We are often asked how to bring new investment into a San Diego business without giving up too much or violating state or federal law(s)? What do you need to know about the legal side of adding a new investor or shareholder into your company?
Raising Operating Capital Has Its Risks
Raising operating capital for your company may require you to bring a new investor into your San Diego based business. Investors know they are taking a risk, but they want as much security as possible for their money, and a clear (and well documented) strategy for how it will be used and how it will generate a return. They also often demand a portion of “control” over the business and associated decisions.
It is important to understand the nature of attracting investment. Many well-intentioned business people have attempted to raise money for their company only to find they have violated the California business code or federal securities laws. The old model of a “country club investment” where a bunch of people go together to kick in some money can actually get a business person into a lot of trouble.
Likewise, if you bring a new member or shareholder into an existing LLC or corporation it is important to carefully classify the nature of that investor’s position from both an equity and voting rights perspective. It is also important to understand that all members of a specific “class” of investors, members or shareholders are entitled to the same treatment and benefits as others in their same class.
How to Bring New Investment into a San Diego Business
What is the best mechanism to legally bring investment capital into a business while protecting your own interests as well as the integrity and strength of your company?
The Watkins Firm are experienced small business attorneys with decades of service to the San Diego business community. We are small business owners ourselves. We can relate to these issues and we can help your company.
There are laws at both the federal and state level that govern investment capital and how it can be raised. It might be as simple as establishing an installment loan with the investor, or it may require modification of corporate documentation, shareholder agreements and/or operational agreements. Each situation is unique, and it is important to carefully consider the options, and the implications they will have on your business, profit distribution and controlling interests.
We will help you to identify options and negotiate with investors to develop the best deal possible for your company while providing the incentives and protections necessary for the investor. We will create well crafted agreements or review those provided by the investor’s attorneys to ensure your company is protected and you fully understand all of the risks and benefits.
Over 40 Years of Experience, Proven Track Record of Success
The Watkins Firm has been serving the San Diego business community for more than four decades. We have helped literally thousands of businesses like yours to determine the best way to bring new investment into a San Diego business while ensuring our client’s goals and interests are protected.
How will the investment be secured (if at all)? What position in the company will the new investor(s) hold and what class of stakeholder will they be? What is their equity position? Distribution rights? Voting rights? Say in the day-to-day operations of the company? What happens if they pass away, you want to buy them out or another capital call is required of the ownership?
These are important questions which must be considered and answered. This isn’t something you can do by downloading forms from some website. Draw upon our decades of genuine San Diego and Southern California business experience.
We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today. What is the best way to bring new investment into a San Diego business or corporation? The short answer: very carefully.
