Learn How A Corporate Attorney Can Create A Legally Binding Agreement For You And Your Investors When Funding A New Invention

Law Blog

If you have a great invention that you would like to start selling on a large scale, you may need to find investors to help fund the project. When you have investors backing your project, you need to be sure to take the time to hire an attorney to create a contract that is legally binding. The following guide walks you through a few things the attorney can include in the contract.

Exact Information about the Money that Is Invested in the Business

Within the contract, the attorney will indicate how much money each investor is investing in the business. This is important because investors who invest more money than other investors may want more equity. It also helps you to be transparent when you file taxes for your business at the end of the year.

Exact Information About the Equity that the Investors Will Get

When you have investors funding an invention, they often want a percent of the equity for the business. You need to be sure that you keep over fifty-one percent of the business or more in order to have the controlling share of the business. This will allow you to make final decisions when it comes to your business.

Exact Information About the Royalty Agreement for the Investors

There are also some investors who want a royalty for each item that is sold. This means that they will get a certain percentage of the profits that are made each time one of your inventions sells. You want to be sure to determine how long the royalty will need to be paid and to whom. Some investors want to receive a royalty forever, while others only want the royalty until they recoup the money that they invested in the business.

Exact Information About What Happens if the Project Busts

Within the contract, the attorney will specify what will happen if the company ends up busting because the product does not sell as well as anticipated. If this happens, you need to know if you are expected to repay the money that was invested in the company or if the investors have to take the flop as a financial loss and move on to the next project.

You can meet with an corporate lawyer to find out more information before you agree to anything with your investors. This ensures that both you and your investors are properly protected in every aspect of the investment agreement.

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10 October 2017