If you are starting your own business, you are probably investigating options for raising capital. This can be a stressful process and you may be tempted to collect the funds in any way you can. However, you should proceed with caution and make sure you don’t get yourself into trouble. Below are a few considerations:
- Investors. Many start-up owners are so thrilled when somebody wants to invest in their venture that they fail to conduct due diligence. This can be a huge mistake. You must remember that you are establishing a relationship with your investors that can last a very long time, so it is important to know what you are getting yourself into.
- Legal structure. One of the most important decisions you can make is selecting what legal structure is best for your entity. You want to remember that investors typically want to keep their personal taxes as simple as possible, which may mean that you should not create an entity that will be taxed as a partnership.
- Securities laws. If your start-up company intends to offer or sell its securities, they must be registered with the Securities Exchange Commission or exempt from registration. Failure to properly comply with the securities laws can negatively impact your investors and your start-up business. Save yourself time, money and risk by working with an experienced business attorney.
- Intellectual property (IP). It is important to protect your company’s intellectual property. In other words, the company (not the shareholders or founders) own the IP. You should also consider having confidentiality agreements signed.
- Investment agreement. You want to keep the investment terms simple. If you have an investor that starts requesting complex or unusual terms, be wary. You can save yourself trouble in the future by sticking to the standards commonly recognized in the industry.
If you are an entrepreneur and you would like to learn how we can help ensure your start-up company gets off to a successful start, contact us to schedule an initial consultation. We are located in Sacramento County, and serve clients throughout California.