Thread: Investing in friend's business
03-10-2012, 02:15 AM #1
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- Mar 2012
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Investing in friend's business
Jurisdiction / State: Virginia
An acquaintance started a small business a couple of years ago---a "family center" offering classes and daycare. I told her I liked the model and mentioned that I would like to invest, but didn't go into specifics. (I've never directly invested in someones business.) On two occasions I was offered vending opportunities (drink machines, leotards), but declined.
The business grew and prospered as I suspected it would. Then just recently the building was condemned and the business was in jeopardy of having to close for an undetermined period of time. Not having the capital to afford a move, she contacted me once again.
I was offered a percentage of the profits and a "seat one the board" if I would pay for the move to a new, larger location (first month's rent plus security deposit). This time I jumped on the opportunity. Time being crucial, I made a personal loan with the understanding that a formal contract was to follow. The move went smoothly, over a weekend; there was no need to close.
My question is about how much I need a business attorney and how much money I can potentially save when hiring (or not hiring) one. I'm thinking I can save a lot by editing a standard or form contract myself, rather than paying by the hour for a professional to draw up one to my specifications. I'd like to create some specific options and benefits, and I think I can write in unambiguous legalese. I just need something to start with...
What basic kind of business arrangement am I looking at? A limited, silent partnership? How much should I expect to pay for a good fill-in-the-blank contract and a good attorney to look over my new wording? Is this a good way to save money?
03-10-2012, 04:25 AM #2
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- Nov 2009
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Would you do surgery on yourself to save money?
This is far too important (unless you want to give away your money) for a DIY effort.
This is also far more complicated than just getting her to sign a contract. You could share some of her potential profits, but you will share all of her liabilities.
Go slow, you're already on thin ice.
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