of jobs (at least 10 full-time jobs per investor), and these jobs are what make the EB-5 investors eligible for their permanent green cards.
- Job Counting: The Regional Center that oversees the project typically uses indirect and induced job creation (jobs that result from the economic activities of the project, even if not directly employed by the JCE) to help fulfill the job creation requirements.
In evaluating EB-5 investment opportunities, investors will want to have a clear understanding of who the NCE and JCE are and who is responsible for running each entity. Having experienced groups heading the NCE and JCE can be key to a successful outcome for the EB-5 investor.
