If you're considering raising capital by selling equity in your business, there are two main ways to go about it. For a limited number of investors, usually high net worth individuals or institutional investors you can opt for a private placement where shares are sold via a broker or investment bank. Alternatively, an initial public offering (IPO) allows companies to offer shares publicly through an underwriter who helps market the deal.
Before jumping into a sale of equity it is important to get professional legal advice and understand any tax implications that could arise from this process. The team at John Barkers can help guide you through the process and make sure everything is done correctly.
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When you sell equity in your business, you are essentially divesting a portion of ownership to another party. This can be done for a range of reasons, such as raising capital or introducing a new partner. Before beginning the process, it's important to comprehend what implications it may have on the company's operation and structure.
A few key points to keep in mind when selling equity include that equity is usually sold for money but can also be exchanged for other assets like property or another business. The amount received will depend on the value of the business plus the percentage of ownership being sold. Additionally, selling equity will reduce one's stake in the company - e.g., if 20% is sold, then 80% remains owned by you. Furthermore, when you sell equity, you may no longer have sole control over decision-making in the company since new shareholders could now have a say. It is therefore essential to get legal advice before circulating any agreements so that your interests remain protected and that the deal is fair
Overall, selling equity can be a great way to raise capital or accept new partners without entirely relinquishing control over your business - provided thoughtful planning and consideration goes into each step of the process.