The International Entrepreneur Rule Explained
For any foreign entrepreneur looking to build his business in the United States, now may be the prime time to do so. The International Entrepreneur Rule (IER), or Parole for Entrepreneurs, or EB-6, as it is also known, is a new program that makes it much simpler for qualifying international entrepreneurs to relocate and build their businesses on American soil.
Initially, the parole program was scheduled to go into effect on July 17, 2017, but was delayed until March 14, 2018.
Who exactly is being afforded this novel opportunity and what this new rule means for foreign entrepreneurs? The simplified breakdown is as follows.
What is a Parole
- Parole is not a regular nonimmigrant status. Rather, parole is a discretionary permission to enter and work in the U.S. for the qualifying startup entity. Parole allows you to bypass getting a visa through a U.S. consulate and apply for entry into the U.S. upon parole approval.
- Parole does not directly lead to permanent residence unless the entrepreneur qualifies for it under another immigration program.
- Parole entry is not considered an official admission to the U.S. Therefore, parolees cannot later change their status to another nonimmigrant or immigrant visa classification within the U.S. and are generally required to depart the United States and apply for a visa at a U.S. Consulate abroad in order to return in another nonimmigrant status, such as H-1B, O-1, E-1, E-2, L-1, TN, etc. or as a permanent resident.
Parole Qualifying Criteria in a Nutshell
- The U.S. Startup Entity was formed within the last five (5) years immediately preceding the date of the filing of the initial parole application
- Entrepreneur owns as least 10% of the startup entity
- Entrepreneur has an active and central role in the operations and future growth of the entity (mere passive investor will not qualify)
- The startup entity has received significant funding from either:
- Qualified U.S. Investor(s) in the total amount of $250,000 or more, within 18 months immediately preceding the application; or
- Government grant or award in the total amount of $100,000 or more, within 18 months immediately preceding application; or
- If the entity partially meets one or more of the above criteria related to capital investment or government funding, Entrepreneur may still qualify for parole under Alternative Criteria with evidence that the startup will provide significant public benefit to the U.S.
- Formation of a New Startup Entity
An entity may be considered recently formed if it was created within the 5 years. See 8 CFR 219.12(a)(2), 8 CFR 103.2(a)(7).
- Applicant is an Entrepreneur
The applicant is an entrepreneur of the startup entity who is well-positioned to advance the entity’s business. An applicant may meet this standard by providing evidence that he or she:
a) Possesses a significant (at least 10%) ownership interest in the entity at the time of adjudication of the initial grant of parole; and
b) Has an active and central role in the operations and future growth of the entity, such that his or her knowledge, skills, or experience would substantially assist the entity in conducting and growing its business in the United States. See final 8 CFR 212.19(a)(1). Passive investors do not qualify.
- Significant U.S. Capital Investment or Government Funding
The startup entity has a substantial potential for rapid growth and job creation. An applicant may be able to satisfy this criterion in one of several ways:
a. Investments from established U.S. investors.
The entity must have received investments of capital totaling $250,000 or more, within 18 months immediately preceding the application from qualified U.S. investors.
Who can be considered Qualified investors?
- Non-US based investors do not qualify
- Qualified Investors, such as venture capital firms, angel investors, or start-up accelerators, must have established records of substantial investment in successful start-up entities if, during the preceding 5 years:
- The individual or organization made investments in start-up entities in exchange for equity, convertible debt or other security convertible into equity commonly used in financing transactions within their respective industries comprising a total in such 5-year period of no less than $600,000; and
- Subsequent to such investment by such individual or organization, at least 2 such entities each created at least 5 qualified jobs or generated at least $500,000 in revenue with average annualized revenue growth of at least 20 percent.
b. Government grants. The start-up entity must have received significant awards or grants totaling $100,000 or more from Federal, State or local government entities that typically provide such funding to U.S. businesses for economic, research and development, or job creation purposes.
c. Alternative criteria. If the above investment criteria is only partially met, the entrepreneur may still qualify for parole if there is supporting evidence as to the startup’s considerable potential for fast-paced growth and job creation, such as:
- number of users or customers;
- revenue generated by the start-up entity;
- social impact of the start-up entity;
- national scope of the start-up entity;
- positive effects on the start-up entity’s locality or region;
- success using alternative funding platforms, including crowdfunding platforms;
- the applicant’s academic degrees;
- the applicant’s prior success in operating start-up entities as demonstrated by patented innovations, annual revenue, job creation, or other factors; and
- selection of the start-up entity to participate in one or more established and reputable start-up accelerators or incubators.
Period of stay in the U.S. on the parole
- An applicant who meets the parole criteria (as well as a spouse and minor unmarried children) generally may be granted parole for up to 30 months (2.5 years).
