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How do you write an investment contract?

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Quick Answer

An investment contract lays out the terms for people to invest in a business such as the amount of the investment, how the funds are to be used, and when and how the investors can expect a return on their investment, according to azcentral. The contract should also state whether or not has the investor has any control within the company.

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Full Answer

Investment contracts contain the names and addresses of the people entering into the contract, the date the contract takes effect and the structure of the investment, such as ownership shares in the company and signatures of all the parties involved, states azcentral. The contract should also describe what happens when the investment is transferred to the owner of the business and the form it takes. Usually the investment is provided by check or a wire transfer, but sometimes it is in the form of tangible assets.

The investment contract must clearly state when the investors can expect to receive a return on their investment, reports azcentral. It must establish procedures whether the investment earns a flat interest rate or a return rate based on the success of the business. Finally, it should include what happens if the business declares bankruptcy and whether or not the investors have any management or voting rights in the company.

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