In a capital raise, words matter—and calling someone the wrong thing can destroy your deal.
If you raise money from a partner, they are not an investor. A partner:
• Has ownership
• Has a voice
• Has rights in decision-making (even if you retain majority control)
The moment you try to treat a partner like a silent money source, you’re blending lanes. And that’s where serious problems start.
If someone puts in money, has no real voice, and is told to “just sit there,” they are not a partner. They’re an investor. If the deal goes bad, they can claim they were misclassified—and now you’re in securities law territory, not just a civil dispute. That’s where fines, penalties, and even jail time come into play.
The trade-off:
• Pros of partners: Faster capital, added expertise, relationships, credibility
• Cons: You give up equity and decision-making power
You must choose the lane before money changes hands:
• Investor lane = securities compliance
• Partner lane = shared ownership and voice
Blend them, and you expose yourself to massive legal risk.
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