Sister an I have invest opportunty 25k ea. in hi risk net biz. What kind written agreemt we need?

Question

We are investing $50k into internet start up company, all profit/loss split 50/50. What type agreement we need to protect each other? Also, should we incorporate? How do we reduce tax liability if and when it pays off?

Answer 1

I would definetly form an LLC to limit your personal liability. You should not have any written agreement and not even consider the deal if you are putting up the capital, only getting 50% of the profits and getting stuck with 50% of the unlimited loses!!

What is the other party putting in? A dream and a smile?

First of all don't expect any profits for at least 3 years, and that is if the venture is extremely successful. At a minimum I would suggest any initial profits to be split 80/20 until your investment is recouped and then revert to 50/50.

I would also suggest that any salary that the other parties make be offset with an equal amount being paid against your investment.

I don't think I would be worried about tax liability quite yet....there is a better chance that you will be enjoying tax benefits with your write-offs for your investment losses.

Answer 2

Are you sure you want to do this? That's a lot of money - and internet startups peaked a long time ago. Not that none of them make it now - but most don't.

And split profit AND LOSSES 50-50? Is there any cap on how much you could lose, beyond your original investment?

Your question is a little confusing - are you and your sister investing in a business that someone else has, or are you starting one up together?

Answer 3

You need to see a lawyer who specializes in business, and speak with a tax advisor. A 50k investment is a big deal and you should have the specifics handled by professionals. It will cost you some money, but could save you thousands in the long run. You don't want to miss something and wind up losing your hard earned cash.

Answer 4

you should put that question in the legal section.