First non family/friend investor

[Peter Tiberio]

Hello, I am currently securing my first non family or friend investor for some new single family development. I know the terms of the investment of what I'm offering I'm curious to the legal side of this. What do I need to do legally to cover everyone. What is the best way to create a fund for multiple investors or invest in my company? Thanks,

Peter

[Brian Burke]

@Peter Tiberio, if the investor is an active participant in the project you just need to have a good business attorney draft a partnership agreement. 

If the investor is passive, you are selling a security and you have to follow securities laws. This isn't a DIY project, you absolutely have to have competent securities counsel.  Failure to comply with the securities act can have criminal penalties and your counsel will make sure it's set up properly. There are disclosures you need to make and a set of offering docs that need to be created, and filings to make with local securities regulators. Your lawyer will do all of this for you. But it can get expensive ($10-$20K), so raising passive money for one-off small deals can be cost-prohibitive.