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Advice on funding a LLC.
Lifesales
subscriber Posts: 1
I have a question on the funding of my LLC.
I have an investor that wants to invest $50,000 in my new business. In exchange for that I am giving him 15% equity in the company.
The person who drafted the operating agreement (not my equity partner) also included my LLC being charged interest on the loan, to the tune of 12% a year.
Now, if I`m funding with equity (15%), why would I also be funding with debt (12% interest per year).
Myself and my equity partner know little about these arrangements. If I have one minority / silent partner that puts up $50,000, should I be giving equity and paying interest on the loan?
I guess I don`t know what the "norm" is, but I`m really not interested in giving up equity and paying interest.
Any thoughts would be great.
John
I have an investor that wants to invest $50,000 in my new business. In exchange for that I am giving him 15% equity in the company.
The person who drafted the operating agreement (not my equity partner) also included my LLC being charged interest on the loan, to the tune of 12% a year.
Now, if I`m funding with equity (15%), why would I also be funding with debt (12% interest per year).
Myself and my equity partner know little about these arrangements. If I have one minority / silent partner that puts up $50,000, should I be giving equity and paying interest on the loan?
I guess I don`t know what the "norm" is, but I`m really not interested in giving up equity and paying interest.
Any thoughts would be great.
John
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Comments
Are you thinking a corporation would be better?
John
In any case - do not sign any investment docs without attorney review. Be sure the attorney is representing you alone. Even if money is tight now, this is a critical thing to do.
Mark