Are you selling equity to investors for cash? I meet so many entrepreneurs who are searching for investment but don’t have a company to put the money into. Or, in fact, put anything in to. There’s a lot to get straight but with a bit of thought everything becomes clear.
Let me explain.
Shareholders are a group of people who come together because they want to profit from an implementing a plan. They assemble a company of people to exploit an idea and invest in their cash as the capital to start the company. They each own a share of the company.
The company is a separate legal entity from all the people associated with it. It can take out loans, pay tax, build assets but, unlike us humans, can live forever.
Each year, the shareholders appoint a board of Directors who usually meet each month to review and set the company’s direction for the next 5-10 years. They will seek input from independent advisors to guide them on industry trends, executive pay, etc. The secretary, keeper of secrets, will record these meetings and ensure the company is complying with the law.
The Directors instruct and authorise the Executive to put their plan into action. The Executive are full time employees of the company.
You may have heard of Executive and Non-executive Directors. Executive Directors work full time in the business and sit on the board while the Non-executive Directors don’t get involved in running the business.