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Anyone willing to share their operating agreement/investment offering?

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  • Anyone willing to share their operating agreement/investment offering?

    Hi all.

    As I detailed in another thread, I'm trying to figure out how to structure my LLC so as to be appealing to investors. The question is, how to structure profit distributions to investors and founders, and whether those percentages should flip.

    For example, Alarmist Brewing (formerly Panic Brewing) went with an 67%/33% split between investors and founders until the investors recouped their principal, at which point it would flip to 33%/67% investors/founders forever.

    That is certainly one way to do it. Did others take a different approach? Would anyone mind sharing what they did?


    Thanks,

    James

  • #2
    I have reviewed a few investment packages from potential breweries. I wouldn't send any over to you because they were all terrible. Bad business plans plus bad equity structures. Unsurprisingly, not a single one has opened doors.

    Who your equity partners may be will be/should be a huge factor in how you choose to structure the business. Friends and family can often be acquired for little to no management involvement and a reasonably low rate of profit. Venture capitalists will typically want a huge piece of management and a high rate of return. Random local investors may be acquired somewhere in the middle. There is no reason why you have to offer everybody the same deal or why you cannot take a part-equity and part-debt capital structure.
    DFW Employment Lawyer
    http://kielichlawfirm.com

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    • #3
      Thanks very much for that.

      Although, I have to say, I'd be very interested in seeing the terrible offerings, so we don't make the same mistake!

      We will not be offering voting rights with our membership units. We are also going for a about a 60%/40% split between equity and debt. We have spoken to a few local VCs that specialize in food and beverage companies, and all they are interested in is a cut of the raised funds, not control of the company.

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      • #4
        This is great information so far. I'm curious how breweries have gone about raising equity and debt financing in the past? Is there a common split, do banks like to see a certain amount of equity financing, etc.? Any information would be useful. We're looking into offering investment into the company for a similar split, but we're being overly cautious for many of the reasons above.

        Essentially, we're looking for a way for investors to make small investments (say, $5000 for 1%), retain no actual management control, and we'll buy back X amount of the company at different times. We have not considered offering an unlimited profit sharing -- that's an interesting concept.

        How do you define "profit" vs money you use to continue investing in (growing) the company?

        I'm very new to this, my fundraising experience has been very much tied in with tech startups in the past, and opening a brewery seems to be a completely different type of venture.

        Cheers,
        Matt Richards
        Pubstomper Brewing Co.

        Brewery in planning.

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        • #5
          Originally posted by mattc0m View Post
          How do you define "profit" vs money you use to continue investing in (growing) the company?
          "Profit" in accounting is the net of: revenue - operating costs (all) +/- non-operating income/expenses +/- gains/losses (one-off things) - interest - taxes.

          You'd subtract dividends from that, and anything left over goes into retained earnings. If you have one class of stocks, you can't issue dividends to some shareholders and not others. Many companies never issue any dividends at all, but investors in those cases would expect to realize their gains through capital appreciation.

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