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Diluting Your Equity May Solve A Short Term Problem, But At The Expense Of Long Term Difficulties

Many entrepreneurs faced with the demands on cash of a growing business are tempted to sell equity to outside investors, or perhaps give away stock to retain a valuable employee. Diluting your stake in this way may solve the immediate problem, but it can have unforeseen consequences when the business eventually is sold. Stockholders’ personal circumstances evolve in different ways over the lifetime of a company, and whatever the original intention everyone may not be on the same page when you are ready to sell.