- Parole may be extended for an additional 30 months (2.5 years), for a cumulative 5-year maximum.
Requirements to extend the parole
- The entrepreneur retains at least 5% of ownership and continues to play an integral role
- The entrepreneur maintains a household income of four (4) times the federal poverty line
- In addition, at least one of the following must also be demonstrated in order to be considered for parole extension:
a) The business has created at least 5 full-time jobs
b) The business has obtained at least $500,000 in qualifying investments or governmental support as described above
c) The business has produced at least $500,000 of U.S. revenue in addition to averaging at least 20% in annual growth throughout the initial parole period
d) If the business does not meet the requirements, the entity may still qualify under alternative criteria if substantial evidence is provided regarding the business's public benefit and/or its potential for such growth and job creation.
What is the Job creation requirement to extend the parole?
- A qualifying employee includes a U.S. citizen, a lawful permanent resident, or other immigrant lawfully authorized to be employed in the United States, who is not an entrepreneur’s parent, spouse, brother, sister, son, or daughter.
- Only full-time jobs qualify (over 35 work hours per week).
- Each job position must have been filled for at least 1 year by one or more qualifying employees.
Work Authorization under the parole
If parole is granted, the entrepreneur will be authorized for employment incident to the grant of parole, but only with respect to the startup entity.
Can family members join the principal entrepreneur in the U.S.?
Yes, a spouse and unmarried children under 21 may join the entrepreneur in the U.S.
The entrepreneur’s spouse will be able to apply for employment authorization consistent with new 8 CFR 274a.12(c)(34).
Reporting of material changes
The parolee must immediately report any material change(s) to USCIS, including not being employed by the start-up entity, losing a qualifying ownership or control in the entity, or if the entity ceases to operate.
Restrictions and Limitations of Parole
- Minimum Household Income. The parolee must maintain household income that is greater than 400% of the federal poverty line for his or her household size as defined by the Department of Health and Human Services.
- Number of parolees per startup. No more than three (3) entrepreneurs may receive parole with respect to any one qualifying startup entity.
- Temporary nature of stay in the U.S. The parole is a temporary allowance of stay in the U.S. and is not intended to transfer into a permanent status or extending stay past its maximum of five years, that is, unless the entrepreneur may qualify under another U.S. immigration program.
- Discretionary nature of parole grant. USCIS will consider the totality of the evidence, including evidence obtained by USCIS through background checks and other means, to determine whether the applicant has satisfied the above criteria, whether the specific applicant’s parole would provide a significant public benefit, and whether negative factors exist that warrant denial of parole as a matter of discretion. To grant parole, USCIS adjudicators are required to conclude that both: (1) The applicant’s parole would provide a significant public benefit, and (2) the applicant merits a grant of parole as a matter of discretion.
- Possibility of revocation. Throughout the duration of the parole, the entrepreneur must continue to maintain relevance and continuation of his or her business operations. In other words, parole may be revoked if the startup ever ceases its operations or is no longer judged to be providing notable public benefit.
How to Apply
An individual seeking an initial grant of parole as an entrepreneur of a start-up entity must file an Application for Entrepreneur Parole (Form I–941) with USCIS, with the required fees of $1,200 and biometrics fee of $85, and supporting documentary evidence to prove eligibility. Additional fees and forms will apply for dependent spouses and children.
Approval of parole must be obtained before the entrepreneur may appear at a U.S. consulate and then a port of entry to be granted parole.
If the entrepreneur is already in the U.S., he/she must still depart the U.S. and reenter in order to be admitted in “parole” classification.
Application to extend parole
The entrepreneur must either renew their parole period prior to its expiration, or depart the U.S. before the parole period ends.
- If the entrepreneur is in the United States at the time that USCIS approves the request for re-parole, such approval shall be considered a grant of re-parole.
- If the alien is outside the United States at the time that USCIS approves the request for re-parole, the alien must appear at a port of entry to be granted parole.
Appeals or motions to reopen
There is no appeal from a denial of parole, but a new application with new facts will most likely be considered.
An Opportune Moment
For those who wish to build their businesses in the fertile ground of the United States, but may not have qualified through other immigration procedures, now is an important time. A long awaited program to encourage innovation and economic opportunity within America's borders, the International Entrepreneur Rule is finally coming into full effect.
The Department of Homeland Security has estimated that three thousand beneficiaries will find increased opportunity under the IER every year. For those whom as-of-yet have not found any viable window for entry and U.S.-based business growth, as well as America and its newfound accessibility to global talent and innovation, this is a time worth celebrating and seizing upon.