If you could provide the street address of the potential business in which your friend considers purchasing, I could be more specific in my answer. Without the address, my answer is general regarding the legal restriction that would apply to purchasing a business in which a $500,000 investment would satisfy the EB-5 program requirements. An investment of $500,000 might satisfy if the business is in a rural or high unemployment area, referred to as a “Targeted Employment Areas” (TEA). To qualify as a TEA the area may consist of a state, county, city or tract with an unemployment rate greater than 150% of the national average as reported by the Bureau of Labor Statistics. To determine whether a location is within high unemployment area, you have to identify the census tract that includes your business location. If the unemployment rate of the census tract exceeds the high unemployment threshold, the area could be approved as a TEA. Additionally, a rural area also qualifies as a TEA but would not be applicable to Los Angeles. By definition a rural area must be both outside of a metropolitan statistical area and outside of a city or town having a population of 20,000 or more. Los Angeles would probably not qualify as a rural area.
To qualify as an EB-5 investment by purchasing an existing business, an investor must meet the job creation requirement. If the existing business is a “troubled” business, at least 10 full-time jobs must be preserved, created, or some combination of the two. If the purchase of the existing business that is restructured, reorganized, or expended so that a new commercial enterprise results, the new commercial enterprise must create at least 10 full –time jobs. Without a restructuring, an existing business can be classified as a new commercial enterprise if the investment creates a substantial increase in net worth or full-time jobs and “substantial” has been identified as a 40% increase in the net worth or 40% increase in full time jobs.