Capital Contribution Agreement Sample

When starting a business, there are several legal documents that need to be prepared to ensure the smooth running of the business. One such document is the capital contribution agreement. This agreement outlines the terms and conditions of the capital contributions made by each partner or investor. In this article, we will discuss the purpose of a capital contribution agreement and provide a sample agreement for your reference.

Purpose of a Capital Contribution Agreement

A capital contribution agreement is a legal document that outlines the terms and conditions of the contributions made by each partner or investor in a business. This agreement should be prepared early on in the life of a business to prevent disputes over ownership and control of the business. It defines each partner’s or investor’s responsibility for financing the business in exchange for ownership shares or profits.

A capital contribution agreement typically includes the amount of money or assets that each partner or investor will contribute, the payment schedule, how ownership shares will be allocated, and how profits and losses will be shared. It also covers how the business will be run and how major decisions will be made.

Sample Capital Contribution Agreement

The following is a sample capital contribution agreement that can be modified to suit your business needs:

Capital Contribution Agreement

This Capital Contribution Agreement (the “Agreement”) is made and entered into as of [Date] by and among [Partners/Investors names and addresses] collectively referred to as the “Parties.”

Recitals

WHEREAS, the Parties have formed a business entity, [Business Name], in accordance with the laws of [State].

WHEREAS, the Parties have agreed to contribute capital to the business in exchange for ownership interest.

NOW, THEREFORE, the Parties hereby agree as follows:

1. Capital Contribution

a. The Parties agree to contribute the following capital to the business:

[Partner/Investor Name] shall contribute $[Amount].

b. The Parties shall make their respective contributions in full no later than [Date of Payment], unless otherwise agreed to in writing.

2. Ownership Interest

a. The Parties agree that ownership interest in the business shall be allocated as follows:

[Partner/Investor Name] shall own [Percentage] of the business.

b. The ownership interest shall be determined based on the capital contributions made by each Party.

3. Profit and Loss Sharing

a. The Parties agree that profits and losses of the business shall be allocated as follows:

[Partner/Investor Name] shall receive [Percentage] of the profits and shall be responsible for [Percentage] of the losses.

b. Profit and loss sharing shall be determined based on the ownership interest of each Party.

4. Management and Control

a. The Parties agree that the business shall be managed by [Name of Manager] unless otherwise agreed to in writing.

b. Major decisions regarding the business shall be decided by a majority vote of the Parties.

5. Term and Termination

a. The term of this Agreement shall commence upon the execution of this Agreement and shall continue until the business is dissolved or until otherwise agreed to in writing.

b. Upon termination of this Agreement, the Parties shall take the necessary steps to wind up the business in accordance with applicable laws.

6. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of [State].

7. Entire Agreement

This Agreement constitutes the entire agreement among the Parties and supersedes all prior negotiations, agreements, and understandings, whether written or oral.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.

[Name of Partner/Investor] [Signature] [Date]

[Name of Partner/Investor] [Signature] [Date]

[Name of Partner/Investor] [Signature] [Date]

Conclusion

A capital contribution agreement is an essential document that helps prevent disputes and ensure smooth business operations. By outlining the terms and conditions of the capital contributions made by each partner or investor, this agreement helps to avoid confusion and disagreements over ownership and control of the business. The sample agreement above can be modified to fit the specific needs of your business.