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Help on investing in small businesses

Carl Hume-pankulis

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So I have a friend that wishes to start her own business but she needs capital.
I am willing to give her the needed capital of £2,000 for a 15% share in the business...

I have no idea what I'm doing!!
Iv never invested before, iv never ran a business, I have some spare cash that I'd rather invest in someone than be sat in the bank.

What do I do in regards to tax?
What type of contract do I need to create and how do I create it in order to not get stung or even kicked out of the business if we ever fall out for whatever reason?
Do I need to seek a solicitor?
What other things do I genuinely need to look into doing?

Any and all detailed information you can offer is appreciated.

Many thanks,

Carl
 
What type of contract do I need to create and how do I create it in order to not get stung or even kicked out of the business if we ever fall out for whatever reason?
In our country, if the business has 2 owners, you need to go to Department of Trade and Industry and register the business as partnership and if there are more investors each has different percentage of shares and amount of capital invested, it should be classified as corporation.

-former entrepreneurship student (we're 5 members in the group but decided to register our school business project as sole proprietorship under the name of one of our group mate)
 
I will advised you bring in a lawyer to write out every details of the business and get you to know the workings every thing that would be done in.conjuction with the owner. Don't take friendship into business of this magnitude.

Let everything be documented and contract plan drawn out and signed by both parties and their witnesses.Good luck on this because you will surely need it.
 
I wasn't sure I'd need a solicitor for such a small amount of money but as I said I don't really know what I'm doing lol.
I'd like to have a rough understanding on what I will need to expect or even mention to the solicitor as I know they charge by the minute haha.
This is why I thought I'd come to the experience of the forum to potentially give me a rough insight on what to do

Many thanks,
 
get an idea about his business and then get advice from the leaders in that industry and think twice then invest
 
I don't know the minimum capital required for a company to be registered as a limited liability company and the minimum number of people . In my country you will need at least $4000 worth of shares and minimum of two people. If same go your country, it is better you be his partner with your percentage share clearly stated you both get the business registered, fine tune the binding documents for your agreement then you will be cover for every eventualities.
 
I wasn't sure I'd need a solicitor for such a small amount of money but as I said I don't really know what I'm doing lol.
I'd like to have a rough understanding on what I will need to expect or even mention to the solicitor as I know they charge by the minute haha.
This is why I thought I'd come to the experience of the forum to potentially give me a rough insight on what to do

Many thanks,
It is normal to not know what to do in business investment, especially if it is a first time. It is best to have a mentor who will guide you in this. You can even have a lawyer to advice you on what to do with your money.
 
as an investor you shouldn't really care about taxes or anything like that, the only thing that matters for you is your 15% profit, you will invest an amount that will get back later and the profit will continue
 
Business shouldn't be based on emotions and to avoid anything that could lead to loss, try to make everything legal and binding as someone correctly said.
That is so true. Business should be business and emotions should not be your guidance. When investing to a business startup, you need to make it legal and not play with it just because it is a friend or family.
 
Her being a trusted friend should not get you asking these questions. Though people vary, but since it's a friend, the need for a solicitor is minimal. Just make sure you understand each other first before you go into it.
As much as relationships are very important, money can turn even an honest man into someone else. You can do business with someone without legal backings if and only if you are seeing your investment in such business as a gift. If not, better to do the needful.
 
I think you did your part by giving the money for investment ,you just wait first till the business really hit top notch before you start thinking of other things to do
 
As much as relationships are very important, money can turn even an honest man into someone else. You can do business with someone without legal backings if and only if you are seeing your investment in such business as a gift. If not, better to do the needful.
That is true. Money can change a person and bring out their ugly self. I guess that is where the phrase, "money is the root of all evil" came from. So it is best to do all the legal legal requirements when you are investing in a business.
 
For you to donate money for a business start up, you need to evaluate the business first and do thorough feasibility studies. Ask yourself how viable the business is, extent of patronage and costs involved.
Its just quite unfortunate that people don't really look into this things ,before starting a business or investing ,what if the small business lacks all this and you invest in it this might result to loss
 
So I have a friend that wishes to start her own business but she needs capital.
I am willing to give her the needed capital of £2,000 for a 15% share in the business...

I have no idea what I'm doing!!
Iv never invested before, iv never ran a business, I have some spare cash that I'd rather invest in someone than be sat in the bank.

What do I do in regards to tax?
What type of contract do I need to create and how do I create it in order to not get stung or even kicked out of the business if we ever fall out for whatever reason?
Do I need to seek a solicitor?
What other things do I genuinely need to look into doing?

Any and all detailed information you can offer is appreciated.

Many thanks,

Carl
This kind of business should be agreed upon by the two of you of how to manage it and also share profits and losses accruing to the business. When both you have agreed to run the business together, you now need to register it legally as a partnership.
 
Since it's a small business, it's best to allow for a certain time for the person who's got the business idea to settle first, then from the way things go it will determine whether or not to provide more financial support or not. If the person turns out to be dishonest, it would be wise to disengage with them
 
So I have a friend that wishes to start her own business but she needs capital.
I am willing to give her the needed capital of £2,000 for a 15% share in the business...

I have no idea what I'm doing!!
Iv never invested before, iv never ran a business, I have some spare cash that I'd rather invest in someone than be sat in the bank.

What do I do in regards to tax?
What type of contract do I need to create and how do I create it in order to not get stung or even kicked out of the business if we ever fall out for whatever reason?
Do I need to seek a solicitor?
What other things do I genuinely need to look into doing?

Any and all detailed information you can offer is appreciated.

Many thanks,

Carl
For problems like this, I think it is necessary to make a legal agreement so that when problems arise in the future, they can be resolved properlyn without any unexpected incidents.
 
Since it's a small business, it's best to allow for a certain time for the person who's got the business idea to settle first, then from the way things go it will determine whether or not to provide more financial support or not. If the person turns out to be dishonest, it would be wise to disengage with them
You know that it's not everyone that have enough to start the business at first , the issues lies on if the person did not have any cash at all to start the business that's the issue
 
You know that it's not everyone that have enough to start the business at first , the issues lies on if the person did not have any cash at all to start the business that's the issue
In this case, it's okay to help the person and give him/her the benefit of doubt. If it's possible one should make sure he is not expecting anything in return.
 

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