Question about opening a new business with others, question about financing

[chriSmesS]

I have been looking around these forums recently as I plan to open a business one day.

I plan to open a new business with a couple others who have already submitted their articles to become a S-corp. We are all investing an equal amount of money into the business, but I will be getting my money from a home equity loan with the help of my parents, while they are investing money directly from their bank accounts. They have asked me to get a letter signed by my father, stating that when the time comes, that we will have the money on a certain date and then be added as an owner. I was wondering if such an agreement exists, and if so what is it called/consist of. Thank you very much in advance

[Mr Rewire]

How is this business set up ? Is it an LLC ? S-corp is how you elect for an entity to be taxed if they are applying for S-corp status then the entity has already been set up.

[Fulcrum]

Talk to your lawyer and have him draw up a "Letter of Commitment" between yourself and your father. Make sure that it includes and escape clause for your father in the event something turns sour before you get off the ground.

[Paul]

Be very careful about investing in a corporation as a minority owner. Besides the “shares’ representing your ownership make sure there are other protections for you. Get some form of an anti-dilution agreement; try to get some type of veto power if you are a minority owner. Make sure you have access to records and have a say in how money is dispersed.

Things can get ugly sometimes and in a corporation it is ALL about who controls the majority position.