[UpNorthPrince]

Originally Posted by 4-Knots

1% short here by the way for the full 100.

typo...12% and 88% = 100%

[DaveAPN]

Don't you want to retain 51% ownership of your operation?

If we're talking about a percentage breakdown:
4 investors of $10k / each = 49% ownership.
1 principle @ $5k invested + (sweat equity) = 51% ownership.

40k = 49% of company equity puts the company at a startup value of $81,632.65. 81632.65 - 40000.00 - 5000.00 = $36,632.65 (the value of your sweat equity, idea, leadership, etc).

If your investors can live with this, you will retain control over your company as it grows. Otherwise, y'all will be at a whim to divide not only ownership claims, but decision making.

You could make 2 of those investors lenders if you'd prefer. No reason everyone has to be involved in an equity relationship. OR, you could set $5k of each investor aside as debt (which requires reimbursement), and then $5k as equity (which they can use at their discretion).

Just my thoughts,

[UpNorthPrince]

Input appreciated Dave, but I'm feelin the Convertible Note more.

Any of you good folks here please help me to find a good example of a Convertible Note? Preferably one without too much complicated Legal jargon.

Thanks in advance.

[david29]

Hi all,

Looking at the solution you gave to UpNorthPrince, I myself had some similar question which I'd like to ask.

I'm planning to start a company and I'm thinking about the equity allocation section.

If I allocated the equity as below:
A: 40% (Angel Investor)
B: 25% (Partner 1)
C: 15% (Partner 2)
R: 20% (Reserved equity)

meaning that of the 100% shares in a LLC company, I allocated 80% to all the shareholders and 20% reserved for other potential shareholders or investors.

If, for example in my monthly business, my partner and I would draw $2000 per person. We plan to reinvest $1000/person out of the drawn $2000 back into the business itself so that the business would not run out of resource too soon. Can we give the directors the stock options to purchase more equity out from the 20% reserved equity using the reinvested money? Or is there a better way to work with the reinvested capital?

Thanks.