129 votes

How does it work when somebody invests in my business?

Almost nobody would just give you a pile of money with no expectation of return. In most cases you exchange equity in the company for the investment. A simple example might be that I estimate your ...
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  • 63.9k
61 votes

Greedy shareholder that does not want to dilute his portion

What can be done? Buy that person out or find a different method of financing the company. You're not going to get very far calling that person greedy and framing the entire issue around that. ...
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  • 48.5k
47 votes
Accepted

Start a business or remain an employee?

My general rule of thumb with start-ups is don't quit your day job until you can afford to quit your day job. If you were a single man, or your wife also could provide income for the family, then you ...
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  • 1,324
44 votes
Accepted

Why is this tutor agency startup so highly valued by investors?

There is an interesting phenomenon in the world of eCommerce that the existence of an established online marketplace for a specific family of goods or services makes it very difficult to find clients ...
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  • 21.6k
36 votes

Greedy shareholder that does not want to dilute his portion

A no dilution privilege is precisely that, a privilege and not a duty. There is no reason to believe the shareholder is being greedy, after all, they are adding risk to their own position at the same ...
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  • 4,190
35 votes

If one owns 75% of company shares, does that mean that he would have to take upon himself 75% of the company's expenses?

A firm is a separate legal person from its shareholders or owners (but doesn't get invited to parties much). Owners invest capital to get shares in the firm or may get shares for investing time, ...
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  • 8,492
29 votes

Start a business or remain an employee?

I did this 20 years ago. I wanted desperately to quit my job, but my wife wouldn't let me -- not because she thought it would fail, but just because she thought it would take longer than I thought. It ...
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28 votes

How does start-up equity end up paying off?

You will probably never see it. The startup at some point may start issuing dividends to the shareholders (which would be the owners, including you if you are in fact getting equity), but that day ...
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  • 1,067
28 votes

How does start-up equity end up paying off?

The details of how you can convert your 5% equity share to cash or stocks will be detailed in writing in the legal agreement you have already signed. If you do not have any signed written agreement, ...
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28 votes
Accepted

How to compute worth of my equity?

It seems like I hold only $1 because 100,000*$0.00001 = $1. No - you have the right to buy stock at $0.00001 per share. Presumably, the stock will be worth more than that, so your "profit" will be ...
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  • 114k
17 votes

How does start-up equity end up paying off?

Read the book, "Slicing Pie: Fund Your Company Without Funds". You can be given 5% over four years and in four years, they hire someone and give him twice as much as you, for working a month and not ...
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  • 185
17 votes

How to structure equity buyout?

The bottom line is that whatever you two agree on is fair. Having said that, if the company is worth 1 million your equity is 45K, 3 million 135K. Offering you $4,500 is ridiculous and you may want ...
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  • 74.9k
16 votes

Greedy shareholder that does not want to dilute his portion

There are various ways that a company can raise capital without diluting shareholder stakes. Have the company issue bonds. These are loans that the company will pay back with interest. Usually bond ...
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13 votes
Accepted

Can my US company buy my foreign company for $1 USD?

I used to work in transfer pricing for 5 years so I know a bit about international tax (I am not an international tax expert by any means). Tax authorities don't generally care about transactions ...
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  • 928
13 votes

How does it work when somebody invests in my business?

Typically, if you create a business that wants investors, you will issue stock in the company. One unit of stock is called a share. You decide how many shares there will be and how much each share is ...
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  • 900
13 votes
Accepted

Why is it ever a good idea to found a company?

There are a few common errors you are making in your statement. Before I try to address what I see as problems with your line of thinking, take my overall response to the headline of your question as ...
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13 votes

How to structure equity buyout?

It isn't possible to give advice on your specific situation without actually knowing the value of your current equity. Get a lawyer to represent you and give specific advice, including possibly hiring ...
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12 votes

Start a business or remain an employee?

No one can make this decision for you. Involve your wife and truly value and heed her thoughts on the situation. Succeeding in such an endeavor without her full support/consent will bring an ...
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  • 6,582
11 votes

How does start-up equity end up paying off?

I agree with all the people cautioning against working for free, but I'll also have a go at answering the question: When do I see money related to that 5%? Is it only when they get bought, or is ...
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  • 1,370
11 votes
Accepted

Is it possible to make money off of a private company?

Yes, but only if they're looking for investors. You would need to contact them directly. Unless you're looking to invest a significant sum, they may not be interested in speaking with you. (Think at ...
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  • 13.8k
10 votes
Accepted

How did Bloomberg keep such a high share of his company?

A couple of factors: The company grew gradually since 1981 - the perception that you cannot have a successful company without outside investors is most commonly associated with internet startups that ...
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10 votes

If one owns 75% of company shares, does that mean that he would have to take upon himself 75% of the company's expenses?

I think your question might be coming from a misunderstanding of how corporate structures work - specifically, that a corporation is a legal entity (sort of like a person) that can have its own assets ...
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  • 201
10 votes
Accepted

Why should a company go public?

You go public to raise money, to invest in the business and/or pay off the existing shareholders. It's really as simple as that. The advantage of being public is that your shares can easily be bought ...
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  • 22.2k
10 votes

How to structure equity buyout?

There's a very simple solution to this. You own 4.5% of a company whose valuation is difficult to determine. Were it simple to determine, it would be obvious that you would be entitled to 4.5% of that ...
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9 votes

Selling units/shares in my startup to my Roth IRA

Since I can't transfer/gift shares directly to my Roth IRA, what's the most tax-efficient way for my Roth IRA to take ownership of as many units of XYZ LP as possible? None. XYZ LP has some ...
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  • 129k
9 votes
Accepted

Is having a 'startup fund' a good idea?

Saving money for the future is a good thing. Whether spending those savings on a business venture makes sense, will depend on a few factors, including: (1) How much money you need that business to ...
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9 votes

How to compute worth of my equity?

Cliff period is defined as that period until you vest any options. So if your employment is ended at 2 months 29 days, then you would have zero vested options. Waiting one more day gives you 8.33% ...
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  • 74.9k

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