Starting an LLC with Partner and Investors

2 Replies

Hey All, I'm looking to do a big project (for me, anyways) and will need outside money for the first time. I'm starting an LLC w/ my brother in law. We're going to be a partnership, but we're probably going to need more money than the two of us have. How do we bring in other investors (they would be my inlaws, his parents)? Would we need to make them partners too, or is there a better way to set this up? I just filed my articles of organization yesterday so this is all very new.

If someone could point me to a good resource for figuring all of this stuff out that would be great.  

It might have been easier as an S corp if you just gave them shares. You may be able to do this with your LLC as well. You also need to establish how the other people's money is going to be counted. Is it a loan? Or is it a purchase of a portion of your company? This will have a big impact on your question.

Hi @Andrew Merritt ,

You have a few options.

First, you can try to bring in your brother-in-law's parents as private money lenders.  The upside to them is that they would get regular, predictable payments at a decent interest rate.  The downside to them is that they would not get to participate in the overall profit of the project if it all goes well, but of course they also have less risk than everyone else.

If they want in as equity investors, you should consider an LLC or a Limited Partnership (with the LLC as the general partner). There are a few variables that go into which structure you go with, so you would want to talk to local attorney and CPA that knows South Carolina's state tax laws. The upside to both of these structures is that they would get to participate in the overall profit of the project. The downside for them is that they won't start getting any payments until you do, and there is more risk involved for them since equity holders get paid after debt holders in a liquidation.

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