What Is the International Entrepreneur Rule (IER)
The hard truth is that the U.S. does not have a temporary work visa category specifically geared toward the needs of international entrepreneurs and start-up founders looking to come to the U.S.
How can this be? You may wonder how among all the various work visas the U.S. does offer, there is not one to help foreign entrepreneurs looking to start businesses and bring jobs to the U.S.
There is one option, the International Entrepreneur Rule (IER), but it has had a rocky past and may not seem like a viable option for foreign entrepreneurs. But let’s first look at the popular work visas and why they are not a good fit.
Existing U.S. Work Visas Don’t Help International Entrepreneurs
Of course, you may be thinking of the following temporary work visa categories: B-1 (Business Visitor); F-1/OPT (Optional Practical Training); H-1B (Specialty Occupation); O-1A (Extraordinary Ability and Achievement); E-2 (Treaty Investor); L-1 (Intracompany Transferee); and EB-1 and EB-2 (Extraordinary Ability).
The problem with these work visas is that they are intended for either foreign talent to come to the U.S. as an employee and work for a U.S.-based company already in existence or for foreign investors providing funding for, you guessed it, already established U.S.-based businesses!
Why the H-1B Visa Is Not a Suitable Option
For example, the popular H-1B visa allows for a maximum of 85,000 beneficiaries per fiscal year and includes the regular H-1B cap (65,000) plus an additional U.S. master’s cap (20,000). For reference, for FY 2021, USCIS stated that it received close to 275,000 H-1B cap registrations, meaning that only about 31% of those who applied actually were able to take advantaged of the H-1B program.
Plus, the H-1B program is not suited for foreign entrepreneurs. Among one of the several factors that determines eligibility, the “employer-employee” relationship must be established between the petitioner (the employer) and the beneficiary (the employee). This entails showing that the petitioner can hire, pay, supervise, fire, and overall control the work of the employee.
In cases where the H-1B beneficiary has an ownership stake in the petitioning organization (which tends to be the case with entrepreneurs), proving that the entrepreneur is the employee of their own start-up can be even more challenging, if not impossible. Most of the time, entrepreneurs are their own boss, therefore establishing this required relationship may make the H-1B visa not a viable option for most international entrepreneurs.
Susan J. Cohen of Mintz summarizes the argument quite well:
“Although it would seem logical that having an ownership stake in a U.S. start-up company, an objective indicator of the shareholder’s commitment to making his or her company succeed in the U.S. marketplace, should be a positive factor in the eyes of the government, unfortunately, it is seen as a negative factor: something that must be overcome when seeking an H-1B visa.”
E-2 Visa Has Many Limitations
Some may also look to the E-2 Treaty Investors visa as a way to do business in the U.S. According to the USCIS, this “nonimmigrant classification allows a national of a treaty country . . . to be admitted to the United States when investing a substantial amount of capital in a U.S. business.” The full current list of treaty countries can be found on the Department of State website.
But in addition to the previous requirements, the treaty investor must also intend to enter the U.S. only for the purpose of developing their specified business. USCIS clarifies that the treaty investor must prove this by “showing at least 50% ownership of the enterprise or possession of operational control through a managerial position or other corporate device.”
As a further hurdle, according to Cohen, “for this visa to be viable, the U.S. company must at all times be at least 50% owned by the foreign entrepreneur or others who share his or her nationality. As soon as the ownership percentage of the U.S. company drops below 50% foreign ownership, the E visa status becomes void.”
As you can imagine, this can cause great stress for entrepreneurs and investors. Start-ups are young and growing companies, always changing, evolving, and subject to a variety of factors that are not set in stone. In addition to developing a business from the ground up, the treaty investor must also worry about inadvertently voiding their visa and having to leave the U.S., leave behind their start-up, and deal with further immigration issues.
Then what are the options for international entrepreneurs?
International Entrepreneur Rule to the Rescue… Maybe
Let’s review what the IER is, why it can benefit international entrepreneurs, and why it is currently not a very well-known option.
What Is the IER?
The rule was published on January 17, 2017 by the Obama Administration in the Federal Register to “increase and enhance entrepreneurship, innovation, and job creation in the United States” and was set to take effect on July 17, 2017. This rule expanded the Secretary of Homeland Security’s discretionary parole authority to give foreign entrepreneurs permission to temporarily enter, stay, and work in the U.S. on a case-by-case basis to start and grow their business.
The rule also specifies that it is geared toward granting parole to “entrepreneurs of start-up entities who can demonstrate through evidence of substantial and demonstrated potential for rapid business growth and job creation that they would provide a significant public benefit to the United States.” This is the key point that differentiates this rule from the other work visas we reviewed earlier. It focuses on the potential for growth in the future.
Why Is the IER Important?
