Where the Promoter Comes In.—There are promoters and promoters; by which I mean that there are various sorts of promoters and then some.
A tin-horn promoter is an unprincipled fellow of some ability who secures an option on a patented invention, or on the stock of a company based on an invention, and exploits it for all he is worth to his own profit and without regard to the inventor or the stockholders. The chief business of a tin-horn promoter is to secure control of the entire stock issue of a company, sell it at inflated prices, pocket 90 per cent. of the proceeds and either doctor the books or disappear then altogether. Steer clear of the tin-horn promoter.
An ordinary promoter is merely an agent who acts as a go-between for the inventor and people with money to invest and by his enthusiasm brings them together for the good of the cause. A real promoter is a genius who possesses both business ability and the necessary wherewithal to start, accelerate and carry on any kind of an industrial, financial or commercial enterprise.
You will meet the promoter in one shape or another as soon as it becomes noised around that you have an invention of merit. The ordinary promoter will be of assistance to you at any stage of the invention where experiments are still to be made and the patent is yet to be granted. He may also prove of service after the preliminary work is done in securing for you a real promoter.
On signing contracts with the latter he will relieve you of all the cares of starting the business or of starting a company to start the business. And if you are not shrewd and careful and know just what he is doing and you should fail to have a hard and fast contract he will not only be likely to relieve you of the business cares but of everything else you may hold dear and sacred in this world.
An ordinary promoter will ask about 25 per cent. of whatever money he brings in for your use in developing the invention and a certain small interest—1 to 5 per cent.—in the company that exploits it. The real promoter wants and usually gets a working agreement of 50 per cent, of whatever profits there may be made out of the invention. If possible you should hold a 55 per cent, interest for this will give you the whip-hand and will save you much trouble in the end.
Few promoters though will agree to such a division and about the only way you can keep the controlling interest is to organize a company and manage it yourself but this takes business ability of quite a high order.
What a Stock Company Is.—A company is a number of persons who band themselves together for business purposes. A stock company, or stock corporation to call it by its proper name, is a company whose capital is represented by shares and which is held either in the treasury of the company, or by persons who buy the shares.
Three or more persons may form themselves into a stock company for any industrial purpose in the State of New York. A stock company must be incorporated, that is legally formed, under the laws of a State and different States have different laws. A copy of the corporation laws of any State may be had free of charge by applying to the Secretary of State.
