Contract for Passive Investors

[Stephen Grindle]

Hey all, my business partners and I want to start inviting passive investors into our deals in order to speed up the process and not have to use banks for all of our funding. A couple of questions related to this: 

1. Does anyone have a sample contract/agreement they can share that they use with their passive investors?

2. What kind of legal processes do we need to set up other than an LLC? (We already have an LLC)

3. Are there limitations on inviting too many investors in to fund a single deal? Basically, do we have to fund one deal with one investor, or can we include several investors on a single deal? 

Thanks!
Stephen Grindle

[Marco Bario]

@Stephen Grindle -

1. You can seek private lenders (debt)

2. You can partner with a single investor in a joint venture structure (equity)

3. You can form a syndication with multiple investors (debt or equity)

#2 and #3 are regulated by State and Federal securities laws. You absolutely want to discuss with a securities attorney who is licensed in your state before offering either option. Note that #2 is often played more loosely by some investors. That doesn't mean those investors aren't taking on a great deal of risk by doing so.

#1 is "just" leading. I'd still involve an attorney before taking any investor funds, but the discussion is shorter and the cost much lower.

Mauricio Rauld puts out a lot of good content on the topic if you'd like to learn more.