Many businesses require loans, either to get them off the ground or to expand their operations. Business owners know that they can be profitable, but they need startup money to get the company going. Once they do, they hope that the business will bring in enough annual revenue to pay off the loans.
But uncertainty about this sometimes holds business owners back. For instance, maybe you’re thinking about taking out a loan to start a company. But if you can’t pay the loan back, then you are worried about losing personal assets.
Say that you need a $300,000 business loan, and you also own a home that is worth $250,000. You may want to take out the loan because you believe you have a good business idea, but you are worried that you are risking your family’s entire future. If the business fails, are your personal assets – like your home – going to be at risk?
Starting an LLC
They can be, but it depends on how you take out the loan and how you structure the company. There are steps you can take to reduce this risk.
Perhaps the easiest way to do so is by starting a limited liability company (LLC) and taking out loans in the company’s name. If the business doesn’t pan out, you may have to liquidate all of your business assets. The company is still responsible for that debt. But there is no personal liability, so you don’t have to worry about losing your family home or other assets that you need.
This is just one thing to consider when starting a business. Make sure you know what legal steps to take.
