Irrespective of which part of the world you plan to set up your business, your business needs funds.

So now say you need a funds of 100 curreny units to start your business. If you have all the 100 bugs, you will be easily able to setup your business. Imagine you have 60 bugs and decide to get the remaining 40 from an outsider.

You have 2 ways of making him invest.

1. Either you ask him to invest 40$ (imagining the business is in US) and give him a regular interest. Return his money when you can. 2. Or ask him to give you 40$ and give him a pro-rata share in profits and return his money evaluating the worth of the company once both of you decide. Again on pro-data basis. The first method is called debt. The second method is called Equity.

The amount considered here is a low 100$ and you will get a single person to give you the required 40$. Usually the amount required to set up great industries runs into billions and you may not be able to find a single entity to invest the entire money. Thus the need comes to ask more people. Different laws exist in different countries to deal with this. But the principle purpose remains the same.

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