What is an Investment Agreement?
An Investment Agreement is a document that holds the terms of investment for the parties involved. All conditions, obligations, and duties must be specifically and clearly explained by an investment agreement. Whether creating a restaurant partnership or media company partnership for small or big companies, there must be an investment agreement between two parties or more that binds them together legally. An investment agreement will also serve as a safeguard for both parties.
How to Make an Investment Agreement
According to Lawfarm, a cultivating legal solutions company, to gain from a businessperson's investment is his commercial intent. To save you and your investors from unforeseen, possible confusions and disputes, always begin the investment with an investment agreement document. Follow these comprehensive guidelines in making an effective investment agreement and to ensure the success of any type of investments you are part of.
1. Identify Parties
Always clearly determine each party's identity. Make sure to encode their legal names and exact addresses. This is to hold evidently of who is accountable for whatever happens within the business investment, positively or negatively. Always have the papers signed by the relevant persons involved.
2. Simple and Clear
Spell out vividly the investment's basic structure. There shall be no room of ambiguity of terms and conditions both parties will be incorporating. Clarifying your authority and borders on each other will save you from encountering any legal issues. In some circumstances, investors can directly control a sector or more to a company, if it is well-written in an investment contract. To be authorized in any reporting or control activities, specifically mention it through the investment agreement together with its limitations.
3. Investment Terms
Investors can provide anything, depending on what is written in the business agreement. Investors can provide cash, check, or by the form of concrete and tangible assets. Your business investment agreement should specify those. When concrete assets are offered, it is also as important to state how those assets are returned when the contract is due or terminated. By this, it will be a peaceful agreement for both parties.
4. The Monetary Flow
As business always involves money, it is vital for your investment agreement to entail who is accountable for the payments, the payment schedule, how the payments will be done when the payments will occur, and other related necessary details regarding the flow of money. In business, we always do not want to miss even a penny. Crystal clear states the payment duties and commitments of both parties. Also, it is fundamental to specify the return of investment method that was agreed firsthand.
5. Secured Circumstances
It is important to signify how the investors will be handled if the company goes down or will be in a state of bankruptcy. Also, as each business person would like to save his own business promptly, you should always indicate the conditions when one of the parties will not able to comply with the agreed-upon stipulations within deadlines. One of which should be able to create a partnership termination letter or contract. By establishing the possible risks that are highly related to the business, it will be a help for both parties to keep away from further damages, at least in terms of money and time.