Nita asked:
I’d like to invest some money instead of borrowing to my brother’s company . How is that going to work? Do I get the profit every profit every month? If I change my mind can I always get the initial money I put?
money.co.uk
I’d like to invest some money instead of borrowing to my brother’s company . How is that going to work? Do I get the profit every profit every month? If I change my mind can I always get the initial money I put?
money.co.uk
That all depends on your terms. typical investments pay off in quarterly dividends (every 3 months) Some of them pay at the end of the fiscal period typically December 31st. And a few pay every month. Make sure that you get it in writing before you invest.
If you are buying stock in the company the payoff will be when you sell your shares.
You can usually buy shares in a company. You make the profit when you sell the shares if they go up. And you lose if the they go down. A percentage partnership is different again.
Then you can get a return as an income in bought in in the form of say a wage for example.
Some investments pay dividends at specific periods. You should speak to an accountant before you commit yourself to anything. It can be a high risk. Specially with family.
If the business is poor you could lose all your money!
Its all very high risk with no guarantees at all.
It sounds like he is a small business owner (or is planning to be).
When you buy a stock, you buy a teensie tiny piece of a business. If that business pays dividends then you get a profit from it. But in most cases the primary profit (or loss) in a stock comes from the value of the stock itself. Whatever happens to the price of the stock is considered ‘unrealized’ gains or losses until you sell it, then it becomes ‘realized’.
But if you are ‘investing’ in a small business, you would have to work out between the two of you (and probably with the assistance of an attorney - not just from a business angle but from a tax angle as well) work out what percentage of the business you are buying from him, what kind of a return you expect (and how often), what kind of say you would have in the business, what liability you might have in the business, and if any procedure would be in place to allow either you to sell your share back to him or to someone else, or to buy more from him. Even though it’s your brother, I’d say that getting everything in writing is MANDATORY and having a business and/or tax attorney somehow somewhere in the process mandatory as well.
When it’s time to sell (say, 15% of the business), the two of you would have to agree what 15% of that business is worth (it might be more or less depending on the success of the business and the future prospects of it as well as what liabilities it has). If he won’t buy it back at a price that you think is what it’s worth, you might have the option of selling it to a third party. But this kind of investment is what would be considered ‘illiquid’. There is no guarantee that he or anyone else will buy your stake in the company. You could lose it all.
In the end, it might be much cheaper to just make a loan (even then you would still need to get the terms in writing).