Equity Investment Contract

This agreement sets out how a company can accept equity instead of cash for services or products. It functions as a practical equity agreement template for small business owners and early-stage startups that want to conserve money while still moving a plan forward. The parties involved are a Company and a Customer; Exhibit A defines the key terms, including whether payment is all equity or a cash-and-equity mix, the percent or number of new shares issued, and any restrictions.

Examples referenced include preferred stock issued at a stated price and aligned with a company's common stock agreement. Expenses are reimbursed in cash, and late amounts accrue 1. 5% per month, so the deal can be structured to fit monthly payments.

The term runs from a start date until terminated with 90 days' written notice. The contract includes standard protections: entire agreement, governing law and venue, binding effect, good faith, nondisclosure of compensation, and attorney's fees. It limits assignment by the Company without consent and allows the Customer to assign its rights. These rules help safeguard both sides in case disputes arise.

This simple agreement does not set investor rights that future investors, angel investors, or venture capitalists typically request, such as voting rights, first refusal, dividends, vesting schedules, liquidation preferences, a valuation cap, or conversion mechanics. Such cases are handled in related documents like a stock purchase agreement, restricted stock agreement, shareholder agreement, or a convertible debt agreement using convertible notes with a maturity date and trigger event. If you intend to raise capital later, coordinate this deal with those documents so the corporation's stakeholders and holders of shares maintain fair expectations and ensure compliance. Legal counsel can assist with tax, valuation, ownership, dilution, and control issues so the organization maintains a clear record and a long-term success strategy.

Use cases include a marketing firm trading hours for equity in an app launch, a software developer accepting future equity for implementation work, or an employee advisor receiving a proportion of equity in lieu of higher cash income. Entrepreneurs can invest effort on behalf of a growing enterprise without taking a loan against assets or a mortgage on property, reducing risk while aiming for future return if there is an acquisition or sale.

Proposal Kit streamlines writing and document assembly, with automated line-item quoting for Exhibit A, an AI Writer to build supporting documents, and an extensive template library. Its ease of use helps businesses structure different types of investor agreements consistently and professionally.

Beyond the basics, this arrangement sits near equity financing but focuses on services-for-equity rather than a classic investor agreement. Exhibit A becomes the center of gravity: it captures investment terms the parties agree to, the period for work, and certain rules on cash versus equity, so both sides stay aware of dilution and value. It is not to be confused with home equity agreements, shared equity agreements, or a house sale; this article addresses a business entity trading expertise and efforts for shares.

In the early stages, a service provider may accept a lower price in cash to support growth while aiming for future profit if the company secures funding or a buyer. The board's authority, the company's shareholders, and existing shareholders' relationships are crucial, as conflicts can arise if involvement and duties are unclear. Generally, being prepared with an exit strategy and a plan for later transactions helps maintain confidence among partners.

Operationally, the process should account for taxes and bookkeeping so a person paid in equity can still pay rent and expenses. Parties may decide to tie vesting-like milestones to delivery, giving the provider a full right to claim shares as work is completed. In some circumstances, if the company is unable to acquire new capital, equity can become a risky alternative to cash, with the possibility of losing value.

Legal guidance helps a representative of each side qualify key assumptions, avoid overbroad claims, and align authority with corporate operations. That foresight can lead to smoother deals and better outcomes for early investments, retirement planning, and later-stage exits that were discussed at the outset.

Proposal Kit can assist teams in writing and assembling these agreements, generating consistent language for Exhibit A, and using automated line-item quoting and its AI Writer to build related documents. Its template library gives businesses a practical advantage when documenting roles, milestones, and payment structures with clarity.

Further considerations strengthen execution. Define objective milestones and a reporting cadence so both sides know where the most effort is required and when equity is earned. Tie equity pricing to a clear valuation method to turn cash savings into fair consideration, and specify what operational knowledge the provider will receive (e.g., periodic metrics) to track progress. Establish approval thresholds so the board can act quickly on critical changes while avoiding surprises. Include an escalation path to manage conflict before it becomes litigation. Document how this arrangement interacts with future rounds so new investors agree the terms are compatible with later financings. Aim for simple, auditable records that map hours or deliverables to shares. This discipline protects the runway today while preserving flexibility for tomorrow's growth.

How do you write a Equity Investment Contract document? - The Narrative

How to Build a Legal Contract with Proposal Kit

This video illustrates how to create a legal contract using the Proposal Pack Wizard software. It also shows how to create a proposal with an invoice and contract at the same time.