Crowdfunding and Shareholders: Ways That Business-Litigation Attorneys Can Help You Grow Your Business
Internet, television, and modern technology has really changed the way that businesses and products are launched. Thanks to various forms of funding, people can reach out to others and see investments in exchange for shares of a company. Giving away parts of your company can become a complicated process, especially when you need to make decisions over other shareholders. Before you start reaching out to the public or attempt to get on a program like "Shark Tank," it's important to understand your options and the best way to handle shares or disputes. By getting the professional help of a business-litigation attorney, you can navigate tough areas and understand exactly what you are giving up for your company.
Products and Businesses
When reaching out for investments, it's important to know the difference between seeking investments for a product versus a company. A product is a single release that does not go beyond that initial product. For example, if you sold a new special type of sunglasses, you could seek investments for that product. That would be separate from any other eyewear you sold and essentially operate as an independent venture. A business-litigation attorney could set up ways so that shareholders could own a part of that product business, but you would still have exclusive access to the rest of your company overall. This allows you to keep control of your business and launch new products with some extra help through investments.
Multiple Shareholders
Before you reach out for investments, it's important to consider any current partners that you have. For example, you may have a started a company with a partner and split that ownership 50 percent each. If you go out seeking investments, then you are likely only giving your equity in the company and not your partner's. For example, if you gave away 30 percent of your personal shares, then you would be giving up 15% of the whole company. If your partner agrees to help raise investments equally, then you could both split these shares so you do not lose as much. In the previous scenario, doing this would end up taking away 15 percent of the total company or 7.5 percent of your personal shares. A lawyer can help set up these agreements to ensure the equal split and allow you to keep as much of the company as possible.
Majority Shareholders
The best way to keep control of your business and the decisions that are made is to stay as a majority shareholder. This is why it's important to have a lawyer that can help structure deals that can keep you in control of the business. Ideally, you want to stay above 50 percent to help make all of the decisions. If there are shares spread among a lot of people, then you want to have at least 33.3 percent of the company to help make important decisions, including the sale of the business. A lawyer can help break down figures and explain everything as clearly as possible for you.
Royalty Options
Getting investments is not always about giving up shares. To help keep ownership of your company, you can choose different options to negotiate with. One of the more common options is a royalty payment. For example, you sell a food product, then the investor may seek a nickel from every product that is sold. Royalties can be set up a number of different ways. Some royalties can be stopped after a certain amount of time or if a certain amount is reached. Some other royalties can last forever or lower slightly once a certain point is reached. If you want to give out fewer shares, then you can also consider a royalty that is paired with a small amount of equity. This amount can range anywhere from 1 percent to 5 percent.
Consult with a business lawyer to understand your options and make the best decisions for your business.
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