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Should I buy into the family business?

My brother-in-law is a builder who’s doing really well and expanding rapidly. He has offered me equity or a share in his business. How should I work out what to do?

There are rules of investment, which applies to shares, real estate and even a small business. You see, investment involves putting your savings or borrowings secured by your income into some kind of asset.

A business is an asset, which can be sold. A share is only a part of a whole company and so if you’re buying into your brother-in-law’s business, you effectively will hold shares in it. Here are some questions I throw to anyone looking at investing in shares, fixed interest products and property.

First, do you know precisely what you’re putting your money into? Second, does the investment tally up nicely with your life plans? Third, have you listed all the risks and are you ready to deal with them? How will they affect your returns?

Fourth, is there an escape hatch if you want out? Would others happily take your place in the business? This is where your research is crucial. And if you can’t do it, then pay for someone objective to give you an opinion. A good accountant could go over the vital numbers.

Finally, what is the total cost of the investment? Get in writing that there are no other hidden costs and make sure you don’t end up partly responsible for your brother-in-law’s debts. You can see why I recommend that an objective accountant looks at the figures.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Tuesday, December 15, 2009

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