Worst case scenario?
Worst case scenario?
(OP)
I've read in a book about engineers going solo, that if you fail as a sole proprieter, as long as it wasn't for unethical or gross negligence reasons, it will not hamper your ability to reenter the work force; you will have learned new skills and be better because of your free lance experience. So worse case, your out the financial cost of the business failure, but you should be in a better position to find a job as an employee with your new business experience that was gained, and the courage and independence to have taken a risk.
Does anyone agree, disagree, or have anything to add to that?
Does anyone agree, disagree, or have anything to add to that?





RE: Worst case scenario?
I read that same book and tend to agree. The experience shows that you can be a man to wear many hats and that experience and skill set that you gain can take you far.
RE: Worst case scenario?
www.SlideRuleEra.net
RE: Worst case scenario?
I learnt a lot from my brief stint (18 months or so) in a partnership that failed.
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Worst case scenario?
He could not apply for Social Security assistance as technically he still owned the company for whatever its worth.
When he went on a holiday ,while settling his bills he realised that there was no balance and all his money withdrawn. Missus had to come back to US,make short borrowings and then remit the money to him for settling the bills.
He worked in WalMart,unloading packages,as a janitor sweeping the floors and also in a platic injection industry on a line cleaning the labels.
These are just a few of the worst scenario presentation. I too have many but they are in a different country and may not be applicable to most of the members.
RE: Worst case scenario?
I don't plan to invest more than I can afford to lose, about 1 years expenses. I expect to know if the business is working or not before then.
RE: Worst case scenario?
Don Phillips
http://worthingtonengineering.com
RE: Worst case scenario?
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Worst case scenario?
Impossible to get a loan or credit; I'm not sure I understand the context, can you explain?
Richard
RE: Worst case scenario?
RE: Worst case scenario?
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Worst case scenario?
RE: Worst case scenario?
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Worst case scenario?
You can always borrow money as 'you' and give it to the corporation.
-b
RE: Worst case scenario?
Without a personal guarantee and a collateral for a startup company I doubt if anyone would fund.
Additionally for the traditional industries there is negative rating provided by the finance companies and I see most of us in this sunset industries. So real hard way.
Today I have a debt free company and the very same finace companies are willing to provide funding,which I have been declining. This style of working without finace sort of has become an addiction today. But it is not easy to juggle your cash flow especially in a manufacturing environment. Sorry for the long post.
RE: Worst case scenario?
If you start a biz, then pay the bucks to be incorporated or LLC'd. It protects your personal assets.
Regarding any "stigma" associated with running / failing, then getting back into it: the workplace is littered with people who tried/failed. I'd say it doesn't even matter. The optistic view is that it is a badge of honor to show your initiative and "real-world experience." Your business savvy and luck doesn't even show up on your resume, only that you were self-employed at some point.
TygerDawg
RE: Worst case scenario?
Taking a personal loan out against your personal assets and lending it to your company is identical to not having a company in the first place, if it all goes belly-up, so far as the loan institution is concerned. If you can't keep up the payments in either scenario they will come after the assets the loan is secured against.
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Worst case scenario?
It is understood that any loans I take in my name remain my responsibility to repay to the creditors, regardless of what I do with it.
RE: Worst case scenario?
rlee53 understood it correctly. Having a corporation just limits your losses to whatever's currently in the corp.
-b
RE: Worst case scenario?
Let's do the maths
I have house value 100k. I borrow 100k. I lose 100k, and cannot make repayments. Bank takes house.
I set up company. I have house value 100k. I borrow 100k. I lend 100k to company. company loses 100k. I cannot make repayments. Bank takes house.
In the real world what is the difference?
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Worst case scenario?
If you do this and don't relegate yourself to last place in the chain, if your business has to file bankruptcy, your personal finances should not be affected beyond the capital lost in the business.
Remember, business failure does not necessarily equal personal financial ruin.
RE: Worst case scenario?
To me, that means you (finance) and start a business and it more or less goes continuously downhill - no profits and maybe not even any meaningful cash flow - just expenses (including payroll) which deplete capital. The "trick" is knowing when and how to VOLUNTARILY "pull the plug" (close the business) while there are still sufficient assets to cease operations and avoid bankruptcy - saving your reputation.
Either way (voluntary closure or bankruptcy), you, as an individual, will wind up "poorer" (whether a sole proprietor, corporation, or LLC) AND no matter where the money came from (savings, loans, etc.) - with one exception...
