Whether you have a great idea for a new business, looking to acquire or merge with another business or looking to purchase your favorite franchise, don’t overlook a key question you will need to answer for yourself. That is, how do you want to structure your business? You have several options, each with pros and cons when it comes to accessing the commercial finance marketplace.
Let’s look at some of the typical business structure options for consideration. New or restructured businesses can go it alone and operate as a sole proprietorship, or get a little more complex and investigate partnerships, limited liability companies or corporations. When considering your options though, it is important to understand the importance of separating yourself from your business.
Why is separating yourself from your business important? On the positive side, it allows you the flexibility to consider various commercial finance products, and unfortunately, not doing so exposes your personal assets to liability. Real estate assets, for example, are considered by many to be high liability risk assets so how you hold them in your business is something to be carefully considered.
Sole proprietorships are the simplest way to start your new business, however, this structure carries with it the most liability risk because your personal and business finances are completely intertwined, and it eliminates access to commercial funding options. Although, limited liability companies and corporations are legal business structures that separate business and personal assets, understanding your financial options ensures lines of credit, for example, you select are truly unsecured. A common method for owners to fund new businesses are to use the equity in their homes. However, home equity lines of credit are personally secured by the value of the business owners home and the subsequent lien allows traditional lenders to seize the home if a default occurs. Traditional secured loans and lines of credit generally require submission of detailed documentation and a long underwriting process. Personal credit cards are another popular choice until the business can mature enough to see credit on its own. Business credit cards are unsecured business lines of credit and are one of the best and most flexible financial vehicles open to companies today.
At D.P. Martone Capital, we are experts at getting you the commercial funding you need to launch your business. You have many products to choose from and we have only touched on some of them here. Another of the lesser used options is to consider tapping your 401k/IRA for start-up capital. We have partnered with one of the leading nationwide firms to help you roll existing funds into a new business or franchise and handle all the administrative work to make the process easy for you. Tax filings for your new plan are all handled on your behalf so you can focus on exceeding your customers’ expectations.