Forums: Discussions for entrepreneurs and small business.

I am in the process of planning to form to corporations next year, one will act as the general partnership (me, holding company for future ventures) one will act as the limited partnership (investors for this 1 specific venture).  I am finacial commitments from friends and family of $50,000 to help me finish my business plan, pay for attorneys, draw up contacts etc.. for the additional 500,000 I need. 

What do I do with the first money?  Should I deposit in my personal account then pay my attorney etc.. until I get the corporate docs to set up a business banking account, or should I get my attorney to do the work, set up the account, deposit the money in their and then pay from that account.

Thanks.

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Strong wood does not grow with ease. The stronger the breeze, the stronger the trees!
J.W. Marriott

The answer to where to put the first money depends on the agreement you have with your friends and family. Do they think they are making a personal loan to you? Or do they think they are investing in a new business venture or lending money to it?

 

 

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

They know exactly what they are doing, investing in the business.  Actually they are investing in the general partnership.  Their investment will gain them a piece of any future ventures that I am part off.

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Strong wood does not grow with ease. The stronger the breeze, the stronger the trees!
J.W. Marriott

I would definitely open a business account first. You do not want your business moey missed up with personal. What have your attorney said?

If they are investing in a business - then you should:

1. Establish the entity -that they are investing in
2. Open a bank account for that entity
3. Place all funds received into that account 

I would also suggest having some documentation for your "investors".

 

-------------------------

Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

Ryan,

Forming the holding Company and getting a biz checking account takes a few days/week.  Do that first.

Get some accounting software, link it to your acct.  Keep track of every dime and store your records safely.

Use a promissory note with (or without a personal guarantee) and an "option to convert" from simple interest debt to some form of equity at some point in next 12/18/24 months.

Lay a solid foundation, take the time to do it right.

 

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www.bizbuddypro.com
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Get a free business consult - discover how to make more money today.

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Thanks for the responses, it all makes sense.  Catch 22.  You can not open a business bank account with out papers, and most attorneys will not draw up papers with out money up front, I can not use my buisness money until a have a bank account to put it in. 

 

What comes first, the Chicken or the Egg?  I guess they both came at the exact same time.

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Strong wood does not grow with ease. The stronger the breeze, the stronger the trees!
J.W. Marriott

In most states you can file for C corp right thru the secretary of state web portal

OR

You can do a name search, print out your forms and take them to the Sec of State office (they have one in the state bldg of every city) pay your fee and have them filed while you wait

OR

You can use an online service like legalzoom or bizfilings

-------------------------

www.bizbuddypro.com
Find out how we make investors WANT to do business with YOU
Get a free business consult - discover how to make more money today.

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I must point out that a convertible promissory note is a security and therefore subject to both the State and Federal Securities regulations.

-------------------------

Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

Ah yes the fungibility factor.  Quite right Mr. J

Ryan,  go with a simple promissory note and issue the conversion instrument later when you are capital compliant.

 

bizbuddy 

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www.bizbuddypro.com
Find out how we make investors WANT to do business with YOU
Get a free business consult - discover how to make more money today.

www.bizbuddypro.com