ChApter 10 | SELLING YOUR BUSINESS PLAN | 181
Equity Investments
If you plan to arrange for an equity
investment, you have considerable work to
do beyond the scope of this book. In short,
you need to have a detailed plan for the
legal form of organization you prefer—a
general partnership, limited partnership, or
small corporation.
Most entrepreneurs form corporations
and sell shares to raise money. They are
regulated by both the federal Securities and
Exchange Commission and by their state’s
corporation department. All require confor-
mity to numerous regulations designed to
protect investors from dishonest promoters.
While the regulations are extensive,
they are designed to help the process.
For example, some stock offerings can
be exempt from expensive filings if they
involve a small number of shareholders
and a small amount of money. (Chapter 4
discusses corporations and partnerships in
more detail.)exAmple:
Wilhelmina Whalen needed $35,000
to start a coffee shop. She decided
to form a small corporation and sell
an investor 25% of the company for
$35,000. If the coffee shop succeeded,
as she expected, the 25% investment
would be worth $100,000 in three years.
Harrison Flyright liked Wilhelmina and
her business idea. He offered $25,000
but wanted 50% of the company.
Wilhelmina thought that was too high
a price and said “No.” Sometime later,
Harrison increased the amount to
$32,000, and Wilhelmina agreed to give
him 49% of the stock, thereby retaining
control of her business. As a California
resident, Wilhelmina incorporated her
business using How to Form Your Own
California Corporation, by Anthony
Mancuso (Nolo). She issued 49% of the
stock to Harrison in exchange for his
cash, and was off and running. ●