My business partner asks me to check with my client for funds for expansion.

 

ChatGPT said:

That’s a significant step, and it’s good that you’re approaching it carefully. Here's how to assess this request and protect your interests:

🔍 Step-by-Step Considerations:

✅ 1. Understand Your Role Clearly

  • Are you formally a co-founder, shareholder, or just assisting?

  • Are you listed as a director or partner in company documents (MCA records)?

👉 Why it matters: If you're helping raise funds, your legal responsibility and reputation could be at stake. Make sure your role is officially defined.

💼 2. Check the Company Status

Ask your partner for:

  • Company CIN (Corporate Identification Number)

  • Latest Incorporation Certificate, PAN, and GST

  • Shareholding pattern or cap table

🔍 You can verify these on MCA website.

🧾 3. Understand Why They Need Funding

Before involving your clients:

  • What’s the use of funds? (e.g., hiring, marketing, product development)

  • Are there financial statements or projections?

  • Is there a business plan or pitch deck you can share with clients?

✅ Only approach clients if you have professional, transparent documentation that builds trust.

⚖️ 4. Be Cautious with Client Relationships

If you refer your existing clients:

  • Be clear if you’re asking as a personal favor or in an official capacity.

  • Avoid risking client trust if the business is not ready or lacks clear accountability.

  • Disclose any financial benefit (e.g., equity or referral fee) you're getting.

📜 5. Put Agreements in Writing

If you're helping raise funds:

  • Sign an agreement or MoU outlining:

    • Your role in fundraising

    • Your compensation (if any)

    • Your liability limitations

🚩 Potential Red Flags to Watch:

Warning SignWhy It’s Concerning
Vague about fund usageMay indicate poor planning
No clear role or agreement for youLegal/ethical risk for you
Asking to “just talk to your clients” casuallyUndermines your credibility
Not willing to share legal docsCould indicate non-compliance or risk

✅ What You Can Do Next:

  1. Ask for all legal and business documents.

  2. Request a clear, professional pitch or proposal.

  3. Clarify your position and protection in writing.

  4. Only refer clients if you fully trust the business and it adds value to them.

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