If you sold stock in your venture to others, they loose instead of you - not the way to keep friends or build a career, however.
www.SlideRuleEra.net
RE: Worst case scenario?
If you must start your business please go ahead and do so. But keep your commitments to a level that it does not hurt you or the family. Also keep a clear exit plan.
Rest do not brood over all those details discussed here. It is like this, when you visit a hospital,it is with an intention or desire of getting cured. You do not go and ask where is the mortuary? Though everyone knows that in the backyard and in the darkest corner the mortuary exists.
So take the positives and plunge into your venture.
RE: Worst case scenario?
Your maths are correct. Here's my maths:
House value is $100k. Borrow $50k. Get sued for $250k. Lose house.
or
I set up company. House value is $100k. Borrow $50k. Give $50k to company. Company gets sued for $250k. Keep house.
I prefer the latter.
-b
RE: Worst case scenario?
From the looks of it, your "maths" are better. Doesn't sound like fairyland to me, but then again, I haven't looked into it very deeply.
www.engineerboards.com
RE: Worst case scenario?
First, the good news:
Then the bad news:
Don't take my word for it, read it for yourself
http://
As stated above, notice that a Corporate structure is treated the same way. See it here
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There is no "free lunch", the US legal system in not that naive.
www.SlideRuleEra.net
RE: Worst case scenario?
RE: Worst case scenario?
www.SlideRuleEra.net
RE: Worst case scenario?
You have brought out the finer nuances in borrowing, about the situation under which personal liability clause can be enforced. More often than not,the Recovery department will start applying these to their advantage. Also there may be lot more in fine print which we tend to oversee while signing the loan documents. As you rightly said there can never be a free lunch!
RE: Worst case scenario?
If you look at the rules SlideRuleEra posted under which you could be liable in spite of the corporation you'll realize that they're the sort of rules all good companies follow. In practice it is very difficult to "pierce the corporate veil". A corporation is very good protection.
-b
RE: Worst case scenario?
But, if you're the type who likes to skim profits or use business receipts to cover shortfalls in your checking account, or, if you would tell the cops that you are on business when you leave the bar and t-bone someone at the intersection, an LLC or corporation is not going to help you.
If you operate as a sole proprietor, then when you undersize a bolt and someone claims that you cost them 2 million in lost production, someone can sue you for all you personally have, including your house.
RE: Worst case scenario?
One disadvantage of owning your own business I found is that there will be very few businesses that you will want to work for after you had your own.
RE: Worst case scenario?
"One disadvantage of owning your own business I found is that there will be very few businesses that you will want to work for after you had your own."
ROGER THAT.
TygerDawg
RE: Worst case scenario?
If you see the business picking up but you need to spend more time working on it, take a vacation for a few weeks and run it full-time. Then see if the extra profit was worth the extra time that was spent to earn it.
RE: Worst case scenario?
When you want your employees to make decisions like they own the company, hiring former owners make sense.
Don Phillips
http://worthingtonengineering.com
RE: Worst case scenario?
In that case, hiring former owner, the former will then be probably a consultant.
RE: Worst case scenario?
I too had my own business outside of engineering 15 years ago. What I learned most was the care, the performance and sense of duty expected of employees by owners. I actually became a better, and more efficient employee. All it takes is to think of it as if it were your own business, and things fall into place.
A former boss hired one previously self-employed engineer, he couldn't stand working for someone any more, he kept bitching about every thing until he got fired.
I guess it goes both ways.
RE: Worst case scenario?
A company is a legal fictional “person”. The company is independent from the owners and creditors.
It is this independence that makes it hard for the company to get a loan in the first place. No assets or track record then no credit rating and no loans.
Lending money to your own company or to mine simply makes you one of the creditors of the company. All you stand to lose is the amount of the loan. Your liability is limited to your investment, hence the term limited company.
If the firm is sued for millions then too bad for the winner of the lawsuit as the only recourse is the assets of the company, which includes your loan. If they sue you personally then all your assets are at risk including your house, car, bank account etc.
Get legal advice is setting up your corporate structure and any lending agreements r you could find that the court may rule that the company is only a shield for liability and rule that it does not exist for liability reasons and attack your assets directly. You may also inadvertently create some personal exposure depending on the exact wording of the documents.
Rick Kitson MBA P.Eng
Construction Project Management
From conception to completion
www.kitsonengineering.com