Limited Company - What are the risks?

Hi,

If you decided to set-up a limited company, then legally you would be seen as separate from the business.

Strictly speaking, if the company took out a loan and could not repay it, then you (as a separate person) would not be liable for the debt.

The banks and most lending houses are aware of the protection provided by limited companies in this respect and therefore in all likelihood, would resolve the problem of them potentially losing money by insisting that you give them personal guarantees.

In doing this you would be effectively be relinquishing the advantage of having limited liability and be agreeing that you and the company are one and the same.

Obtaining the loan through false pretences is a whole other matter which would exacerbate any repayment problems which the threat of criminal proceedings.

In the event that the company failed, provided all debts were discharged to the satisfaction of the lenders and did not result in you being officially disqualified from acting as a company director, you would be free to register another company and to act in that capacity.

You are right to give the risks of your business venture some serious consideration before committing to a large debt which might cause issues further down the line.

Perhaps you could take another look at your idea to discover ways in which the start-up costs could be reduced even further or consider scaling back the initial launch so that lower funding is required at the beginning.
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Simon - Company Formation Services