The Ownership Of A Company

857 WordsMay 19, 20164 Pages
More Ownership The less you have to rely on external sources of funding, the more ownership of your company you retain. For example, if you fund an expansion or acquisition with venture capital, the investor might want part ownership of the company, rather than simply a cut of the profits, including a say in management. If you use an asset-based lender, that lender owns those assets if you default on your debt. As part of an agreement not to seize the assets and shut down your company, the lender might require part of your business in return. The more stock you sell to finance operations, the less you own of your company. More Control Depending on your situation, you might need to give up some control over your company when you rely on external funding. An investor might ask for a board seat or a position with the company, or to place a representative on your management team. In some instances, an investor will require blocking rights, preventing you from spending more than a certain amount of money, making an acquisition or shutting down the company without his approval. If you use credit to run your company, you will be required to work with a creditor’s committee during a Chapter 7 bankruptcy proceeding, rather than submitting your own plan to the judge. If you struggle to repay loans, a bank might cut off future credit unless you bring in a consultant. Lenders may not legally force you to use a consultant, which can result in increased liability for them. However,
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