Legal Question in Investment Law in Georgia
writing an investment contract
Is there a standard percentage amount a sole investor should be able to collect on. We are opening a small business with one investor, not a partner, and we are at a loss as to write a contract up. It is very informal, between friends, so no business plan is needed, just curious as to a percentage amount this person should collect on net profits. Thank you.
1 Answer from Attorneys
Re: writing an investment contract
There is none. I would want to caution you though to treat this "friends & family" round of finance seriously. Just imagine how Bill Gates and Paul Allen would get along today had one of them felt "cheated" out of a mere 4 or 5 % of shares in Microsoft...
The share an investor receives is always subject to the value he contributes. Its relative value for the business depends on the latter's valuation, which is usually based on the business plan. You can ignore this and allocate shares on a different basis but it might be the seed for future dissent. I would hence strongly suggest to provide for a transparent and clear mechanism to determine the valuation on which you base the investment.
Good luck with your venture!
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