Question
What does giving a percentage of ownership to your company to the investor, give the investor?
What does the investor get out of this? Does he get whatever percentage he has in the business in net profits? ex. If he has 15% in equity, does he get 15% of the net profits? What else do they get?
2 months ago - 2 answers
Best Answer
Chosen by Asker
A 15% equity holder does not have any control in the business, as long as you own the remaining 85%. The equityholder is entitled to vote, however, common sense prevails in that a 85% shareholder has much more voting power than a 15% shareholder. The key figure here is 51%, ie you must own at least 51% of the shares to have control of the company. No shareholder is ever entitled to profits. Profits are passed to he shareholder by means of a dividend, at the companie discretion. If 100 shares are in issue, you own 85% and the other shareholder owns 15%, using a £100 per share dividend example, you will receive £8,500 with the other equity holder getting £1,500.
by David G
2 months ago
Asker's Rating: 
Other Answers
Lets say I give you 100k to invest into your company for an agreed upon 10% equity. This means I would be valuing your company at 1million total. A private investor I may bring my knowledge, experience and business connections to the table. I would not recieve a 'wage' or really do any actual 'work' as I am an investor. Depending on the contract, I may have no control over the companies descision making processes. Typically as a 10% owner of a company I would be involved in almost all major decsions within the company. Where the investor makes his money is when he sells is stake in the company. It all really depends on the valuation of the company (which can be found a number of ways). Say 5 years later the company gets sold and gets valued at 20million dollars, since you have a 10% stake you would be intitled to a 2million dollar payout.
by Will- 2 months ago