Interesting new AAO decision

The most recently published EB-5 related Administrative Appeals Office decision (Oct. 26, 2009) is an illuminating read. The decision is a denial of a stand-alone EB-5 petition filed in 2008, and includes opinions that will interest professionals related to the “in process of investing” issue, how funds must be used in the new commercial enterprise, what terms make a “buy-back” agreement unacceptable, the “engaged in management” requirement (with specific reference to LLC membership), the “material change” hot button, and finally, the vital importance of the business plan. The decision also lives up to the USICS standard of entertainment with its apparently random black-outs of text here and there while leaving me with the names of most of the entities involved.

The definition of a business plan in Matter of Ho, you may be interested to know, was cited in 20 of the 40 most recently published AAO decisions (aka denials), from January to October 2009. By Oct. 26 the judge seems to be frustrated and goes on for paragraphs emphasizing the importance of business plans and even implying that the petitioner might have gotten away with having only six full time employees so far if only she had submitted that comprehensive business plan.

Counsel then states that the petitioner “may” submit a comprehensive business plan, implying that the submission of a comprehensive business plan is optional. Counsel then asserts that “the business plan need only indicate the approximate dates (e.g. through pro-forma income statements) during the following two years when the employees will be hired.” As GPP I1 is a “full-functioning business,” counsel states that it need not “absolutely” submit a comprehensive business plan. Rather, counsel concludes that a comprehensive business plans is more appropriate for businesses not yet in operation. Counsel states that GPP I1 “does not exist merely in vapor” and, thus, a comprehensive business plan is not required. The petitioner submits an employee list showing six active full-time employees and seven active part-time employees, ten Forms 1-9 and payroll records.

The petitioner has now demonstrated that the new commercial enterprise employs six full-time qualifying employees. The regulation at 8 C.F.R. 5 204.6(j)(4)(i), however, explicitly states that a petitioner “must” submit evidence of ten employees ” or ” a comprehensive business plan. As the petitioner has not documented ten employees, she must provide a comprehensive business plan. We are not persuaded that the comprehensive business plan requirement may be waived for operational companies. While GPP I1 does not exist in a “vapor” we will not presume that every operational company currently operating with fewer than ten employees will create at least 10 full-time jobs within two years. It is the petitioner’s burden to demonstrate the likelihood of this job creation through the submission of a comprehensive business plan. Moreover, pro-foma income statements cannot take the place of a comprehensive business plan. Such statements, while they may show an increase in projected wages, do not provide the information specified in Matter of Ho at 213. Specifically, income statements do not explain the business’s staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions. In light of the above, the petitioner has not established that her investment will generate the necessary full-time employment.

About Suzanne (
Suzanne Lazicki is a business plan writer, EB-5 expert, and founder of Lucid Professional Writing. Contact me at (626) 660-4030.

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