What does an investment contract cost? This is a question many parties ask when deciding to invest in a business. So let’s explore this question and review some general information about investment contracts.
How Much Does an Investment Contract Cost?
An investment contract is a legal agreement in which one party invests money (usually into a business) with the expectation that they will receive a return on their investment. Investment returns are referred to as ROI. Investment contracts are used across various industries but are very common in real estate.
For a transaction to be considered an investment contract, the investment must meet specific criteria that have been developed and regulated by the Securities Act of 1933. The requirements are defined by the Howey Test and require the following elements:
- An investment of capital (it doesn’t always have to be money)
- A common enterprise
- The expectation of a profit (ROI)
- The profit will be derived from the efforts of others
Investment contracts are complicated financial instruments, especially if you are new to investing. As a result, investment contracts carry a certain degree of risk. Therefore, anyone investing in a business or real estate should first consult a knowledgeable attorney.
Hiring a lawyer to assist with an investment contract will come with costs. Still, a lawyer will ensure that the terms of your investment contract are fair, legally binding, and adhere to all state and federal laws regarding investment contracts.
Based on ContractsCounsel’s marketplace data, the average cost of a project involving an investment contract is $575.
What’s Typically Included in an Investment Contract?
A typical investment contract will include clauses that lay out the terms of the investment and when the investor can expect a return on their investment. Other basic information you may find in an investment contract includes:
- Names and addresses of all parties
- The basic information of the investment
- The amount of the investment
- The form of the investment
- The purpose of the investment
- The date the agreement is made
- Signatures of all parties
There are several different types of investment contracts. The type of contract will determine what information needs to be included. If you are unsure what type of investment contract you need or what provisions should be added, always consult with a knowledgeable attorney.
Types of Investment Contracts
Depending on the type of investment and business in which you are investing, there are various investment contracts for different situations. The most commonly used investment contracts include:
- Stock Purchase Agreements. Used for investments that are not publicly traded.
- Non-statutory Stock Option Agreements. Investment contract for employees who want to invest in the company they are employed.
- Statutory Stock Option Agreements. Heavily regulated by the IRS but also have generous tax benefits.
- Convertible Debt Agreements. Used when an investor loans money to a company. The three types of convertible debt agreements are convertible notes, convertible promissory notes, and SAFE notes.
- Royalty, Commission, or Percent of Revenue Agreements. An investment contract is used when the investor does not want to have ownership of the company.
Before investing in a company, it is recommended that you consult with a business lawyer who specializes in investment contracts. They can help you determine which type of investment contract is best for your situation.
Examples of Investment Contract Projects
Investment Contract Drafting Service
An investment contract is an essential document because it dictates how you invest and receive a return for your investment in a company. If this document isn’t drafted correctly, you may face financial ramifications. The best way to ensure that your investment contract is drafted correctly is to hire an experienced lawyer for drafting services.
A lawyer specializing in investment contracts will help you choose the type of contract that best suits your needs and ensure that the contract includes all necessary information. Your contract must adhere to all applicable laws and be legally binding to protect both you and your investment entirely.
When you hire an attorney to draft your investment contract, you typically start with a consultation with the lawyer to discuss your investment. The lawyer will then prepare a customized investment for you to use.
Investment Contract Review Service
It is always possible to find an investment contract template online. However, if you choose to use a template without consulting with an attorney, you may be putting your investment at risk. Before executing an investment contract, you drafted yourself. You should always consult with a lawyer for review services.
When you hire a lawyer to review your investment contract, they will ensure the contract follows all state and local laws. They will also make sure it’s the appropriate contract for your investment and protect you and your money if a dispute arises.
Drafting Investment Contract Costs
Hiring an attorney to draft an investment contract will come with costs. However, the lawyer will be using their time and expertise to provide valuable legal services and expertise.
ContractsCounsel’s marketplace data shows the average investment contract drafting costs are $625 across all states and industries.
Investment Contract Review Costs
Hiring a lawyer for review services will also incur legal fees. Review services take the time and legal knowledge of a licensed attorney.
ContractsCounsel’s marketplace data shows that the average investment contract review costs are $515 across all states and industries.
How Do Lawyers Charge for Investment Contracts?
Investment contract lawyers typically charge for legal services using an hourly rate fee structure or a flat fee rate structure.
Hourly Rates for Investment Contracts
When using an hourly rate fee structure, the lawyer will inform the client of their hourly rate and then bill the client for all hours spent working on the project or case.
Attorneys usually prefer this method to ensure that they are compensated for all time spent on a client’s case, even if the case or project takes longer than expected.
The downside of hourly rates for clients is that they will not know the cost of legal fees until after the project is complete.
ContractsCounsel’s marketplace data shows the average hourly rate for a hold harmless agreement lawyer ranges from $250 - $350 per hour.
Flat Fee Rates for Investment Contracts
When using a flat fee billing structure, a lawyer will quote the client a single fee for the entire project's cost. Most lawyers who use flat rate billing structures estimate how much time a particular project will take to come up with a fair fee.
The benefit of flat fee billing is that the client knows the total cost of their legal project before hiring the attorney. Unfortunately, many lawyers require flat fee rates paid upfront before beginning work.
According to ContractsCounsel’s marketplace data, the average flat fee rate for an investment contract cost is $575.
Get Help with an Investment Contract
Do you need help with an investment contract? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.