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shapeform

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Location : Arizona/Michigan

PostSubject: buisness structure   Sun Jan 31, 2010 10:11 pm

Say an inventor has a product idea and an investment of time and money,this inventor agrees to exchange aprox half or 49% of any profits with another party in exchange for XXX amount of dollars...now both parties are lacking adequate capitol to further develop and are considering share equity to gain necessary services to bring the product to market. how would this be setup?
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former mentor




PostSubject: Re: buisness structure   Sun Jan 31, 2010 11:48 pm

Ok, so let me understand

You have an idea that you worked on and because you needed some money you gave someone else 49 points in your invention. Or, 49% of the profits made from that invention if and when any are ever made. Now, you need more money (or services) to keep going.
You can look at this 2 ways.

One, Think of your idea as just that, an idea and if/when it makes money 49 cents of every dollar are going to this investor. Although he’s entitled to the money, he doesn’t own any rights to the invention itself, or any other inventions you may create in the future..

Second, you think of your invention as a company and your friend as a partner so you own 51% and he owns 49% of the idea, the company, and anything ever developed under that company.

You first have to know what one you think of this as, and what he thinks of this as…..

If he is an “investor” you have 100% (points) left to offer anyone you like in share equity. However, if he is a partner, you and/or he would need to delude your shares to make room for a share equity partner.

Hope this helps
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shapeform

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Location : Arizona/Michigan

PostSubject: buisness structure   Mon Feb 01, 2010 12:07 pm

Thank you...To clarify this better in my mind, first no contract has yet been drawn up. If I am understanding you correctly we as partners would retain say 60 shares of the 100 leaving 40 shares available for trade for services and our owner ship would be 49 and 51 percent of the 60 shares. Is this correct?
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former mentor




PostSubject: Re: buisness structure   Mon Feb 01, 2010 12:12 pm

No, If you want to look at it as a company one owns 51 shares, and the other 49 shares. In order to bring someone else in, thier shares would need to come from that 100 total shares. You, your partner, or both of you would have to chip in shares.
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shapeform

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Location : Arizona/Michigan

PostSubject: buisness structure   Mon Feb 01, 2010 12:46 pm

Thank you I think I've got the picture now.
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former mentor




PostSubject: Re: buisness structure   Mon Feb 01, 2010 1:12 pm

No problem, Just remember 49 cents of every dollar made belongs to your "partner" but so does 49 cents of every dollar of debt the "company" incurs.

Share equity is a great way to get a team of people together and get a product to market, but you need to study up on some business principles first to make sure you do it correctly.

Good luck with it.
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