Hi Eveyone-
I posted awhile back about Big Bank Blues, Thanks to those who replied! Well I am still working on my project, a small restaurant start up, and It looks like I am going to bring in a few smaller investors. I have 2 of the 5 I need lined up and I have to pitch my plan soon. I have not gotten with my CPA as it is that time of the year, the lawyer is my next stop but I know he'll want money just for talking about so I am looking here for some advice on how to set this up.

They are going to be limited investors, How do I set this up?

Do I lay out terms for retun and dates buy out?
Or
Do I just let it go and grow and buy them out as I can or as they want out?

Help!
Thanks in advance

CJL, Ohio

I would keep it simple so as not to run afoul of any securities laws. Offer them a promisory note secrued by the business itself. Put in specific payment terms,maturity, interest rate (in accordance with state regulations) and default remedies (what can they get if you fail)

This gives them something a little more "solid" then trying to deal with selling shares and securities.

Hope this was helpful and best of luck with your venture

>Hi Eveyone-
>I posted awhile back about Big Bank Blues, Thanks to those who
>replied! Well I am still working on my project, a small
>restaurant start up, and It looks like I am going to bring in
>a few smaller investors. I have 2 of the 5 I need lined up and
>I have to pitch my plan soon. I have not gotten with my CPA as
>it is that time of the year, the lawyer is my next stop but I
>know he'll want money just for talking about so I am looking
>here for some advice on how to set this up.
>
>They are going to be limited investors, How do I set this up?
>
>Do I lay out terms for retun and dates buy out?
>Or
>Do I just let it go and grow and buy them out as I can or as
>they want out?
>
>Help!
>Thanks in advance
>
>CJL, Ohio

CLJ..

You should clarify if they are to be lenders or investors. Lenders, generally loan you the money and get their return from the interest you pay during the course of the loan. Investors on the other hand, put up money for an interest in the business and receive their return from distributions of profits according to their vested interest. Investors can either be passive or active. Passive investors just put up money or credit and take an equity position and receive dividends or distributions from profits and will share in any capital gains if the business is successful and is later sold...and will not have any part in the day to day running of the business. Active investors, will also put up money or credit, take an equity position, and will receive the same returns the passive investor does, but they will be active in the day to day running of the business and will usually work in it for a salary.

Check with your state (probably the Secretary of States office) and see how many people you can have as an LLC (Limited Liability Company). I think it'll be 35 to 50. It's simple, doesn't require secuity registration and all that scrutiny. It serves pretty much like a corporation as far as protections go, but allows the business' profits to be passed through to the partners personal returns.
Hope this helps
Denny