This is similar to negotiating a loan from friends or family to launch a business.


The main things to remember are:

  • In order to be legal, the investment must either occur between people who have a substantial, pre-existing relationship, or the investment must be made by an accredited investor.
  • The “offer” of the equity position must not be made in public unless the audience for the investment is limited to accredited investors.
  • The business will need to decide what kind of equity they are offering and the implications of having investors who own a portion of their business. The business must be structured appropriately to allow equity investments.