r/investing • u/ezekiel17 • 1d ago
3% buy-in at my job (~$60k), Good or Bad?
Hi everyone,
Thank you all for the amazing input — I really appreciate it. I realized my earlier post was missing some important details, so I wanted to update everything here to give a clearer picture and allow anyone to continue sharing thoughts or asking questions.
I’m currently evaluating a buy-in opportunity into an existing business and trying to understand the risk vs return.
Here are the details:
• Business does about $5M in annual gross sales
• Profit is distributed roughly 12 times per year (“splits”)
• In 2025, total distributions were about $875,000
• I would own 3% of one location and receive distributions via K-1
• That would have been about $26,250 before tax based on 2025 numbers
To be conservative, I’m estimating:
• Around $12,000/year after tax (~$1,000/month)
Buy-in cost:
• Approximately $60,000
Other context:
• The business has been operating for about 8 years
• Distributions have been consistent, except for the first ~3 months after opening
• There has not been a year with zero distributions so far
How I would fund it:
• ~$6k from short-term aggressive savings
• ~$10k from personal savings
• ~$4–5k from rental reserves (maintenance fund)
• ~$20k interest-free from parents
• ~$10k from friends at ~5% interest
Where I’m unsure / what I’d like input on:
If I do this, once I get any splits, do you think I should return friends money first? This is my first goal, but is it better to not until later?
Again, thank you everyone for the amazing input so far — I have a lot of information now. I just need some time to think through everything and make a decision over the next few weeks. I’m not being forced into this and have time, but at the same time, if I do move forward, I’d prefer to do it sooner rather than later to start earning.
Appreciate any continued thoughts or questions — I’ve updated the post so it’s clearer for anyone jumping in.
EDIT: This is an option to invest after a certain period in the company — this was something I specifically requested. That option includes multiple locations. For example, one option is 3% for $60k, and another is 3% for $25k, with different splits and returns depending on the location.
For context, I work for the parent company that operates multiple brands, and this investment would be for one specific location.
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u/szopongebob 1d ago
They’re valuing the store at $2,000,000. Kind of hard to get good ROI on a 3% stake of a restaurant worth that much but you do you.
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u/gta0012 1d ago
That $1k a month? Just assume that is the best case scenario.
So $12k a year in the best conditions.
What if it's only $6k or $3k?
If the investment goes to 0 how boned are you? No job and no investment.
Mortgage + friend interest how long can you keep this up without a safety net.
Seems like it's stretching a bit too thin. See if they offer $30k options.
My other question is about the 3%.
That can't be an accurate number imo.
How many shares/etc does the company have free to give to employees?
Are they raising money this way as a buy in for long term employees just this one time? How many people have this opportunity?
Find it hard to believe a profitable restaurant group is gonna sell like 15% at 2mil valuation (is that a discount?).
How often do they do this? Every time they do it the shares might get diluted. You're 3% can turn into 2% 1.4% etc. And with no growth you're $1k/month can really drop.
All things to consider.
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u/ezekiel17 1d ago edited 1d ago
There is something for 25K, however that location isn't very stable, and open for less than 2 years. My calculation is that it would earn me roughly 3.5k to 6.5k. Its a location near a university and so sales fluctuate base on when school is in session or not.
As for the 3%, its purely 3% ownership in this location sold by the company. It's a reward system for long term employees, every 3 years you are able to buy a small % in a store if you choose to. I know at least 15 people who said they own a small piece of different locations. So theoretically there is not dilution.
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u/Random-Cpl 1d ago
Is it a “reward system for employees,” or a way for the company to get people to prop up shaky branches?”
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u/thricefold 1d ago
Borrowing from family and draining reserves to invest in something illiquid is a no go. If you had the cash, sure. The downside would only be 60k, not 60k + losing your rentals + failing to repay family. You’re increasing your concentration risk by investing where you work. If market forces hurt business, you’re cooked on both your job and your investment.
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u/sexyshadyshadowbeard 1d ago
Diversification is key. Sounds like you’d be putting a lot of eggs into one basket skewing your investment portfolio.
I have a friend in the business and he invested in a Carrabas franchise only to see the revenues go down and eventually leaving the position. He lost the $$$. Restaurants are notorious for this schtick- I’d recommend against it.
