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Thread: Legal to setup a company to promote your own company?

  1. #11
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    And I smell a future episode of American Greed in your future.

    I don't say this to troll you, nor do I intend to insult you with this. As Harold pointed out, you haven't even described to us what you want to do other than acquire other people's money, and I quote, "such as seniors". I have heard of stories where people have setup companies doing exactly what you propose and the originators either turned it into a pyramid (trying to preserve the returns of the early, high dollar investors) or stolen most of the funds.

    To do what you want to do, there is licensing and registrations that need to be done. Managing a syndicated investment probably needs to be cleared through federal regulating authorities.
    Brad Miedema
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  2. #12
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    Greedy people who are inexperienced aren't always bad either. The only reason I'd want a smart investor is to possibly help us because they may have access to additional resources or people that we can't. Generally smart investors check on their investments and are very careful with what they do. They also seem much harder to get a hold of. Greedy people don't have a problem giving away money if they are sure that they will make more. After all, they are greedy. My company is essentially an outsourced IT support provider and equipment leaser. Basically an MSP of sorts. We have our business plan, and we have very close figures on what we will charge and what it will cost to start. I'm also in contact with many people that would be willing to work for us, some are college students that need experience, others are experienced IT veterans that have lost their jobs and need to feed their families. I almost want to go to the next mayoral election and offer them the ability to exploit us essentially as a bunch of teenage entrepreneurs that they "helped" by investing and supporting, which in turn would show that they support youth in the community and all that stuff and could help them get ahead.

  3. #13
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    You're looking at setting up two completely different businesses.

    1) IT support
    2) Equipment leasing

    Personally, I wouldn't even consider your business model as being something I would want to put my money into (and I'm quite aggressive when it comes to investing). Though the latter can support the former, they both need to be operated independently.

    There's a few reasons that you usually see banks and high wealth corporations operating equipment leasing companies.
    1) They already have the licenses in place
    2) They have the underwriting in place
    3) They have the experience in dealing with high dollar paper assets
    4) They have access to the funds needed to purchase the equipment

    As to the "American Greed" references, I think you're not understanding what we are referring to. The show focuses on people and companies who have committed financial crimes (in general). Not all of these people set out to screw over those who invested into the business. Watch the show if you can and you should see what we are referring to.
    Brad Miedema
    Fulcrum Saw & Tool

  4. #14
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    You really need to understand the rules and regs and potential problems associated with raising capital; especially for start ups and even more particularly from seniors!

    Regulatory enforcement agencies aren’t concerned with accredited (minimum net worth) or sophisticated (experienced) investors losing money in startups or risky plans. HOWEVER, they ARE very concerned with the inexperienced investor investing beyond their means. They are very sensitive about seniors being targeted for investment. There are some laws that especially protect that class of investor. Obviously there are plenty of savvy senior investors with available investment funds but DON’T be trying to convert retirement savings funds from those that need it. It’s unethical and often illegal.

    Raising capital from those outside your own circle of friends and associates is VERY serious business. Here are a few items from a standard subscription agreement. The emphasis is on the investor, not the investment. It is your responsibility to make sure the investor is suitable for the risk. They don’t care if Donald Trump loses 10 million on your deal, BUT they do care if some retired senior citizen loses their $ 50,000 nest egg.

    7. I recognize that an investment in startup entities such as the Corporation involves a high degree of risk and that I could lose all or a portion of my investment.

    8. My commitments to all investments, such as the Shares, bear a reasonable relationship to my net worth, and I am able to bear the economic risk of an investment in the Shares.

    15. I AM ABLE TO BEAR THE ECONOMIC RISKS INHERENT IN AN INVESTMENT IN SECURITIES ISSUED BY THE CORPORATION, AND I UNDERSTAND THAT AN IMPORTANT CONSIDERATION BEARING ON MY ABILITY TO BEAR SUCH RISKS IS THAT I CAN AFFORD A COMPLETE LOSS OF MY ENTIRE INVESTMENT IN THE COMPANY. I HAVE ADEQUATE MEANS OF PROVIDING FOR MY CURRENT NEEDS AND PERSONAL CONTINGENCIES AND HAVE NO NEED FOR LIQUIDITY IN MY INVESTMENT IN THE COMPANY.

