When to incorporate?

[ThePoetSuede]

We all know its a good thing to incorporate as it lessens your direct liabilty. And after some research we can find that there are different corporations. I want to form an S corporation for my laundrymat. I am not sure on when is a good time to do this. Should I get my lease, loan and equipment contract signed and done THEN incorporate? Will this be useless as I have already signed my major paperwork as an individual and therefore liable? Or should I incorporate 1st and then present my status to all the parties involved, ie:landlord, distributor, etc. Will my incorporation lesson my chances of proceeding as the involved parties may see it as me unsure of the business prospering? Or am I totally lost with what I am saying?

[Duane]

There are many ways to set up a business. A company to own the equipment and then lease back to your laundry business. If you own the real estate then you may have a third company who owns the real estate and then leases back to your laundry company.

Very important to see an account and lawyer at this point. Don't make this decision on your own.


Usually an LLC (Limited Liability Corporation) is the easiest and cheapest to incorporate a business into.

Again, get professional advice.

Duane.

[phantom]

poet,
always try to limit your personal liabilities. i would definately incorperate first . this way you are not personally liable for anything. and try not to personally guaratntee your lease either. (although youll be hard pressed to find a landlord that will let you.) but do try. and look into an LLC ( Limited Liability Corp) instead of an S Corp. talk to your accountant about that.

[ThePoetSuede]

Will my incorporation lesson my chances of proceeding as the involved parties may see it as me unsure of the business prospering?

[SecretarytoBraveDave]

Your kidding right?

[ThePoetSuede]

Now, now Secretary, let's remember there are no silly questions...... I did mention in my initial question "hope I am making sense". My thinking is since I do not have an established business (this is a start up) and since I do not want to use my home as collateral the bank or landlord may be reluctant to proceed under an corporation status. Wouldn't that mean if all fails they cannot come after me for my home? I am just looking for some direction. If I have it all wrong then please give me a shove. Again, I am reading and asking plenty of questions so if this question is way out there then please forgive me. I plan to succeed, therefore I am approaching all aspects of this business cautiously.

Thanks for the response, The Poet Suede

[SecretarytoBraveDave]

When I signed my lease for my restaurant I did so as my business entity, however, the business financing was personally guarenteed.

Your collateral should be a combination of cash, experience and the equipment you purchase. Check with your attorney to see what should be done to protect you the most.

[ThePoetSuede]

Now that was exactly what I wanted to hear.
Good direct advice.

So if the financing is an individual agreement outside of the incorporated entity then the bank may in fact ask for more of a down payment or they can even turnaround and ask for my home as collateral.

Can being a corporation ever hinder you when in a startup?

Thanks all.

[SecretarytoBraveDave]

I have never heard that incorporating would hinder any business. But start ups are difficult to do in any business and banks are looking for minimal risk and yes they will want a decent down payment to reduce their investment as well as increase the risk and investment of the potential owner. Most banks would not "hold" your home, but request you take the cash out of your equity and use it as part of your downpayment.


Incorporating in todays world is smart business.

[phantom]

poet,
i would trust everything the wise secretary says.there is much wisdom in her words. but at the same time you must proceed as YOU see fit. analylize all the info you collect and make an educated decision based on your findings. whatever is best for your situation. in my case i took out an equity loan on my home to start or purchase my business, and later paid it off with a business loan under the corp name.(no personal guarantee) its alot easier to get a business loan with a healthy established business.so i waited until the business took off , then took my home out of harm's way. this was risky, but i was willing to take a shot, you may not be in that position. i was confident in my endeavor through all aspects before i proceeded. then took my shot. its basically a crap shoot no matter how you slice it. be careful and arm yourself with as much knowledge as possible. good luck!

[ThePoetSuede]

As per your response that's exactly how I planned to proceed. Take out the equity in my home, after I feel established, proceed to get a business loan to pay off the inital home equity loan. Its a gamble I feel confident in.

Thanks for your response.