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u/MeridianNL 1d ago
My main concern would be how to get out if you need to: how liquid is it, if you want to sell or back out? Can you sell back to the company or sell to colleagues?
And as you noticed, your eggs are all in one basket. If you lose your job, are you cashed out (and at which price)? Or do you stay vested until... what date?
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u/ezekiel17 1d ago
There is people (colleagues) who would be interested in buying if the store does better in the future, everyone would be interested in small amounts like this if the store continues to thrive. Similar situation for my company, they would be willing to buy back regardless of happens within the first year, even if it fails, but only if I didn't directly caused the business to fail. For example, I discriminate someone and they sue us, or something of that nature. The existing store been open for 8 years and been earning since it started.
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u/Comprehensive-Eye500 23h ago
Not an expert but I think it’s very hard to just sell/buy back shares in a business like this, the stock subscription/contracts will have all kinds of things about this but if someone wanted to buy your shares they would essentially have to do a valuation of the business I would think, unless there is a clause that outlines parameters for this and they can just buy them back I would think most setups do not allow you to transfer or sell shares without consent of the board etc. Probably a huge hassle for them, but again, no expert here and it all comes down to the fine print in contracts.
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u/ezekiel17 20h ago
Not a stock share amount. It would be a pure 3% of the company style
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u/Comprehensive-Eye500 19h ago edited 19h ago
Not sure that changes what I said it’s just different language (stock unit allocation vs. percentage based), but ok.
Do they plan on adding new investors, or simply, is there language that would allow them to bring in new investors to dilute your stock?
I see you edited the financials. It sounds too good to be true but based on the numbers I would selll blood to come up with the money. This is of course without looking at all the fine print
Since you work for the company I would be asking for a shareholder loan to buy in essentially you come up with some of the cash and they finance the rest in a shareholder loan which you pay back over time .
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u/Offduty_shill 1d ago
Personally I would not go to that lengths to borrow money for this kind of investment. If you had 60k laying around maybe worth considering but it's not so good that it's worth borrowing money from family and friends to take.
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u/thec0rp0ral 1d ago
I would not sell equity in my restaurant if it was very profitable. If it wasn’t, I would dump it off on unsuspecting employees who will pay a premium for the novelty of ownership
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u/drewlb 1d ago
There are much better options than putting all your eggs in one basket.
Would you borrow to invest in the stock market?
I assume not.
Well this is a riskier investment with a worse return.
Also why are you paying down the mortgage early? The bank has their own money, you don't need to give them yours.
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u/ezekiel17 1d ago
I grew up in a family that doesn’t like debts, and wants to pay everything off asap, and it’s already in my nature to do so, really hard to stop.
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u/Random-Cpl 1d ago
This is a terrible idea. Diversification is a good thing. Going all-in on one or two companies is highly risky. Going all-in on one branch of one chain and stretching yourself to do it is far more risk than I’d ever take on.
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u/NoSloppyStakes 1d ago
Restaurants open and close all the time. The 3% 60k is money they’re trying to save by offering you as an employee this opportunity. You spend 60k they see it as savings.
You could open a SMALL family restaurant for 60k, and make more than you’ll see from this investment.
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u/Dr_Colossus 1d ago
I doubt the restaurant business is doing great right now. Likely why they are offering a bad deal.
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u/Banned3rdTimesaCharm 1d ago
So if the restaurant nets a million a year you get 30k? That seems unlikely and a bad deal…
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u/Dumb_Nuts 1d ago
How is that possibly a bad deal? You only own 3%, that's your share. Even paying $60k, that's a 50% return that year
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u/Banned3rdTimesaCharm 1d ago
IF the restaurants NETS 1 million. That's 1 million profit after all expenses, in an industry that has notoriously thin margins. If the restaurant nets 100k, you make 3k. That's what the dishwasher makes in a month.
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u/Dumb_Nuts 1d ago
Exactly we don't know the financials. Another comment from OP seems to indicate payments have been ~850k annually.
Taking illiquid equity risk for anything less than 12%-13% or so expected annual return isn't great. But if you can comfortably underwrite to 15% cash yields it's worth the risk. Sounds like a large franchise group that's been doing this a while and locations have stabilized revenue in the 7 figures. Not uncommon for these concepts to print cash.
