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  1. #11
    nee andante bechimo's Avatar
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    Quote Originally Posted by Beefeater View Post
    So what?

    It's all the surrounding circumstances that matter.
    Did the business owner already get a personally secured loan from a bank?
    How much of their personal money are they putting at risk?
    Have they given up a job?

    I think all of these are better at showing the owner's commitment to the company rather than the legal entity chosen.
    You're assuming that all this information is relevant and ignore the core reason for LLCs. Also ignored is the operating structure of the LLC.

    Investor beware.

  2. #12
    LL P. Stewie Beorn's Avatar
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    Quote Originally Posted by Jenaphor View Post
    You're assuming that all this information is relevant
    It's relevant to the following question you posed:

    Quote Originally Posted by Jenaphor View Post
    Why would they trust you with their money if you've stepped so far back from responsibility but have no proven track record?
    Quote Originally Posted by Jenaphor View Post
    and ignore the core reason for LLCs. Also ignored is the operating structure of the LLC.

    Investor beware.
    Look, every situation is different and this is why people should always consult an attorney. My point was that there are still a lot of older general practitioners that are ignorant of the rise of LLCs and will set business owners up in a partnership when an LLC would far better serve their interests. For many small business owners an LLC is ideal because of the limited liability, pass-through taxation, and small amount of paper work.

    There are definitely advantages to forming a corporation over an LLC, but those advantages are only important in much bigger deals involving much more sophisticated investors and business owners.
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  3. #13
    violaine
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    I'm a fledgling small business owner. I have been involved in a small business before with a partner but his skill set seemed more suited to it than mine so we parted ways.

    It's taken me a lot of time and research to get to the point I am with the new business I started but I'm not turning a net profit yet. The problem is that I haven't been able to devote the time needed to develop it so I'm thinking of devoting the next few months to it to see if I can get it up on it's own legs. (I don't really want to go into the details of what it is exactly yet, nothing very innovative but I enjoy the business immensely.) From seeing some of my friend's businesses fail, I think the most important thing is to make sure I have the resources to get the business to the point where it's profitable. I had a friend who had a great little business but because she didn't fund it properly, it collapsed about six months shy of when she would have started being profitable. :/

  4. #14
    nee andante bechimo's Avatar
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    Quote Originally Posted by Beefeater View Post
    Look, every situation is different and this is why people should always consult an attorney. My point was that there are still a lot of older general practitioners that are ignorant of the rise of LLCs and will set business owners up in a partnership when an LLC would far better serve their interests. For many small business owners an LLC is ideal because of the limited liability, pass-through taxation, and small amount of paper work.

    There are definitely advantages to forming a corporation over an LLC, but those advantages are only important in much bigger deals involving much more sophisticated investors and business owners.
    There are advantages and disadvantages to each type of corporation or partnership. And yes, we do agree on getting a professional involved. But to infer that LLCs are the best way to go for small businesses isn't necessarily accurate, particularly since there are jurisdictional differences. Also, from the perspective of being a managing member, there are also IRS salary caps which has its upsides and downsides.

    As far as attempting to mitigate any commitment issues towards the LLC that members might have, particularly managing members, you can request personal guarantees that trump the benefits of an LLC. But who in their right mind would sign this, considering that we live in such a litigatious society?

    Forgive the flipping back and forth between investor due diligence to managing investor due diligence. Hopefully it's laid out for easy consumption.

  5. #15
    Senior Member INTPness's Avatar
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    ^^This is why every INTP business owner should have access to an ENTJ within a 5 mile radius at all times. Just kidding. Sort of.

    So I understand that there are jurisdictional differences, but let's just take your "average/common/run of the mill" LLC. As long as said LLC stays fairly small, then I'm not worried about anything and don't have any questions. But, let's say for discussion that said LLC suddenly gets a big contract that brings in ~7 figures in a short period of time (all at once, or even spread out over ~3-ish years). What problems could there be at that point for the owner/founder of the LLC? In other words, if bigger money came in, would their be reasons the LLC owner had wished he had gone with a regular corporation over the LLC structure?
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  6. #16
    nee andante bechimo's Avatar
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    Since I'm not a lawyer, I can only give you my layperson's perspective. LLCs are flow-through entities for the purposes of taxation. With this in mind, retained earnings aren't permissible.

  7. #17
    Senior Member Sparrow's Avatar
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    All of this is like a foreign language to me lol, thanks for your input! I'm clueless for the most part...keep the info flowing . I should go to more of the SBA meetings. Do you guys think loans are a good?
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  8. #18
    Senior Member Sparrow's Avatar
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    Sooo rather then starting big by opening a store front, I have been thinking of doing something on-line first. Anyone familiar with on-line retailing? I myself don't like to buy clothing on-line...but I guess people do. Any thoughts or info regarding this type of business?
    Fe | Ni | Se | Ti ... 3w4 ... Lawful Neutral ... Johari -Nohari

  9. #19
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    Quote Originally Posted by Sparrow View Post
    All of this is like a foreign language to me lol, thanks for your input! I'm clueless for the most part...keep the info flowing . I should go to more of the SBA meetings. Do you guys think loans are a good?
    Loans are good if you can pay off the loan to grow your business with a suitable margin over that loan.

    This is why most business work the economics based on a Discount Rate based on a Working Actual Cost of Capital (WACC). The WACC follows the riskiness of the business. For new businesses or risky industries it is high.

    There is a rather more complex argument of Loans-vs-Equity rather than 'are loans good?' The answer is: it depends how good the opportunity is and also ones preference for risk and partnership.

  10. #20
    Striving for balance Little Linguist's Avatar
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    Well, I'm "sort of" an entrepreneur. I say 'sort of' because I'm a freelance contractor: I work with other clients or businesses to acquire clients, but I'm solely responsible for managing my own time, doing my own work, and basically am not an employee, really.

    At some point, I am thinking of shedding the 'middleman' completely and going out on my own, but in my business (teaching) it makes more sense to build a customer base slowly. I'll probably never be fully free from the middleman for part of my income, but that's okay. I like the stability that provides combined with the freedom I have.

    So while I'm independent and do indeed have my own business, it's more in the service sector. Hope this helps. Feel free to ask any questions you may have.

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