Legal Question in Business Law in New York

Hey,

The story:

I am looking to find private funding to do concert production under a recently formed record label, The location being in New York, United States. My question regarding this situation is as follows.

A friend has offered to find the funding for me to execute the concerts. I was seeking to make this a "High yield, High Return, High Risk" sitiuation in which I am not liable to pay the funding back if the concert was to fail or yield poor sales. In addition, I have offered my friend a percentage of the total net revenue for finding the lender, 10% to be exact.

I dont want to do this deal by selling stock or securities. The structure of the business is essentially going to be an LLC or Sub-Chapter S.

The loan amount is for $30,000.00 - $40,000.00

My questions as follows:

1.) What would the structure/agreement of this deal be called? I.E.Would this be considered an Investment? or Loan? Limited Partnership? or a combination of the 2 of the 3?

a.) Would the IRS have to be notified about the deal?

b.) Could I just conduct business normally and file taxes at the end of the fiscal year?

2.) Would my friend be legally allowed to collect this percentage for finding the capital?

3.) What would be the title of my friend who found the funding?

a.) what would be the title of the person giving me the funding?


Asked on 2/10/14, 8:47 pm

1 Answer from Attorneys
Frank Natoli Natoli-Legal, LLC

This is not an appropriate forum to receive any meaningful legal advice on this. There are way too many moving parts.

If this is merely a loan, then the obligation to pay it back is fixed and not subject to the outcome of the endeavor. If, however, you are essentially selling securities in your venture or entity then you may have some SEC compliance and your friend may fall into a broker/dealer category which also requires proper registration.

If you want to avoid any legal expense, just do it as a straight up loan. If you really want to get clever, you then have no choice but to rely on lawyers to keep you out of peril.

I strongly suggest that you at least flesh it out with a lawyer in private.

If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient.

Kind regards,

Frank

www.LanternLegal.com

866-871-8655

[email protected]

DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.

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Answered on 2/11/14, 6:51 am


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