America is the land of opportunity, and immigrants with a vision may be eager to start their own companies. Owning your own company can greatly increase your income if you are successful. Owning your own company means freedom to make your own choices, work your own hours and answer only to yourself. If your company makes a profit, then you get to decide how to use the money. However, such freedom comes with some risks. One of the biggest risks in starting your own business is the risk of financing; if you take out a loan to start the company, what happens if you can’t pay it back?
To encourage business growth and risk taking, states permit something called “limited liability.” Limited liability means this: David, a nonresident alien, has a wife, two children, a nice house and a car. He works at a nice job, but he is ambitious, and wants to start his own company. David can get a loan, but he’s afraid about what will happen if he is not successful. What if he cannot pay the loan back because he makes no profits? Will the bank take his car? His house? Where will his family live if they take his house? Where will his kids grow up?
David should start a company with limited liability. That means that David’s company’s creditors can only reach David’s company and his company’s assets. His house and his car (and his family!) are off limits his business’ creditors in the event his business fails, expect in very rare circumstances.
For other information about Business Entities, please click on one of the following topics below:
Starting Your Own Limited Liability Business
LP & LLP
S or C Corporation
LLC and LC
An overview of registering business in different states
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