We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co

Need Guidance - How much ownership % to give to investor?

blueandwhiteblueandwhite subscriber Posts: 1
edited April 2007 in Startup Funding
I am in the process of purchasing a business for $500k.  Half of it will be financed by the current owner with the business as collateral.  I will put up $100 and will have a loan for $100.  The remaining $50k will be provided by the investor.  Is it fair to say that the investor should have 10% ownership, or 20% ownership?  Does it matter that he will be an out-of-state investor and won`t be involved in the day-to-day of the business like I will?
Thank you very much for your input.blueandwhite2007-4-28 10:16:2


  • Options
    robertjrobertj subscriber Posts: 0 Member
    While the ultimate "fairness" answer is, of course, what the two of you can agree upon - the math is pretty straight forward. Since the purchase price sets the valuation at $500K - his $50,000 would represent 10% of the equity.
    Other important points include:

    how that is structured
    what he expects
    how he will receive his return on investment
    Robert Johnson
Sign In or Register to comment.