Small business answers — NOW!

Structuring for investor capital

Question
How do we structure our business so that we can attract investors, but still maintain control of the company? 
Answer
In this case, the business will need to be incorporated, to allow you to have multiple shareholders. Then, to answer the basic question very simply: just don't sell more than 49% of the common (voting) stock.

Of course, control is a common goal among investors, so expect your goals to be in conflict to those of your new friends and their money. When this happens, you'll be presented with the dilemma of which to give up, the money or the control. It's not impossible to get both, but it's not a high-percentage expectation.

Now, before you go wandering around the marketplace looking for investors, it's important to get your attention. The securities laws and regulations for selling shares of a company to investors are deep and wide, and the organizations that monitor investment activity and enforce these laws, will punish those who violate them, sometimes including putting them in jail. So the importance of having competent securities law counsel when offering any kind of investment cannot be over-emphasized. 
 
© 2007, Small Business Network, Inc., All Rights Reserved.
Subject to the Terms of Use of AskJim.biz
Print this page   Bookmark this page   E-mail this page to a friend   Go back to previous page
AskJim ID: 232