    The undersigned is an Accredited Investor, as defined in SEC Regulation D or otherwise meets the investor suitability standards established by the Corporation, and will provide such documentation as may be required by the Company as evidence of such fact.


    As some others have mentioned the “promoting” can easily become the business, rather than the actual business. It happens all the time.Again, it is serious, be careful.
    Last edited by Paul; 01-02-2016 at 06:06 PM.

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    Actually, there is an episode about a company that did exactly what you've just proposed. IT support and equipment leasing. It was started the exact same way, getting investor money to buy equipment by promising huge returns on the back-end from the leasing and maintenance.

    It operated like a total ponzi scheme (new investors money to pay old investors) because the business model is completely unsustainable on a small scale when you have to pay investors.

    Look, I'm not here to beat up on you, or accuse you of anything. But you did want feedback and I think understanding how your plan sounds to others is important. What I hear from you is what you want and that you want to use other people's money to do it. It doesn't sound like you've thought anything through past how you're going to talk people into giving you money.

    You also mentioned that you're a teenager? Sorry, but that kills it right there. No one is going to give a bunch of teenagers who have created nothing, invented nothing, and have no college degrees a bunch of money to start a business hoping for returns based on the oldest investment scheme in the book.

    If you're really serious and want people to believe and invest in you, you'll bust ass to save enough money to start this on a small scale, run it for a while, and SHOW potential investors a working, profitable model, and then lay out a plan for expansion and growth.

    It's still a crap shoot, and I personally wouldn't believe in it because I think with such rapid changes in tech, and how affordable it is to own instead of lease that it's completely unsustainable except for in a few instances. No to mention the overhead and salaries. But you'll never get anywhere looking for other people to put up all of the money. Why do they need you?

  6. #16
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    It's nice to finally hear someone agree with me. I was totally with you guys on how that's two different business models, but our adviser insisted that once we have a company interested in our IT support side, then we could come in and say "Yeah you're gonna have to upgrade all these machines, but don't worry we have everything you need". My adviser was actually a pretty smart guy, and has a couple companies under his belt, HOWEVER, he has absolutely no morals and is a greedy, greedy person that doesn't care who he hurts as long as he gets his money, and I have some personal reservations against that. There was once a simpler time where he was going to acquire the investment funds as he is an established entrepreneur and people trust him, but I don't.

  7. #17
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    Quote Originally Posted by shutupdan View Post
    ... but our adviser insisted that once we have a company interested in our IT support side, then we could come in and say "Yeah you're gonna have to upgrade all these machines, but don't worry we have everything you need". My adviser was actually a pretty smart guy, and has a couple companies under his belt, HOWEVER, he has absolutely no morals and is a greedy, greedy person that doesn't care who he hurts as long as he gets his money, and I have some personal reservations against that. There was once a simpler time where he was going to acquire the investment funds as he is an established entrepreneur and people trust him, but I don't.
    Cut ties and run. If you are not 100% comfortable with the person who will be considered a partner, you do not want to be in business with him.

    There are also a lot of other red flags in what you just wrote:
    1) absolutely no morals
    2) greedy, greedy person
    3) doesn't care who he hurts as long as he gets his money
    4) ... people trust him, but I don't.

    Do not enter into business with this guy unless you are 100% comfortable. It could very well be that he got his idea from watching "American Greed". It may be a good idea for you to watch that episode to see if there are any parallels between what those guys did and what your partner is proposing.

    Finally, DO NOT DO BUSINESS WITH THIS GUY UNLESS YOU ARE 100% COMFORTABLE!!!!!!!!!!!!!
    Brad Miedema
    Fulcrum Saw & Tool

  8. #18
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    I've known the guy for 4 years but always felt a little off about him. He's gone now anyways. My point about explaining all that was that my business plan was revised by a professional, and he looked at our local area and decided this was the best route, so while I do realize that these might be two different businesses, we have them set up as two different businesses, so it should be okay. Also I know I'm not that old but I really feel as though I know more and have more connections than most people my age or older even, so while yoi

  9. #19
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    I also forgot to mention that we had a 300k investor attached to our adviser that was able to fund us according to what he believed we needed.

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    If you don't trust the people you're going into business with, don't do it. Why take the risk of ruining your rep, or going to jail?

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