If you’re planning to try and land a government contract for your business, then you’re likely to hear about equitable securities at some point. It’s a share of common stock that gives you an ownership stake in a corporation, such as a company that you’re investing in. Equitable securities can also come in the form of mutual funds provided that pooled equity securities funded them. 

Why do business owners use equitable securities?

Many company owners rely on equity securities to spread ownership stake in their business among multiple investors. It’s easier for them to more readily qualify for leases or secure business contacts by doing this. 

How do equitable securities affect ownership rights?

There’s a direct correlation between how many shares you receive and how much of an ownership stake, or controlling interest, you have in a company. As a business owner, you may need to consult with your corporate investors before making critical business decisions depending on how much of an ownership stake you retain in your company.

You must have a board of trustees if you’re going to have equitable securities in place. Their role will be to act as the filtering board for decisions that stakeholders want to make. The board of trustees will ultimately be responsible for ensuring that their choices are in the company’s best interests. 

Is there an alternative to the standard stock equities securities option?

While some companies are set up based on the common stocks equities securities option whereby investors all have voting rights, there are alternatives. There is a preferred stocks option whereby investors may receive preferential payment options yet not have voting rights. A company can offer one or both options to their investors. 

Setting up a Texas business isn’t always easy, especially if you are trying to position it to make it more attractive to outside investors so that you can secure government contracts. A business law attorney can help you understand the different types of equitable securities that you can offer to investors in your Austin company so that you can make an informed decision about what’s best for you.