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Venture Capitalist Related Questions

What is a Venture Capitalist?

A venture capitalist is a person investing in a venture capital firm that offers seed money for startup companies. Venture capital firms differ from angel investors in many ways. Some of those being, in a venture capital firm many investors are solicited for their funds. Whereas, in an angel fund the manager dealing with the new business is actually the investor and mentor for the new business, giving them continuity. Angel funds normally invest in their area of expertise. The venture capital firm looks to invest in suitable projects, but has a different perspective from the angel fund. Due to the failure rate in startup companies the venture capital firm is looking for a higher rate of return on their investment because of the risk. Typical returns are 25% and up. They usually don’t see any return on their investment until they sell their shares in the company, and that could be years down the line.

If someone and his or her friends just registered a C Corp, one person is investing ninety percent of the money; does he need any special agreements? It should not be as they did not solicit and are all educated investors.

If there is no solicitation involved, it is not actually a registration problem. For tax reasons, the individual might need to look into a sub s election to make the business pass through entity. The individual will also need to all come to an agreement on bylaw and, if applicable, a shareholder agreement covering buy-sell circumstances.

If someone already has a domestic LLC in an industry where they will be training, educating, and developing youth through sports, should they proceed as an LLC or form a 501 c 3. They want to raise funds or get sponsorships from other businesses to provide equipment and uniforms for people’s children without having to pass on these high expenses to the parents.

If the individual could obtain 501c3 status, the individual would be tax exempt for charitable donations. As an LLC, all income and operating expenses would be passed through to the associates. To obtain 501c3 status, the individual should form a not for profit corp. For raising cash, contributions to a 501c3 might be tax deductible.

Does Rhode Island and or DC recognize and honor finder fee agreements for individuals or companies which introduce (and only introduce) a company to a potential venture capitalist or other funding source (i.e., finder fees for locating large distributor chains, etc...)? Does either State require registration of finders?

In the State of Rhode Island and DC, they agree to such finder fee contracts and hold them to be agreements like any other kind of agreement. Registration is only required if for the broke or financier. The finder is not required to register.

Raising venture capital is very difficult and regulated. Would it be legal to form a new airline COOP so as to finance the development of the new airliner design and then use the new airliner in a new regional airline?

The individual can form a LLC whereby the individual awards the associates an ownership percentage in the business, based on their providing capital financial support for the LLC. If the individual does not do so, then they would be obligated to abide by the SEC and additional rules concerning investments.

Situations such as these often cause many more Venture Funding related legal questions to arise. Many of the questions arise from state-specific differences in laws. Venture Funding can be confusing if people are having differing opinions. This is when you can turn to Lawyers to have all your questions answer.
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