Giving investors a share in my business

[MrThompson]

Hello all!

Im starting a business and several people have expressed interest in investing, but with the amount of people offering to invest in the business and the amount they will be putting in a partnership seems unrealistic and turning the business into a corporation seems like too much of a legal hassle.

I want to retain control over the business, and none of my investors have a problem with this as I have the training and expertise to run this place, and I am going to be putting all the work in, while the extent of their investment is going to be monetary.

What I was wondering was this… Is there any way to guarantee my investors a return on what they put in that reflects the amount of profit I make, and that leaves me in control of the business, that won't cause me a lot along the lines of legal trouble or fees?

I'm aware that these things can be really, overly, even unnecessarily, complicated but it seems like there should be some way I can cover both myself and my investors legally in this without a huge amount of trouble. Here's hoping there's something I can do to get around a lot of the trickier laws and requirements for this sort of thing

 

[wwilse]

Response

You can do all this with a partnership agreement. But realistically, your partners would be well advised not to enter into a partnership (i.e. as opposed to a protected entity) in which they have no control. This would make them liable for any debts you incur.

A more realistic approach to raising capital for a company is forming a protected entity, be it a corporation or LLC, and selling shares or interests in such entities. Then the process of operational control, profit sharing, etc. can be spelled out in the Shareholder Agreement.

You would be much better off spending money up front to have an attorney and accountant set up your company properly.