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Will you lose your home if you take out business loans?

On Behalf of | Jun 4, 2024 | Business Law

You’ve had a nice career working in the corporate world. You’ve bought a beautiful home in the suburbs for your family. You have nice cars, a vacation property and general financial security.

However, you’ve always had larger career goals than simply working for someone else’s company. You’d like to go into business yourself, taking out business loans and starting a new company from the ground up.

The problem is that you’re concerned about losing your personal assets. You don’t want to quit your job and start your own business if it could cost your family their home, for example. Are those business loans just too big of a risk?

You could start an LLC

In some cases, business loans are a risk. If the company fails and you can’t pay back what is owed, creditors may be able to come after your personal assets. This could happen if you’re a sole proprietor, for instance. 

But you can structure your company specifically to avoid this issue. Perhaps the easiest way to do so is to form a limited liability company (LLC). The business can get the loans and it is still responsible for paying back as much as possible, but you are not personally liable and your personal assets are not at risk. Even if you had to liquidate all of the business’s assets and declare bankruptcy, you could still keep your house, your car, your vacation property, your investments, etc.

It’s crucial to understand how to set up your company and how to limit risk from the beginning. Take the time to look into your legal options.