Are you searching for information on how to bring new investors into a San Diego corporation or business entity? We are often asked how to bring in a new business partner or investor. This can be a challenge, but you should be able to find the balance between maintaining control of your company and attracting the investment you need to grow.
The Two Most Common Ways to Attain Operating Capital
Basically, there are generally two primary ways to attract operating capital: offer an equity position or incur debt. The right decision may be to consider a loan or a line of credit for the business. Interest rates are returning to fairly competitive rates and this option allows you to maintain complete control over decision making.
How to Bring New Investors into a San Diego Corporation as a Member or Shareholder
You may wish to consider adding a member or shareholder to your company. The central issues surrounding this strategy are the percentage of voting stock they should hold, or security in the form of ownership of the company which will be exchanged for the invested capital. People who invest in LLCs and corporations will want a say in how the business is run, and this must be negotiated and included in any resulting agreements or contracts such as the LLC operating agreement or shareholders’ agreement.
A private equity offering is another way to bring new investors into a San Diego corporation. A “private equity” offering allows you to offer a portion of your company in exchange for operating capital.
There are complex federal and state laws that govern these types of transactions, and you do not want to find yourself in the midst of securities allegations that can result in a prison term. You simply want to make sure you do not give up control of your company, and that investors are fairly compensated for the risk they are undertaking.
You should also consider strategies for buying back that portion of the company when performance increases or improves.
Experienced San Diego Business Attorneys
The experienced San Diego business attorneys at the Watkins firm can help you to determine the best strategy to bring new investors into a San Diego corporation legally, and without relinquishing too much control. We invite you to review our recent podcast Episode 14 – Shareholders’ Rights as well as the strong recommendations of former clients and contact us or call for a free and substantial consultation at 858-535-1511.
