I plan to borrow money from my friends to start my business. Need to speak to a lawyer, who can help answer these questions?

San Francisco, CA Viewed 56 times. Posted 22 days ago in Business

I plan to borrow money from my friends to start my business. I know that I need a promissory note. Still all sort of questions comes up:

- What is the maximum interest they can charge?
- Is there a required minimum rate?
- What type of lawyer should I be talking to: Tax, Contract, ....
- Is there a maximum amount allowed to be borrowed/lend privately per year?
- Do the usury laws applies where the borrower live or the lender?
- What does the lender have to report at the the EOY on their taxes.
- Is the promissory note between the business and the lender or between me and the
lender.
- What if I decide to pay back a percentage of the profit rather then a fixed interest.
Does that change anything. Can I still use a promissory note?
- anything else that I should be aware of.

Answers (3)

Dana Howard Shultz

This attorney is licensed in California. Posted 22 days ago.

You need a lawyer who specializes in startup companies.

While all of your questions are appropriate, it appears that your attorney should start discussions with you at a more basic level to understand what you are trying to accomplish, then help you explore alternative ways to achieve your objectives.

The blog at the link below provide a lot of information for founders of startup companies.

Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.

The High-touch Legal Services Blog

Pamela Koslyn

This attorney is licensed in California. Posted 22 days ago.

Obviously you need to see a business lawyer to help you with this loan arrangement. The maximum interest under CA law, if you don't fit into one of the exemptions to the usury laws, is 10%, and there's no mininimum rate - your lender doesn't have to charge interest at all. There's no required payment amount per year and you could structure it to be a percentage of profits although the lender could then also require accounting and audit rights.

There are probably a lot of things involved in this transaction, and it's way too much for this forum. You need a consultation with a lawyer so that you cna disclose everything and get some specific advice.

Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.

Willem Galen Gentry

This attorney is licensed in California. Posted 21 days ago.

My colleagues are right. You should consult with an attorney and that will cost you some money. If you are still in the planning stages and do not wish to pay for counsel you may wish to check out www.nolo.com. This site has a host of materials--books, ebooks, etc. on starting small businesses in California. You can obtain a lot of information at a modest price. I am not affiliated with Nolo Press in any way, but I think it is a great resource.

Nolo Press