Is it true??

[Pysiek]

I would like to buy a custom kitchen shop business.To do that I will take a credit. Will I loose my house if the business go bad and I file bankruptcy?
I will keep my current job while buying the business.
My friend told me that the business will fail so they cannot take my house.

[FHA]

I'm no attorney, but my understanding is that if you operate that business as a sole propriertorship and it fails, the business' creditors can come after your personal possessions like your house or any other asset you personally own.

To protect yourself from this, I believe you need to create a separate legal entity for the business... like an LLC or C Corp. Then if the business fails, you are protected.

You should consult an attorney and accountant before deciding how to set up such a business.

[fireworks]

You'll have a very hard time convincing any lenders to give credit to a brand-new LLC. Most if not all banks will require you to personally guarantee the loan. If the business tanks and can't pay, they will come after you personally for the debt. That's exactly what happened to me and drove me into bankruptcy.

[nc73]

I don't see how that type of business is profitable in this market? Good luck on getting the loan though...

[killinstinct]

You'll have a very hard time convincing any lenders to give credit to a brand-new LLC. Most if not all banks will require you to personally guarantee the loan. If the business tanks and can't pay, they will come after you personally for the debt. That's exactly what happened to me and drove me into bankruptcy.

Exactly. Go to the SBA (small business administration) website. It will all be made clear.

I assure you that even if you form an LLC or corporation, you will need to have meticulous records. A judge will easily rule that your corporation is a sham and declare you personally responsible.

There is no substitute for common sense here.