So you've started a business, you've been running it for a while, and now you have investors. What do you do first?
You celebrate! And the next thing you do is call a lawyer.
I don't usually tell my business clients they need to call a lawyer right away, but in this situation, it's very important that before a business owner receives any type of funding from another party, they make sure that there is an agreement that defines the scope of the arrangement. That agreement should cover how the money is going to be used, whether it has to be paid back or not, and how it's going to be handled from a tax standpoint.
Additionally, the agreement itself or the funding that the investor is providing has to comply with securities regulations, both of the U.S. and of the state where the business is located. This is true even in situations where most people might not think that securities regulations apply. Many times there is an exemption available, but even if there's an exemption available for a smaller deal, you really need the advice of a professional to let you know.
So once you've gotten funding, celebrate, then call a lawyer. If you'd like to call me, you can look me up at taylorlegal.com.
KATHERINE L. TAYLOR, ATTORNEY AND CPA
5850 Waterloo Rd