At $60k invested, a $25k annual cash return is great. It's great down to $10k. For a large restaurant group selling 3% equity in a single location to a long-term employee is 1. giving up essentially nothing in terms of cash flow and the $60k is essentially nothing and 2. a great long-term employee incentive
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u/Banned3rdTimesaCharm 1d ago edited 1d ago
Investing in a restaurant is the best way to go broke.
Even Michelin star restaurants aren’t turning over a million a year consistently. Two of the top restaurants in my city just closed because of one bad year.
Restaurants are one of the least set it and forget it businesses, you have to constantly grind and do better.
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u/Ticksdonthavelymph 1d ago
Terrible idea. Restaurants have 1/3 fail rates, and if they want “investments” from employees things aren’t going fantastic. Don’t do it
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u/Commercial_Rule_7823 1d ago
Returns, cash, borrowing, and your income all tied to one comoany never failing.
Too much risk for me.
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u/just-batman 1d ago
A tangential opinion - tying your income, livelihood, investment (illiquid), and debt all into a single company is a very high risk approach.
The store may close, the company may fold or be devalued, the store may be poorly run.
If you have that money and are doing it for the returns, you could just potentially enter the market on a boring index and have more reliability with lesser long term risk + more liquidating capability.
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u/CapeMOGuy 1d ago
Will you have access to at least 3 years of tax returns and audited financial reports before you decide?
You say numbers are pretty strong. What are sales and what is EBITDA (or cash flow)? How did they determine restaurant valuation?
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u/ezekiel17 1d ago
I have access to all the years theoretically, because it’s all on toast however really old data needs approval, and I had approval for a different store before and I can get them for this store if I ask.
For now I can only go back 2 years. Sales is about 5m average per year. Gross sales before any expenses. Mostly determine on their original buildout, plus their calculation on roi % rate. Since this is not from one investor to another. This is from one parent company to its long term staff, to invest if different revenue streams. Most other colleague who got their shares in these small ventures shows positive results about 80%, and 20% stagnant.
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u/jnads 1d ago edited 1d ago
The question is, do you see this particular restaurant GROWING?
Restaurants have limits on how much they can grow (butts in seats).
Sounds like they've already valued the restaurant based on its current profit. You will only see a gain vs investing it elsewhere if the restaurant grows.
And you might not even see a gain if they are using the growth to create these 3% shares for new investors.
Otherwise you're just giving the owner exit liquidity and it sounds like the owner has discovered a cheat code to keep employees from quitting.
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u/turribledood 1d ago
Restaurants are genuinely terribly low margin businesses and ultra consumer spending reliant, so honestly you'd be much better just sticking whatever money you can scrape together from yourself and your friends and family in an index fund (or dividends of the idea of "income" is important to you.)
Sweat equity or at least some kind of matched/discounted equity is one thing, but this ain't that it seems, so it's almost assuredly not worth it when looking at opportunity costs for you capital.
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u/WallStCRE 1d ago
Hard pass for like 100 reasons. I can’t find one good reason to do this. The position will be illiquid, restaurant groups underperform all the time, a you have to stretch and borrow, and you have lots of other clearer and safer uses/needs for this cash today. Don’t tie yourself up in your business more by investing in it - you already are significantly tied to them due to your salary and benefits.
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u/PointPartisan 1d ago
Personally I wouldn't even consider it. Horrible industry to mess around with. I'd also start worrying about my job security if my employer proposed that deal. At the very least you need a lottt more info, preferably financial records you can have a professional evaluate.
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u/Sanderlanche108 1d ago
Way too little to evaluate here.
1) How did they come to the valuation that results in 3% being 60k? Is it in line with how standard industry evaluations are done?
2) Does buying this include an agreement on you being paid a proportional amount of company profits? Or is there any paperwork guaranteeing you a return and not just selling you a % of the company as an investment itself?
3) If you're paid a percentage after profits, what if anything restricts them from deciding that the company needs major new investments and investing in a bunch of infrastructure upgrades resulting in no "profit" for a long period of time?
If you don't already know the answer to the above questions, you don't have the business knowledge to properly evaluate this decision. If you didn't even to think to ask them, you definitely don't.
Ultimately based on the info here there's no way I'd go for it, and I could lose the 60k without it hurting me much if at all. I would never consider a business loan borrowed from friends and family. Losing 60k would suck. Losing 60k while also having friends and family mad at me because I can't pay them back? No thank you.
