Your company is going to need a loan for you to get started. Maybe you need the money to buy equipment, such as if you’re starting a restaurant or a medical clinic. Maybe you’ve developed a product, but you need money to put it into full-scale production. Regardless of the specific reasons, you are going to need a business loan.
But you may be worried that it is just too big of a risk to take. You already have a lot of personal assets that you care about. You’re saving for retirement. You bought a home. You have children to think about. If you take out the business loan and then the company doesn’t pan out, are you then going to be personally responsible for paying back the money? Could this put personal assets, like your home, in jeopardy?
Using the LLC business structure
Your concern does make sense, as some business owners find that they are personally liable because of the way they acquired their loans. Maybe the business is a sole proprietorship, for example, or just a side business that hasn’t even officially been registered. You are essentially taking out these loans in your own name, so you are liable for them and must pay them back.
But there is a way to get around this issue, which is to set up an LLC. A limited liability company is responsible for its own loans. The owner of that company does not carry personal responsibility and wouldn’t lose their personal possessions or assets, even if the business entirely defaults on the loan. Structuring your company as an LLC can give you some more security and stability – along with giving you the opportunity to take out business loans without fear of future ramifications.
The key, then, is to know exactly what legal steps to take when you are setting up your business.
