How to Take On Equity Partners
Equity partners don't want to be repaid. Instead, they work on a stake in your business. This gives them a direct and personal involvement in the business, different from merely giving out a business loan. Taking on equity partners requires more than just heading to the bank and requesting a business loan.
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Instructions
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Determine your business's needs. This will help you determine who is the best type of person to take on as an equity partner. Does your business just need money? Are you also in need of business mentoring, design or public relations? Whatever your business is lacking, try to find equity partners who will pick up the slack.
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Incorporate your business. Sole proprietorships cannot have equity investors. Further, if you want more than one equity partner, you'll need to either become a limited liability corporation, a C-corporation or an S-corporation.
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Determine how much equity you want your partner to have. Different types of partners customarily get different levels of equity. Developers and executives might get as much as 10 percent, while those in a creative capacity get between 1 and 3, with public relations partners getting between 1 and 2 percent. You must find an equity level satisfactory to both yourself and your equity partners, but these are general guidelines.
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Draw up contracts. While handshakes might work for informal agreements, few things are more formal than an equity partnership agreement. Get contracts drawn up that address all concerns of interested parties. Once the contracts are signed, you have equity partners.
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