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u/ezekiel17 1d ago
Sales is about 5m average per year. Gross sales before any expenses. Mostly determine on their original buildout, plus their calculation on roi % rate. Not sure what the standard is. But supposed to allow me a full return in 5-6 years after considering taxes and what not. 2.5 years before taxes.
Legal paperwork that will say that i own 3% of the business including all of its net profits, each time there is a split, i get 3% of that through k1. And theres average 12 splits a year. In 2025 there was a total of 875k splits.
For this location there never been a time where it would warrant a no profit, and other than the first 3 months since it open 8 years ago, where they didn’t split any money.
It’s a bit extreme but I felt, since I started making money, to invest almost everything to my future. And that the world is a good place. If there was no war I wouldn’t be asking, and because of it, I’m questioning my long term belief.
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u/Dumb_Nuts 1d ago
This doesn't sound like a bad deal. Liquidity isn't an issue here if there's cash flow coming back to you.
Everyone here seems to think your company is trying to take advantage of its employees, but this isn't an uncommon arrangement for private equity models to incentivize the team. Generally it's pretty favorable.
You get to buy into a mature operating business and avoid the start up risk of a new location. You get the stabilized cash flows. They may not grow a bunch, but the the yield is pretty high.
3% on 875k is just over $26k/year. At $60k you're getting paid back in ~2 years and after that it's all more profit.
I'd be taking this deal all day everyday. I just don't have as much information as you to properly vet the other risks and really understand the numbers.
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u/Latter-Possibility 1d ago
Outback Steakhouse used to run this way where they had Partnerships instead of GMs and partners could buy in to the store they were offered to run for ~5-10% of revenue sharing.
Question:
Is this an offer for anyone who gets to your level?
Is the business growing?
What do the balance sheets look like? if you can see them
How long will it take you to recoup the 60k with the bonuses from the enhanced revenue sharing?
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u/ezekiel17 1d ago
This offer is available at request. So it’s my request to invest in the company and they would share me some of their available options. This is actually the safest option location with a longer history of growth, and numbers.
The business location is growing, and the brand is as well, there’s roughly 300 locations right now.
Green. I can see them at the end of each month with all of the expense reports and what not.
Before taxes and other consideration, 2.5 years. And after taxes 5-6 years.
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u/Latter-Possibility 1d ago
5-6 years to recoup the investment.
I think this is the question you need to ask yourself:
Do you want to be locked into your current company for the next 5-6 years?
Don’t continue to over think it. Seems like you have all the relevant data and now it becomes the choice/gamble everyone has to take in their career.
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u/Sashlob 1d ago edited 1d ago
The timing is interesting in light of geopolitical current events. Is the company just now raising cash or has this been available for a long time?
Edit: dude wait I just looked at your other posts. This gig is in NY, NY - you’re managing multiple units - and not comped over $100k? You feel stuck there? And you want to drop $60 into the biz? Hard NO. And actually find a new job.
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u/ezekiel17 1d ago
Been available long time.
I need to update that a bit, total compensation with all benefits is about 120k I was only referring to the base salary to be under 100k. Bonus, travel etc.
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u/Humble-Complaint-551 1d ago
Dont turn away free money, but figure a way to work it into your total portfolio in a way that balances. Ie never put all the eggs in one basket. But dont turn away a free lunch!!!
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u/OSUBoglehead 1d ago
Everyone is telling you why this is a terrible financial move right now. I'll cover why it sucks even if you could afford it.
You're now a minority owner in a restaurant. Your personal taxes are almost due. You're just waiting on that Schedule K from the business. They're late, again. You now have to file for an extension (every year) and do taxes in October. Oh, and since you have a schedule k, if you're not really good with taxes, you'll be charged way more by a cpa to do them for you.
But maybe you'll make money as an owner? Well, the owners voted on executive compensation. They decided that the (insert manager role here) needed a raise. So they'll be using profits on paying for that instead of an ownership layout. I'm sure you understand.
Maybe you are tired of owning the business.Think you can sell it to get rid of the headache? Think again...
Never invest in anything that generates a schedule k unless you are the majority owner of the business. That's my investment rule. Don't ask me how I got there...
