Why Limited Partnerships Are So Common in EB-5 Regional Centers

Many EB-5 investors who are ready to make an investment will likely find that investing in the vast majority Regional Center means purchasing an ownership interest in a Limited Partnership. What exactly does this mean and how does that affect an EB-5 investor’s ability to manage their investment?

Definition of a Limited Partnership

Limited Partnerships are businesses that have two different types of owners, the General Partner, and the Limited Partners.

The General Partners will typically take on a greater role in the buisness by being responsible for the day-to-day management of the business.  They also have a majority of the decision-making responsibilities but also take on the liability for the business.  This means that they are personally liable for any business debts in the event of failure or legal problems.

On the other hand, Limited Partners have less decision-making power but also less liability.  Limited Partners do not play an active role in the business. For instance, Limited Partners cannot make any business deals on behalf of the limited partnership.  This limitation also protects Limited Partners from exposure from liability.  They are only liable up to the amount they invested in the business and cannot be forced to pay for business debts with their own assets.

Regional Center Operations

Limited Partnerships in general have distinct advantages, including simpler taxation, limited regulation and more flexibility. However, the core reason why the majority of Regional Centers are formed specifically as Limited Partnerships is that the role of a Limited Partner is ideal for most EB-5 investors because of their goals.

EB-5 investors want to qualify for a green card for themselves and/or for their family members and make a sound investment that will hopefully provide a return of their principal investment at the end of the required period. Most EB-5 investors are not interested in starting or managing a business in the U.S. for the long term and prefer a more “passive” investment strategy while still satisfying the “active management” requirement outlined in the EB-5 program. 

Although Limited Partners do not retain control over how their investment funds are allocated, the role of Limited Partner entails significantly less work and less responsibility than for the General Partners while also providing invaluable liability protection. EB-5 investors can rest easy, knowing that their personal assets beyond the $800,000 investment are not at stake under any circumstances. The most they can lose is the amount they invested in the business.

In addition, limited partnerships allow EB-5 investors to withdraw their capital without jeopardizing the legal status of the partnership. Once the required investment period is over, and the investor has received an unconditional Green Card, the investor can leave the partnership—which is usually the ultimate goal for most EB-5 applicants.

Want to learn more about the EB-5 program?  At Jatoi & de Kirby, A.P.C., we’ve worked with many EB-5 investors to prepare them for their EB-5 petitions. Our attorneys have years of experience processing hundreds of cases. Contact us for more information.