Legal Question in Business Law in Maryland

Re: Investment Question

If you are guaranteeing repayment of the "investment" to this person with interest, he's really just loaning you the money. He's not really acquiring an ownership interest in your business. Therefore, what you would sign would be a promissory note. While it would be in his interest to have an attorney draw up the document with the proper language, you could buy this form at an office supply store.

Re: Investment Question

Dear Robert:

Your question has considerable securities law implications. Before, we go any further, we need to determine if your investor is accredited. Non accredited investors must receive a private placement memoranda, before investing any money. Furthermore, offerors of securities are required by both federal and state laws and regulations to disclose all material information to any investor concerning the investment (this is done usually through a private polacement memorandum.) In order to determine, if your investor is accredited, he must be one of the following:

- A director or officer.

- Have a net worth of greater than $1,000,000, exluding insurance, home, and cars.

- Have a salary of more than $200,000.

- Earn more than $300,000 jointly with his wife.

- Invest through a trust fund that has more than $5,000,000 in assets.

- Invest through a corporation that has more than $5,000,000 in assets.

Because offerors of securities are personally liable for any misstatements or omissions made to an investor(even if they have a legal entity), an attorney is always needed to write a private placement memoranda.

Lastly, if your legal entity is an LLC, an operating agreement must be created or amended to include the investment terms. If your legal entity is an S-Corp this is tricker, because S-Corps cannot have 2 classes of stock. The prospective investor would have rights that you do not have, and that would create 2 classes of stock.