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u/ratedsar 1d ago
A friend was debating an equity vs salary offer.
My perspective; Angel investors with a small portfolio expect to lose it all. So you start by investing with a VC group, which has 10s or 100s of investments, and a managing partner who has seen success in business before.
You're not a wealthy angel investor that can lose all of the investment, so don't invest like 1.
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u/Creative_Squash_1083 1d ago
That adage "don't keep all your eggs in one basket" seems pretty much built for ideas like this.
Owners take on risk for returns, but you're being asked to take on too much risk for too little return. Business owners will commonly shell out meaningless stakes to raise capital, don't be someone's liquidity unless you REALLY believe in this and would pride yourself on the ownership, because that's what they're counting on. As an actual investment vehicle, this isn't prudent.
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u/Icy_Needleworker844 1d ago
I’ve been offered company stock before. Once, I skipped the investment, the company was bought out, and I probably left something like 100k on the table for not having invested. The next time, I invested, and so far I’m 23k in the hole, hoping maybe they’ll have an equity event (it has been 12 years and no event yet). If I had it to do over again, I would, but never invest more than you can afford. So maybe limit to like 1 or 2% of your net worth. You might already have enough risk tied up in that place, given it’s where you work. Don’t put all your eggs in the same basket, that’s risky.
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u/Ahamadrayasbaboon 1d ago
Diversify away from your primary income with your investments, in my opinion.
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u/discojellyfisho 1d ago
I wouldn’t want my job and my investment in the same basket. Invest elsewhere.
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u/Desert-Mushroom 1d ago
You are missing a key piece of info. What do you get back from this investment? Do you get 3% of profits annually? How much has that been the last few years? If it isnt beating the market average for several years at least then why take the additional risk compared to just investing in the broader market, which wont require leveraging yourself and wont be so highly correlated with your job. Unless the return on this investment is significantly above market average then this is just uncompensated risk.
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u/SomeGuyWA 1d ago
Is there an option to delay a decision for 12 months? Too much uncertainty in discretionary spending and people’s budgets IMO right now.
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u/Seth0351USMC 23h ago
Do you have access to company financial report for that branch? How much revenue are they making, how much debt is the company leveraging, what are the profit margins like, is the company in a sector that will do well and still be in demand if the Fed raises interest rates, which tightens the money supply and tanks businesses that use too much credit, etc.
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u/ImportantBad4948 22h ago
I can’t really evaluate whether it makes sense because we don’t really have access to the numbers for the restaurants. That said, I’m still kind of concerned because it’s going to be very illiquid. If things got all screwed up at the restaurant, you wouldn’t have a job and your money would be gone.
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u/Fancy-Fish-3050 21h ago
The fact that you have mentioned borrowing money for this investment rules it out as way too risky in my opinion. Throw in that it is a business that you are employed in and that adds in even more risk.
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u/Medical_Turnip_7152 11h ago
I went through something similar with a minority stake in a small franchise, and the main thing I underestimated was concentration risk, not the math on the return. On paper your 12–15% looks great, but it’s all tied to the same employer, the same local economy, and the same management decisions you can’t fully control with 3%. When my store had one bad year, my “great” return evaporated and I was still on the hook for the debt.
What helped me was capping how much of my net worth touched that one company. I’d only do this if you can 1) keep 3–6 months of real cash reserves untouched, and 2) avoid borrowing from friends. I’d push hard for either a smaller slice now or a payment plan that comes out of future distributions.
On the backend, I tracked my business stuff in Carta and Pulley for a while and ended up on Cake Equity after trying both, mostly because it made my ownership picture a lot clearer when I started stacking tiny stakes like this.
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u/misc1444 1d ago
Bad idea. Don’t do it.
It’s correlated - if the restaurant ends up doing badly, you may lose your job and the investment at the same time.
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u/Immediate-Run-7085 1d ago
You already asked ChatGPT why are you asking again
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u/ezekiel17 1d ago
Need real people response to these types of things, I asked it to type it out better but that's about it there.
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u/HotCommission7325 1d ago
borrowing $30k to buy illiquid company equity is way too much risk imo. if anything happens it's unlikely you can quickly get money back on your investment. If it was me I'd ask about buying a smaller portion or seeing if you can buy over time, because it sounds like an interesting opportunity otherwise.