A paper published in February 2021 by the Progressive Policy Institute confirms that “other pathways for highly skilled immigrants, including the O-1, EB-1, and EB-2 visas, rely on a strong record of prior accomplishments and are not a good fit for entrepreneurs whose potential accomplishments lie in the future.” Furthermore, the paper highlights the reason why the IER is so important: “This inability to recognize prospective success is one of the core deficiencies in our immigration system that the IER was designed to address.”
Start-ups are not a sure thing. There is no guarantee of success – even hardworking, intelligent, and driven entrepreneurs sometimes fail. But sometimes, reward comes with taking a certain amount of risk, and that is the balance the IER tries to strike. Yes, allowing an entrepreneur from another country to come to the U.S. to turn a dream into reality is risky, but the benefits are also potentially astounding.
The Progressive Policy Institute provides some incredible statistics around the intellectual power and contributions of immigrants:
“More than half of America’s billion-dollar startups were founded by immigrants, and 80 percent have immigrants in a core product design or management role. Though immigrants make up only 18 percent of our workforce, they have won 39 percent of our Nobel Prizes in science, comprise 31 percent of our Ph.D. population, and produce 28 percent of our high-quality patents.”
Imagine the potential for growth, discovery, improvement of our way of life, and how much richer our combined human experience can be with such contributions. And keep in mind, the parole is not handed out to whoever wants it. There are still a number of requirements that must be met to be eligible for consideration.
Qualifications for IER
To be eligible for the IER parole, the following conditions must be met by each applicant:
- The start-up was formed within the past 5 years prior to the application for parole.
- The entrepreneur has ownership of at least 10 percent of the start-up at the time the parole is granted.
- This ownership requirement is reduced to 5 percent if a parole renewal is requested after the initial period of up to 30 months.
- The entrepreneur must have “an active and central role in the operations and future growth of the entity.”
- Show evidence of one of the following:
- Receipt of at least $250,000 from qualified U.S. investors.
- Receipt of at least $100,000 in grants or awards from government agencies.
- “Other reliable and compelling evidence of the start-up entity’s substantial potential for rapid growth and job creation.”
Considering the above, it is wise to seek the counsel of an experienced immigration lawyer to help determine your eligibility, as well as gather all the documentation, forms, and applications that will need to be submitted to apply for this parole. There is no reason that you need to navigate this IER process by yourself.
The Future of IER
As stated previously, the IER was slated to go into effect on July 17, 2017. Mere days before this date, on July 11, 2017, the Trump Administration published a rule to delay the effective date of the IER to March 2018. That rule also contained the mention of a proposal to rescind the IER altogether. The reasoning behind the delay and possible removal of the rule was the following: “… this program is not the appropriate vehicle for attracting and retaining international entrepreneurs and does not adequately protect U.S. investors and U.S. workers employed by or seeking employment with the start-up.”
On July 13, 2018 the U.S. District Court for the District of Columbia vacated this delay rule in the case of National Venture Capital Association v. Duke. The judge agreed with the Plaintiffs that DHS had violated the Administrative Procedure Act in publishing the rule to delay the effective date of the IER. Despite threatening to do away with the IER rule, the Trump Administration never did issue a final rule formally removing the IER, therefore the rule is still in effect.
The back and forth regarding its removal may have spooked entrepreneurs from taking advantage of the IER, and for good reason. Considering the amount of work that goes into putting together documentation to prove the various conditions of eligibility and the amount of money that would be on the line, until the IER is promoted as a viable option for international entrepreneurs by DHS itself, it will remain unpopular and underutilized for U.S. business development and growth.
Even organizations are banding together and asking DHS to “formally withdraw the proposed rule from the previous administration to remove IER, and to fully implement IER for the first time.” The letter, signed by 16 organizations supporting the IER, provides a sobering analysis of the untapped potential of the IER program. It refers to research published by New American Economy which “estimates that IER could create more than 429,000 jobs in the first 10 years, account for more than $25 billion of direct additional wages over 10 years, and inject more than $18 billion of indirect value into the U.S. economy.”
Seek Skilled Legal Help
If you are an international entrepreneur seeking to come to the U.S. to start and grow your business, it is imperative that you work with an experienced Columbus immigration attorney. The field of immigration law is ever-changing and is full of complexities and nuances. As a company founder, you pour your heart and soul into making sure your dream becomes a reality. Let us work as hard as you do to help take the stress and worry over immigration issues off your plate.
Sam Shihab & Associates Can Help
If you are an immigrant with any questions or concerns regarding your immigration case, H-1B visas, green card applications, or any other legal matter, speak at once to an experienced Columbus immigration attorney. A good immigration lawyer can help you and your family with any immigration issues you face and defend you if you’re accused of violating immigration law.
Our immigration attorneys will review your forms and applications for thoroughness and accuracy. Immigration laws will continually change, but an experienced immigration attorney will always be able to give you the most up-to-date immigration advice you need.
We have offices in Dublin and Columbus, Ohio, Michigan, and Texas. But our full suite of immigration law services is available to clients nationwide and even around the world.
Contact us today!