Evanston, IL asked in Contracts for Illinois

Q: I will have 2 silent investors for a business, and I need a contract.

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1 Lawyer Answer
Eric M Wiechert
Eric M Wiechert
  • Ladysmith, WI
  • Licensed in Illinois

A: First you'll need to figure out how you want to run the business, what sort of activities and industries are involved in the business endeavor, and whether the investment is in cash, labor, or assets. Business licensing and tax issues may influence the contours of the enterprise.

Given the foregoing, there are a number of ways that you can be an investor in a business: the investor can loan money; the investor can own shares in a statutory entity; the investor can be a common law partner in the business; or the investor can lease assets it owns to the business. The more the investment looks like debt or a lease of assets the more likely it will resemble a silent or non-managerial investment. The more the investment appears to get involved in management, the more likely it will be a voting equity, or partnership type investment.

Once you figure out the enterprise and what it will be doing - you and your silent partners can figure out whether the business investment will be debt, equity, or some other purely contractual arrangement.

You should seek advice from an attorney that is knowledgeable about the industry. Most industries have national and local associations. Those associations may have best practices about the industry - getting started, formation, and ways to minimize risk exposure.

The foregoing is for discussion purposes only and should not be construed as legal advice.

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