United States: Entrepreneur Parole: The "Startup Visa" Solution

Last Updated: February 10 2017
Article by Ceridwen J. Koski

On January 17, 2017, the U.S. Department of Homeland Security (DHS) published a final rule in the Federal Register to "implement the Secretary of Homeland Security's discretionary parole authority in order to increase and enhance entrepreneurship, innovation, and job creation in the United States." The effective date of the "International Entrepreneur Rule" is July 17, 2017.

The final rule changes the proposed rule, which was published on August 26, 2016, and formalizes efforts to create a "start-up visa" as available  work visa options most commonly used by entrepreneurs pose significant drawbacks. Still, entrepreneur parole has limitations, as it is not a visa status, but it allows certain individuals to pursue qualifying business endeavors in the United States.

Entrepreneur Parole 

Parole is not an "admission" in nonimmigrant or immigrant visa status, but rather temporary permission to live and/or work in the United States. Congressional action would be required to create a new nonimmigrant visa for entrepreneurs. Under existing law, DHS is given the discretionary authority to grant parole on a case by-case basis for "significant public benefit." The term "significant public benefit" is undefined, but is generally used for aliens who enter to take part in legal proceedings. The ability to interpret "significant public benefit" at its discretion has allowed DHS to implement regulations to facilitate entrepreneurship that would provide a significant public benefit by increasing business growth in the United States.

The final rule is expected to encourage start-ups with the potential for high growth to pursue research and development, create job opportunities for U.S. workers, and increase business activity, innovation, and dynamism to benefit the U.S. economy. Additionally, the parole requirements are expected to form a transparent framework by which DHS will exercise its discretion on a case-by-case basis.

How to Qualify

U.S. Citizenship and Immigration Services (USCIS) will accept immigration form I-941 and a $1,200 government filing fee, along with documentation supporting the required criteria as discussed below. Applicants would be able to apply from within the United States or abroad, and would be required to appear for a biometrics appointment adding a fee of $85 to the cost. Spouses and children would file dependent applications using form I-131 and paying the $575 and $85 biometrics fees. Approval of the first initial period of stay may be granted for up to 30 months (2.5 years) and will be based on the following criteria:

  • Formation of a new start-up entity. Qualifying entities must have been lawfully doing business in the United States and have been created within the five years immediately preceding the date of filing.
  • Entrepreneur. The applicant must be an entrepreneur who will advance the entity's business by:
  1. possessing at least a 10 percent ownership interest in the entity at the time of the adjudication of the initial grant of parole; and
  2. having an active role in the operation 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. A mere investor is not eligible.
  • Investment. The applicant must show, through reliable supporting evidence, the entity's substantial potential for rapid growth, which may be demonstrated through:
  1. investment from established U.S. investors—i.e., the receipt of significant investment capital (at least $250,000) from certain qualified U.S. investors (such as venture capital firms, angel investors, or start-up accelerators) with records of successful investments and histories of substantial investment in successful start-up entities; or
  2. government grants—i.e., the receipt of funds from federal, state, or local government entities totaling at least $100,000; or
  3. partially satisfying one or both of the above criteria in addition to other reliable and compelling evidence of the start-up entity's substantial potential for rapid growth and job creation.

The evidence required to satisfy the criteria listed above will be reviewed and favorable discretion exercised on applications where "the applicant's parole would provide a significant public benefit, and the applicant merits a grant of parole as a matter of discretion." Recipients of such parole will be authorized for employment "incident to status," meaning that a separate application for work authorization will not be needed for the qualifying start-up. The entrepreneur's passport and I-94 record indicating entrepreneur parole will be acceptable evidence for employment eligibility verification (Form I-9) purposes. Temporary employment authorization will be provided during the application for re-parole. Parolee spouses may apply for employment authorization by filing form I-765. Parole may be revoked if the entity ceases operations or DHS determines parole no longer provides significant public benefit.

Extension/Re-Parole

Extensions (re-parole) may be granted for up to 30 months (2.5 years) only if it is demonstrated that the entities have shown significant growth since the initial grant of parole and continue to have the potential for rapid growth and job creation.

  • Sustaining the start-up entity. The qualifying entity must have been lawfully operating in the United States and continue to have substantial potential for rapid growth and job creation.
  • Entrepreneur. The applicant must submit evidence of the following:
  1. at least 5 percent ownership in the entity (this reduced ownership amount takes into consideration that entities raise funds by selling ownership interest); and
  2. an ongoing, active role in the operations and growth of the company.
  • Investment. The applicant must show through reliable supporting evidence, the entity's continued potential for rapid growth, which may be demonstrated through:
  1. investment or grants—i.e, the receipt of investment from U.S. investors with records of successful investments, or grants from U.S. government entities, or a combination of both investments and grants, of at least $500,000 of additional funding during the initial parole period; or
  2. revenue generation—i.e., the entity reached $500,000 in annual revenue with average annualized revenue growth of at least 20 percent during the initial parole period; or
  3. job creation—i.e., the entity created at least five full-time jobs during the initial parole period; or
  4. alternative criteria—i.e., partially satisfying one or more of the above criteria in addition to other reliable and compelling evidence of the start-up entity's substantial potential for rapid growth and job creation.

If re-paroled, the applicant's maximum period of granted parole will be five years.

Key Changes to the Proposed Rule

The final rule is similar to the proposed rule with a few key changes:

  • The minimum initial investment amount was reduced from $345,000 to $250,000.
  • The minimum ownership interest was reduced from 15 percent initially to 10 percent and, at re-parole, from 10 percent to 5 percent.
  • Investment may include securities that are convertible into equity issued by an entity that are commonly used in financing transactions within the entity's industry.
  • Qualified investors no longer are required to make investments in at least three separate calendar years within a five-year period totaling at least $1 million. The final rule removed the "three separate calendar years" requirement and reduced the $1 million minimum to $600,000. The final rule maintains the requirement that subsequent to the investment, at least two of the entities each created at least five qualified jobs or generated at least $500,000 in revenue with average annualized revenue growth of at least 20 percent.
  • The "recent creation of the start-up entity" period was changed from within the past three years to within the past five years immediately preceding the filing of the application.
  • The number of jobs created within the initial period of parole was reduced from 10 to 5 to qualify for re-parole.
  • DHS clarified that qualifying revenue must be generated in the United States.
  • Periods of parole and re-parole are 30 months each rather than 2 years and 3 years.
  • Material changes which must be reported to DHS include a "significant change with respect to ownership and control of the start-up entity."
  • Ownership interest may be reduced during the initial period of parole, but not below 5 percent.

Limitations

Entrepreneurs may pursue nonimmigrant (e.g., O-1, L-1, and H-1B visas) and immigrant status (e.g., EB-1, EB-2, EB-3 visas) while in parole. However, because parole is not considered an admission, those individuals will need to process their applications at consulates outside of the United States rather than adjusting to permanent resident status or changing status in-country.

Applicants are required to maintain a household income of at least 400 percent of the federal poverty line. This threshold is intended to ensure that applicants continue to make "significant economic and related contributions to the United States." 

Only three entrepreneurs per start-up entity will be able to qualify and each applicant must meet the criteria individually.

Conclusion

The "start-up visa" concept is not new and was formally proposed by former senators John Kerry and Richard Lugar in 2010. DHS's entrepreneur parole is a solution with limitations, but it allows qualified investors and foreign entrepreneurs to develop business enterprises which have significant public benefit in the United States. Ogletree Deakins will continue to follow and report on developments related to entrepreneur parole and the International Entrepreneur Rule.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions