Someone wants to invest 100k in me.?

A friend of ours that owns a business wants to invest in my wife. The investment is 100k (maybe more) and she does hair so it'd be a salon. What questions should I ask to more or less protect myself and her from anything unforseen that could happen when we all sit down together ? The investors control of the company/salon 51% and my wife and I would control 49% however we would be listed as the owners. Can anyone help ?

I would incorporate, and issue stock, maybe authorize aobut 3,000 shares of common stock with 200 shares of stock outstanding, where they own 102 shares, and you and your wife have 49 shares each (98 shares), giving them their 51% and you and your wife equal shares. Or you might let your wife have more since she is doing all the work.

That way you and your wife can purchase only 4 shares of stock from them to gain control later. Of course, those 4 shares might cost over $100,000!

Or, if there are more than one investor that is a shareholder, all you would have to do is convince one of them to do something your wary if you you wanted, to have a shareholder majority.

Or, if you can convince the board of directors to accept an offer to accept an offer from you to purchase more shares, you would gain control. Be careful of this though, they often have controlling share clause that would let them acquire more shares if you acquire more, so they can maintain control. Remember that control is based on the outstanding shares, not authorized shares.

I don't understand why they would want you listed as owners if they will own 51%. This is why you incorporate. The business becomes a seperate entity, and the board of directors runs it, and hires a president, secretary and vice president. I think you should consult an attorney who specializes in this area. An attorney who is retained by you and your wife, not by them.

If you are the owners, yet they run the business in the background, won't that make you liable for the debts they incurr in the business?

Consider this:

Incorporate, and issue them bonds on their investment, and you and your wife have all the outstanding shares of stock. That would give them a guaranteed return on their investment, which is debt and not equity, and has preference over stock in case the company goes under. As stockholders, you give them control by voting them as board of directors. That way you really are the owners, yet they have the liability of being the board members.

What really bothers me about what they are asking, is because it is dishonest. They are the real owners, yet you must tell the authorities you are the real owners. Any time somone wants you to lie for them, I get suspicious. Why would they invest $100,000 and ask you to lie and say you are the owners when they really are?

I think I would run a credit and backround check on them also.

I know you said this is a friend of yours. I guess it depends on how well you know this friend.