Are there private company stock & options forms on the web I can print?
A friend is pressuring me to buy into her company which she started a year
ago and now she needs US $15K dollars. She is willing to sell me 1 percent
for $15K dollars but she has no formal stock option form for that.
I've never done anything like this in my life.
Is there a standard private company stock sale form on the web which I can
look at to give me ideas. Is there a web site that gives advice to novice
investors who want to have the right forms for this standard transaction?
Like, how long is the typical options last? How do you price them when the
company hasn't sold anything yet?
Can you help advise me on what forms to use for private stock & options?
Thanks for listening, as always.
If your alleged friend has an alleged company that's worth an alleged 1.5
million dollars how come she's got to borrow 15K from you? Why doesn't she
get a bank loan secured by her corporate assets? My guess: she has no
personal credit and the company's worthless.
For your 15K, how come you only get an option to buy 1 percent? Why doesn't
she sell you actual shares? My guess: she's not incorporated and there were
never any shares issued.
How come your alleged friend with the alleged company worth an alleged 1.5
million doesn't have a lawyer to do mundane corporate tasks? Why does she
expect you to lend her money _and_ locate the documents necessary to
formalize the arrangement? My guess: your friend's a noodlehead whose her
company consists of a half assed idea and a fax machine in her spare
bedroom; she has no lawyer, no accountant, no financing, no assets, and no
customers; she's got letterhead stationary, some business cards, a mountain
of debt, and you, the gullible friend. Another guess: your the "friend" who
drives her to the airport, collects her mail when she goes on vacation with
her real friends, and picks up the check when you eat out.
What should you do with your 15K before you give it to your friend? My
guess: kiss it goodbye.
Buying stock is not the same thing as buying a stock option. A stock option
is the right to buy some stock in the future. I am guessing that you
mis-used the term and what you intend to do is buy stock. There are three
documents involved. One is a stock certificate. If your friend's company
is a corporation (you didn't say), she can get a board of directors
resolution to issue the stock, fill out the stock certificate, sign it and
hand it to you in exchange for money and the deal is done.
The second document is a stock sale contract. The third document is an
investment letter. Those documents are available on the internet, I'm sure,
but you shouldn't bother to look. Those documents are optional and are for
the benefit of the company, not the buyer. If she wants you to sign a stock
sale contract and/or an investment letter, take them to a business
transaction attorney for review. I won't help you find them because that
idea feels kind of like helping a suicidal friend find a gun shop.
Now for the advice you didn't ask for. One thing you don't want to become
in this life is a minority stockholder in a corporation that is not publicly
traded. Your rights in that circumstances are so tiny as to be comical.
Zero return is a common result.
Lending the money to the friend would be better unless you see this company
as the next Microsoft. Get a promissory note, long version, with an
attorney's fees clause. Get it secured by all of the assets of the company
and make sure it contains your friend's signature as personal guarantor.
Ooooo, here's another idea - make it a convertible note. The clause would
say that if the money is not paid on time, the lender has the option to
exchange the note for a stock certificate representing 51% of the company.
Get a business transaction attorney to draft it.
If your friend is pressuring you, I suppose she needs a favor. So you can
do the favor if you don't mind saying goodbye to the money. But when she
stops being your friend and offers you 1% (as close to zero as she could
get) for $15K, that is no longer a favor, that's taking advantage off . . .
well, you fill in the blank.
This answer must not be relied on as legal advice for the reasons posted
In addition to all the other very good advice you've received, please advise
your "friend" that SHE should see a lawyer...FAST!
You, the potential investor, could lose your investment (plus time,
inconvenience, embarrassment, etc.)
Your friend, the potential seller of securities, could spend time in jail.
The federal securities laws are so strict that even unintentional offerings
of unregistered securities can carry severe penalties. I've never been an
attorney, but I've watched several clients as they dealt with these complex
I'm not accusing your friend of any wrongdoing or bad motives. Many (most?)
small companies are started in much this way, and some become successful.
Many of us can point to investments that we wish we had made when we had the
opportunity. But many of us also are very happy that we dodged the snares
that were in our path. And YOU used the phrase "pressuring me". That does
not sound good at all.
BOTH of you should consult competent lawyers!