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Business Investment Questions

What is an investment?

An investment is something that individuals have put money, time, and effort into in hopes that there is a profitable return. Businesses often have lots of investments in companies and many different things that have potential profits. The profits that come from an investment usually include interest, income, or an appreciation in value of the very thing that a person or people have invested in. Read below to continue to find more questions about business investments that have been answered by the Experts.

If an individual is investing into a company in which they will be a silent partner and/or board of trustee, should the individual draw a contract that will possibly guarantee their initial investment from the borrower?

One thing to consider when drawing up the contract about the investment is deciding what kind of investment is looking to be made. It could be a share-based investment, in which the person would be buying stock, or it could be a Limited Liability Company (LLC), where the person would become a member. Another important decision to consider is whether or not a loan would be a better choice for the situation rather than an actual investment. With a loan instead of an investment, the loan may be changed, by the person’s choice, into stock ownership in the company. Making the choice of a loan somewhat protects the individual’s investment and creates a promissory note that the company or owner not only guarantees the original amount loaned, but also stated interest. It is also recommended to do an analysis of the business before deciding whether or not to make an investment or a loan. Request certain financial statements from the business to make sure they are worth investing in.

If a bad investment has been made with a company that is believed to be charged with fraud should an individual start a new investment in order to recover money that was lost?

When an individual has had a bad experience with a company resulting is losing money, it is not recommended to start another investment only to try and recover the lost money. If the first investment was done illegally, and the owner was charged, a new investment will not keep this person out of prison or even stop the criminal charges. A wise choice here would be to have a legitimate investigator go to the new property and check it out to make sure there are no scams involved for the next investment. As for the money that was lost from the first investment, the good thing about that situation would be the fact that since it was fraud, then the court will most likely not discharge the debt.

What is the difference between a business investor and a business partner?

A business investor puts money into the company but usually has no say in any sort of management agreements or any decisions made within the business. Some investors choose to get stock ownership in the company in exchange for their investment, which would give them the ability to vote for their opinions in a company business. Partners are also considered investors, but they usually do not invest in a company as a whole. Business partners usually invest in a partnership with other individuals, or the partners will invest in a Limited Liability Company (LLC). Partners also usually are involved with decision making in the company and they are involved with the business on a daily basis.

What can be done if an individual invests in a company where no contract was received, and the company is now selling to someone else, in return the new owner is suing for no contract as well?

The advisable thing to do here would be to contact the Securities and Exchange Commission (SEC) and notify them about the owner that sold the company and about the new owner as well just to be on the safe side. Since the new owner is suing, the best thing to do is to hire an attorney to represent the investors since they will have to fight the new owner about this situation.

There are many questions about investments, but it is always the best idea to follow the law and make sure all rules are followed otherwise a person could become involved in very serious trouble. It is also a good idea to make sure that the investments that are being made are legitimate and not any type of scam, which could really cause a person financial trouble. Remember to ask any questions about this topic or any others and the Experts to receive fast and reliable answers to legal topics.

Ask a Business Lawyer

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Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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