Question
Simple promissory note? Convertible promissory note? What's more common and how would future investors react?
And if convertible, should there be a discount or a cap on it? Why or why not? I've read there are complications here with liquidation preferences and so forth.
Answer
Unless you have a need to show a substantial equity, usually starting the corporation (assuming that's the type of entity you want) with $1,000 is ok. Then the remainder ($49k in this case) is entered as a loan. That way, once you have the cash back in the business account, you're not worried about taxes and can be repaid the loan directly.