Quote:
Originally Posted by shahab6
I have website, and I want to find investors to invest money in it. How does it work, let's say they invest $10,000 in the website, and let's say the website ends up making $30,000 a year in profits. how much of that money do I have to pay to the investor?? Is it half of it? A
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sounds like you aren't setting up the more traditional investor scenario of forming a new company or using an existing company structure (ie. LLC or C/S corp) and selling shares.
what you might be doing (for simplicity) is essentially a partnership agreement that is a rev-share agreement.
The investor puts in $x dollars and they get y% of the profits (which means after all expenses are taken out, along with taxes, hold backs for expansion, etc).
This would be a "partner" because they are splitting the profits with you at some agreed upon split (ie. 50/50, 30/70, etc).
You can set the terms of this partnership to be like:
- once they have made their money back from the profit sharing, the profit sharing will last for x years/months after that point.
- the profit sharing extends for as long as you are running the business.
You can basicaly define the terms for you and your investor. You will need to write it down, and it becomes a contract that you both sign.
it is wise to have an attorney review the terms, once you and your investor have come to your mutual agreement.
Lawyers fees will cost couple hundred bucks.
$30,000 is not alot of money, so better off looking towards family members that you can get the money as a loan, and repay the principal + interest back (at like 12% interest) and then not having to worry about "investors".
If you aren't confident in your ability to make the money back, then taking someone's money needs to be highly thought out.
A loan structure means you are sharing the risk, because you have to pay it back.
There is no simple anwer to your question, as it all depends on what you and the investor are willing to do and agree upon.
Fight the loan sharks!