Bringing investors into your business gets you more than just money -- you get new co-owners, too.

Unlike a lender -- who temporarily provides you with money to operate your business -- equity investors actually buy a piece of your business. For better or worse, they become your co-owners and share in the fortunes and misfortunes of your business. Here's a look at the pros and cons of raising money through equity investors and the different forms this equity investment can take.

Investors' Rights

As co-owners of your company, your investors will have some say in the way you run your company. They will probably be able to vote to elect your board of directors, and they have a legal right to be informed about all significant business events. And they can sue you if they feel their rights are being compromised. On the other hand, investors can bring helpful business experience with them that can strengthen your company.

Investors' Return on Investment

People who invest in your business may accept the risk of losing their entire investment and not insist that you guarantee repayment. But to offset this risk, the investors may want to receive substantial benefits if the business is successful. For example, an investor may insist on a generous percentage of the business profits and, to help assure that there are such profits, may want to put a cap on your salary. The terms are always negotiable; there's no formula for figuring out what's fair to both you and the investor. In the end, you and your investors will have to work out what you are both comfortable with.

Your Ownership Structure

If you recruit people to invest in your sole proprietorship, your business will, by default, become a general partnership. This means your equity investors will be considered general partners, each of whom is personally liable for business debts and liabilities, whether or not he or she takes part in running the business.