Risk and compliance
Operating agreement
Also called LLC agreement, limited partnership agreement, LPA.
An operating agreement is the contract that governs a limited liability company serving as the EB-5 new commercial enterprise, setting voting, management, distributions, transfers and redemption. A limited partnership uses a limited partnership agreement for the same purpose. Neither is defined by the EB-5 statute or regulations, but the immigration rules test what they say.
What it decides
It decides whether the investor can vote out the manager, when money is distributed, and on what terms an interest can be bought back. Two immigration consequences live in it. First, redemption terms can destroy the investment. For petitions filed on or after 15 March 2022, 8 U.S.C. 1153(b)(5)(D)(ii)(III)(dd) excludes from "capital" any amount subject to an agreement giving the investor a contractual right to repayment, naming a mandatory redemption at a certain time or on a certain event, and a put or sell-back option held by the investor. The exclusion bites even where the right is contingent on the enterprise having sufficient cash flow. Subclause (IV) preserves one structure, and it has two parts: a buy back option exercisable solely at the discretion of the enterprise, together with the investor withdrawing the petition unless the sustainment period and other requirements are met. USCIS adds that a discretionary option still fails if surrounding provisions oblige the enterprise to exercise it, or to liquidate and refund a set amount. Petitions filed before 15 March 2022 are worked through Matter of Izummi, 22 I&N Dec. 169 (Assoc. Comm. 1998) instead. Second, the agreement is how the investor shows engagement, and here the published regulation misleads. 8 CFR 204.6(j)(5) requires day-to-day managerial control or policy formulation. eCFR today prints (j)(5)(iii) in broad terms, treating any equity holder as engaged where the organizational documents grant the rights normally given to equity holders of that entity type. That wording came from the 2019 Modernization Rule, which was vacated in Behring Regional Center LLC v. Wolf, 544 F. Supp. 3d 937 (N.D. Cal. 2021). The CFR was never corrected, so eCFR serves vacated text without a warning. USCIS applies the earlier and narrower version: the safe harbor is a limited partner whose limited partnership agreement carries the rights, powers and duties normally granted to limited partners under the Uniform Limited Partnership Act. An LLC operating agreement has no safe harbor written for it, so it has to show the member's policy making role on its own terms.
Where this is explained properly
Pages here that go into operating agreement rather than mentioning it.
Related terms
- Subscription agreementA subscription agreement is the contract by which an investor buys an interest in the new commercial enterprise, carrying the price, the investor's representations, the closing conditions and, where the offering uses one, the terms on which money leaves escrow.
- Side letterA side letter is a separate written promise between an EB-5 project and one investor, sitting outside the main offering documents and changing what those documents say for that investor alone. It is a securities practice term rather than a USCIS one, and whether it costs the investor the petition depends on which promise it carries.
- Exit strategyExit strategy is the industry name for how and when invested capital is meant to return to the investor, whether through repayment of the project loan, a sale, a refinancing or a buyback. USCIS does not define the term, and immigration law limits it: capital the investor has a contractual right to get back does not count as capital at all.
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