Private Equity Interview Questions And Answers

A private placement is when you sell your company's stocks or bonds to private investors.
Example:
If you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment.

Private placements must come from what the SEC terms an "accredited investor" but know for starters that accredited investors are generally wealthy individuals or organizations.
Example:
For a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

☛ Operating Agreement
☛ Private Placement Memorandum
☛ Subscription Agreement
☛ Accredited Investor Questionnaire Form

An operating agreement is a legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

A private placement memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they will need to know about your company. You can set the amount of stocks you are offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

A private stock offering is when you sell securities in your business without an initial public offering, It is usually called an IPO.

A subscription agreement is an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased in addition to information about the company itself.

An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road when your business is growing even faster. Lawyer provides this form as part of the Subscription Agreement.

Secured business loans require the borrower to provide collateral or any form of acceptable security against the amount being borrowed. Depending on the lender's criteria. The borrower can use his or her home, car, equipment, inventory, cash savings and/or accounts receivable to guarantee that the loan will be repaid.
Secured loans pose less risk to the lender since they have something that can be called upon when the borrower defaults on his repayment. As such, this type of loan offers higher loan amounts, lower interest rates, faster approval rates and longer repayment terms.

Unsecured business loans do not require any collateral and merely rely on the credit history and financial capability of the borrower. This type of loan is usually offered to individuals or business owners who are considered to have good credit or those who have large balance sheets, short-term assets and/or impressive cash flows that are in excess of the required loan payment.
Unsecured loans carry more risks, they offer lower loan amounts, higher interest rates and shorter repayment terms. Despite these things, however, unsecured loans can be a relatively easy and flexible way for business owners to get additional funding for their endeavors.

A registered agent receives important legal and tax documents on behalf of a business-corporation or LLC. They also can receive services of process (SOP) when a business entity is a party in a legal action, like a lawsuit or summons. A registered agent may also receive paperwork from the state for the yearly renewal of the business's charter. Either a member of the company or a third party (like a lawyer or service company) can act as a registered agent.

Owning your own small business is a 24/7 job. You work during the day, think about work at night, and probably even wake up mid-slumber to jot down a great new idea to improve your processes.
When you are a business owner and you are always working even if you are not at work.
But what happens if you or your business is served a summons, a lawsuit, or official state documents and you are not in? Business law dictates that you must, at all times, have a registered agent available to receive these documents during normal business hours.

This agent which can be a business or individual must be on hand to receive and sign for those documents. The idea is to make sure these processes (such as the receipt of tax documents or notice of a lawsuit) are as smooth as possible and to keep people from claiming the information got "lost in the mail."
That is why every business needs a registered agent. It is also why many businesses especially single-owner companies and smaller entities-often select a registered agent not on their premises.

After filing for incorporation for your business, you will have to wait for the state to process your application which depends on the state with which you chose to incorporate.

Service is the delivery of legal documents, such as mail, fax, email or personal delivery. Process refers to legal documents such as a lawsuit, summons or complaint, wage garnishments, subpoenas for records and official state correspondence. You are required to have a registered address with the state where you will receive service of process.

If you do not respond to certain service of process, you may have your company suspended or terminated. Also, if your company does not respond to a legal notice such as lawsuit, you may get a default judgment instead of appropriate relief.

You can, but you must be available during normal business hours. You also have to have an address located in the state where your business is registered and any states where the company is doing business. Your name and address must also be listed in public records.

☛ Sole proprietorship
☛ Partnership
☛ Corporation

A sole proprietorship is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has total and unlimited personal liability of the debts incurred by the business. This form is usually relegated to small businesses.

A partnership is a form of business in which two or more people operate for the common goal of making profit. Each partner has total and unlimited personal liability of the debts incurred by the partnership. There are three typical different types of classifications for partnerships:
☛ General partnerships
☛ Limited partnerships
☛ Limited liability partnerships

A business corporation is a for-profit, limited liability or unlimited liability entity that has a separate legal personality from its members. A corporation is owned by multiple shareholders and is overseen by a board of directors which hires the business's managerial staff. Corporate models have also been applied to the state sector in the form of government-owned corporations. A corporation may be privately held (that is, held by a few people) or publicly traded.

A privately owned enterprise refers to a commercial enterprise that is owned by private investors, shareholders or owners (usually collectively, but they can be owned by a single individual) and is in contrast to state institutions, such as publicly owned enterprises and government agencies. Private enterprises comprise the private sector of an economy.

An economic system that contains:
☛ a large private sector where privately run businesses are the backbone of the economy
☛ business surplus is controlled by the owners, is referred to as capitalism.
This contrasts with socialism, where industry is owned by the state or by all of the community in common. The act of taking assets into the private sector is referred to as privatization. The goal of private enterprise differs from other institutions, the major difference being private businesses exist solely to generate profit for the owners or shareholders.

In countries with public trading markets, a privately held business is generally taken to mean one whose ownership shares or interests are not publicly traded. Often, privately held companies are owned by the company founders and/or their families and heirs or by a small group of investors. Sometimes employees also hold shares of private companies. Most small businesses are privately held.

Privately held companies generally have fewer or less comprehensive reporting requirements and obligations for transparency, via annual reports, etc, than publicly traded companies do.

A private equity is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange.

Growth Capital refers to equity investments, most often minority investments, in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a major acquisition without a change of control of the business.