Hello,
My company (a C-corp) is in the process of acquiring a services business. To be able to purchase the business, we are raising capital through investors - friends, families, etc since the typical lending route is getting tougher with this economy. This is how we are planning to set this up legally.
1. The C-corp will acquire and own the business
2. We'll setup a separate LLC. Each potential investor will be a partner in the LLC
3. We are offering guaranteed returns on the investments of the investors over a 5 year period. Interests are paid out semi-annually, and the principal investment is returned at the end of the 5 years.
4. The LLC's sole purpose is to invest in the C-corp
5. The LLC's investment in the C-corp will be bonds.
6. The C-corp has 2 shareholders - me and another partner, and the bonds that will be held by the LLC
Questions:
1. Since the LLC will be investing in bonds of the C-corp, does that mean that each partner/investor of the LLC will owning "bonds" of the LLC, or can we offer them "shares" of the LLC?
2. Can the general manager of the LLC be a shareholder of the C-corp?
3. If question #2 is possible, does the general manager have to contribute/purchase shares in the LLC to represent his/her stake in the partnership? in other words, if we are raising $1,000,000 for the project, and we'd like the investors to represent a 40% stake in the LLC and the general manager having a 60% stake, does the $600k have to come from the general manager? Can we still raise the $1M and still reflect that as only a 40% stake in the LLC?
4. After 5 years, the C-corp would have paid all the interest and principals of the LLC investors. Does that mean that the bonds held by the LLC have been sold back to the C-corp at that point? Or are the bond quantity being reduced semi-annually since the C-corp is paying interest to the LLC?
Apologies if some of this is not accurate/correct. I am trying to learn the legal aspect of this setup.
Thanks!
My company (a C-corp) is in the process of acquiring a services business. To be able to purchase the business, we are raising capital through investors - friends, families, etc since the typical lending route is getting tougher with this economy. This is how we are planning to set this up legally.
1. The C-corp will acquire and own the business
2. We'll setup a separate LLC. Each potential investor will be a partner in the LLC
3. We are offering guaranteed returns on the investments of the investors over a 5 year period. Interests are paid out semi-annually, and the principal investment is returned at the end of the 5 years.
4. The LLC's sole purpose is to invest in the C-corp
5. The LLC's investment in the C-corp will be bonds.
6. The C-corp has 2 shareholders - me and another partner, and the bonds that will be held by the LLC
Questions:
1. Since the LLC will be investing in bonds of the C-corp, does that mean that each partner/investor of the LLC will owning "bonds" of the LLC, or can we offer them "shares" of the LLC?
2. Can the general manager of the LLC be a shareholder of the C-corp?
3. If question #2 is possible, does the general manager have to contribute/purchase shares in the LLC to represent his/her stake in the partnership? in other words, if we are raising $1,000,000 for the project, and we'd like the investors to represent a 40% stake in the LLC and the general manager having a 60% stake, does the $600k have to come from the general manager? Can we still raise the $1M and still reflect that as only a 40% stake in the LLC?
4. After 5 years, the C-corp would have paid all the interest and principals of the LLC investors. Does that mean that the bonds held by the LLC have been sold back to the C-corp at that point? Or are the bond quantity being reduced semi-annually since the C-corp is paying interest to the LLC?
Apologies if some of this is not accurate/correct. I am trying to learn the legal aspect of this setup.
Thanks!
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