What is the best strategy for bringing new investment or investors into your San Diego corporation? What are the critical issues associated with raising equity or attracting the right partners to become members of your LLC or shareholders in your corporate entity? How can you attract the capital necessary to grow and expand the success of your company without giving away too much control?
The Two Primary Methods for Adding New Investment in Business
Generally speaking there are two primary methods to consider when bringing new investment or investors into your San Diego corporation: incurring debt or offering an equity position. Borrowing money (incurring debt) in and of itself is not an issue which may require input from your legal general counsel. If money is all that is needed and your company has the ability to borrow it a loan may be all that is required.
However, it is quite common for a corporation to offer an equity position in the business in return for an infusion of business capital. You may wish to consider adding members who can contribute not only the needed capital but additional business experience and expertise which complements the existing leadership team.
A private equity offering allows your business to remain “privately held” while offering a position of equity in the company to individuals or groups of investors. Investors are looking for a return on their investment based upon their understanding of business in general as well as the specific unique strengths and opportunities and investment in your company may present.
Usually, this will require an update to the corporate bylaws and the shareholders’ agreement in an S Corporation, Professional Corporation, Management Services Organization or C Corporation. A new investor in an LLC will usually require updates to the operating agreement.
It is important to consider how you intend to provide an investor with access to corporate and financial information regarding the status of their investment and associated dividends and/or returns. The vast majority of the shareholder disputes and lawsuits between members in an LLC center on money, pure and simple. The second largest group of disputes are associated with member and shareholders’ rights and the denial of access to corporate data, the books and other financial information.
Structuring the Right Transaction for Bringing New Investment or Investors into your San Diego Business
The Watkins Firm’s experienced business attorneys provide sound general counsel to all our business clients. Part of this relationship is to guide your LLC or corporation and its ownership through the complications of federal and state securities laws to ensure full compliance when bringing new investment or investors into your San Diego corporation.
Nothing can put the company or it’s owners in serious legal jeopardy faster than securities law violations associated with the implementation of new capital. Our attorneys develop a clear strategy and supporting documents which disclose the risks and meet all federal and state requirements while explaining the purpose for the investment funding and how it will be repaid.
We advise our clients on issues of control, passive and active investment and how to protect the company from those who would approach as a seemingly friendly investor only to later execute a hostile takeover of your company. This is a genuine risk. The process of seeking new investment and/or business partners in any corporation will result in substantial changes in the corporate structure while ensuring compliance with all federal, state and local laws, regulations and ordinances.
If you are interested in bringing new investment or investors into your San Diego corporation we invite you to review our recent Podcast Episode 10 – the Importance of a Strong Corporate Attorney as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
