The International Entrepreneur Rule- A Refresher for Startup Founders

International Entrepreneurs Rule

FINAL RULE – JANUARY 2017

A Simplified Summary by Tahmina Watson

Our regular readers and listeners will remember our dedicated efforts behind the International Entrepreneur Rule (IER) between 2016 and 2017. In fact, the efforts began in 2015 when the Obama administration sought ideas to modernize the immigration system. The IER was all but taken away by the previous administration. There was an attempt to rescind the rule but it didn’t quite get rescinded. That means, the rules could be revived by the Biden- Harris administration.

It is hoped my advocates around the country that could happen in the near future. As such, if you are an immigrant entrepreneur inside or outside the United States, now is a good time to start getting ready in anticipation of it. Here is one of our blogposts from the past that I thought it would be good to add.

Below you will find our FAQ on the rule. Start thinking about all the evidence you have and will need to continue to gather. We look forward to helping our clients file such applications in due course. We would love to help you if you are one of them.

If you have any questions, you are welcome to contact me at [email protected].

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What kind of startup will qualify?

The key throughout the proposed rule is ‘significant public benefit’ and ‘substantial potential for rapid growth and job creation”. These two defining phrases shape the rules.

The rules as drafted require the startup to show the following:

That it was created within the last 5 years of the application filing date. OR,
It was created within 5 years immediately before the receipt of grants, awards or investment.
Must be formed in the US and operating lawfully in the US.
Must have substantial potential to experience rapid growth and job creation through significant attraction of capital investment or government grants and awards.
It excludes small businesses that are intended to generate income for the small business owners and their families.

How can I qualify as an entrepreneur?

USCIS will look for an entrepreneur who is ‘well positioned to advance’ his/her startup. The rules require the entrepreneur to prove 2 things:

That he/she owns at a substantial interest in the startup- which has been defined as at least 10% of the entity at the time of application and must maintain at least 5% throughout the parole period. And,
Has a central and active role in the operations of the startup.

What kind of investment in the startup will qualify?

There are two types of investments that will qualify:

Capital from U.S. investors with established records of successful investments.
Awards and grants from Federal, State or local government.
An alternative criteria where one partially meets the above as long as one provide compelling evidence of potential rapid growth.

Who is a Qualified US investor and what are qualified investments?

A qualified US investor can be a venture capitalist, angel investor or startup accelerator. If an individual, must be a US citizen or a green card holder. If an organization, must be located in the US and controlled by US citizens.
The investment from a qualified investor must be at least $250,000.
The investor must have made similar investments over the last 5 years of no less than – $600,000 and that at least 2 of the investment entities (startups) have generated at least $500,000 in revenue with average annual growth of 20% OR at least 5 full-time jobs.
The investment must have been received within 18 months of filing the application.
The total sum can be a combination of investment made by one or more qualified investors.
Investment can be made in the form of “other security convertible into equity commonly used in financing transactions”.

What king of Grants or Awards will qualify?

A grant or an award for economic development from a Federal, State or local government will qualify.
It can NOT be a contract for goods or services that looks like an award/grant.
Minimum sum must be $100,000.

What if I don’t raise the above amount of money- can I still qualify?

Yes. The rules provide alternative criteria for applicants who partially meet the above investments. If you do not meet the above requirement readily, you can show the following:

You have raised a substantial level of investment even if lower than the above amounts
Provide ‘reliable and compelling’ evidence that the startup will provide significant public benefit and has the substantial potential for rapid growth and job creation.

How do I apply?

A new form has been created for this particular application- Form 941.
Filing fee will be $1200.
An additional biometrics fee of $85 will be required.
Must undertake biometrics-meaning fingerprinting and background check.
If in the US, you will attend a USCIS field office for biometrics. If outside the US, you will attend your local consulate.

Do I need to be earning an income already?

I’m afraid so. The US wants to ensure that you do not become a public charge. As such, the rule proposes that the household income an applicant is 400% above the Federal poverty guideline. That means, if a federal household income for a family of 3 is $20,020, then the entrepreneur will need to show a household income of $80,080.00.

However, this income can be a combination of income from your spouse’s annual income too. These new provisions will allow your spouse to receive a work authorization.

What happens if my application is denied?

Unfortunately, you cannot appeal such a decision. It is important to remember that this is a discretionary provision and does not confer a right to a ‘visa’. The rules do not state you cannot apply again though. The USCIS however can reopen a case on its own motion. Should the USCIS wish, the parole can also be revoked or terminated at any time.

Can my co-founders file too?

Yes. However, only up to 3 founders can apply from the same startup. This is in line with the Invest Visa provisions from the comprehensive immigration reform bill 2013.

How long will I get to stay in the US on this parole?

You will initially get – 2.5 years. You can apply to renew the parole and will receive- 2.5 more years. It is hoped that the business will be established enough to move on to a different immigrant or non-immigrant visa category (though, you may have to leave the US to get the new visa).

What about my family?

Your spouse and children will be allowed to get parole too and live with you in the US. They will have to use the traditional application form I-131 and also go through biometrics and background checks. Children under 14 don’t have to pay the $85 biometrics fee though. The administration is mindful of family unity to ensure peace of mind.

What kind of work authorization will I get?

Thankfully, the administration has thought this out well. Work authorization will be incident to approval. That means you will get permission to work without having to apply for the traditional work authorization that can sometimes take up to 6 months to receive, the delay for which could hinder your startup. For HR and I-9 purpose, the parole will be stamped to show work authorization and together with your passport, you will be able to satisfy that you have permission to work.

Your spouse will have to apply for work authorization in the traditional way though using form I-765 and pay the appropriate fees. No work authorization for children.

Do I have compliance issues to note?

Yes. Any change affecting the startup- referred to as ‘material changes’ must be reported immediately. Material change could be a criminal charge, conviction, plea or any other criminal case or government administrative proceeding against the entrepreneur or the startup. Also, if at any time your ownership falls below 5% your parole can be terminated or revoked.

Application to renew parole?

If you want to renew your parole, you must to do the following:

File another Form I-941 within 90 days of expiration of current parole. Timing is important or else your parole will be terminated.
To qualify your business must still be a startup and you must still be an entrepreneur as described above. You will have to prove the following
You have received additional qualified investment during the parole period making the total investment $500,000. And-
Generated annual revenue of $500,000 with at least 20% average growth during the initial parole period. OR
Created at least – 5 full-time job for at least 35 hours a week, for workers that are US citizens or green card holders.

What if I don’t meet all the requirements for re-parole?

Fear not. The government has thought of this too. If you cannot meet the requirements fully, then you will have to show ‘reliable and compelling’ evidence that you have accomplished a substantial amount of the re-parole requirements as mentioned above.

What happens while my re-parole is pending- can I work?

Yes. Consistent with other non-immigrant visa categories, you will receive 240 days work permission while your re-parole application is pending.

Are there circumstances under which I could lose my parole?

Yes. Parole can be terminated at any time if it is thought your startup no longer serves a significant public benefit. This could be at any time, even without notice. There will be automatic termination at the end of the parole period or if your equity drops below 5%. If you receive a notice of intent to terminate, you will get 30 days to rebut any allegations.

If there is a violation that results termination of parole of your spouse or child, you can still remain in the US. The violator will not be able to remain.

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If you think you or someone you know may be eligible for this, feel free to contact us. The rule goes into effect on July 17^th 2017. And though we have 6 months to wait, preparation for such cases can take quite some time. It is never too early to start preparing. We can be contacted at [email protected].