You want your company to expand. You are sure that you are going to have success, but you need money to put into that expansion or the success will not be realized. Perhaps your operation is just too small to meet market demand.
But the gamble is that you are going to be taking out business loans. You think that this financial obligation will fit within the business’s budget. At the same time, you are worried about an unexpected future. If the business does not work out the way that you are hoping, are you personally responsible for paying back those loans?
This is a big question that many business owners ask, especially because they already own many personal assets that they do not want to risk. This can include a home, retirement savings and things of this nature.
How did you structure your company?
The good news is that there are ways you can structure your business so that you have no personal liability. If you are just running a sole proprietorship or have not taken any steps to structure your business at all, then you certainly may be liable for any loans that you take out.
However, you could set up a limited liability company (LLC). Under this arrangement, you can take out business loans to fund the expansion, and only the business is responsible for paying them back. If the company has to declare bankruptcy, you do not have to worry about losing personal assets, like your retirement savings or your family home.
It is important to consider these types of issues during business formation, and it is critical to understand exactly what legal options you have at this time.
