Your friend is not automatically entitled to any cash just for being an investor. If he owns 2.5% of the company, it just means is that 2.5% of the business as

Your friend is not automatically entitled to any cash just for being an investor. If he owns 2.5% of the company, it just means is that 2.5% of the business assets belong to him. If you operate the business for 50 years, he's won't automatically get anything back, unless you structure the agreement that way. If you sell the business or close up shop, he is entitled to 2.5% of the (remaining) assets and cash. Nolo Press has a bunch of great books to help you set up your organizational structure, and they include templates for your operating agreement. I was just browsing them in Borders last weekend. They are awesome. And they're like 20 or 30 bucks. :)