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Yes - assuming any of this debt is a terrible idea. But taking out a personal loan, investing it in the company in some sensible manner, and having the company

Yes - assuming any of this debt is a terrible idea. But taking out a personal loan, investing it in the company in some sensible manner, and having the company pay off its debts could be a very smart thing to do considering the small amount of money in this case. The take away is that a liability shield is not the same as a credit shield. Your credit will follow you, even if your debts do not. Some people care about this. Some don't. For $17k, I'd surely think about my credit before walking away.

jacquesm 16y ago
Let me get this straight, because I'm getting confused here, there is '0' proof for or against him being on the hook for his credit, but just for the sake of the argument let's assume that it is his personal credit that is linked to the merchant account (that would be spectacularly stupid, but ok). You are suggesting that he take out a private loan even though he's already committed his savings to this venture to the tune of $17K in order to protect his credit rating? Worst case he won't be able to borrow money for a while, and he might not be able to get a mortgage or other financing. Would you borrow money in order to be able to borrow money later? It makes very little sense to me, to pay back $17K privately (so that's after taxes) means that you'd have to be earning roughly double that just to get rid of this debt, at a regular salary and expenses that comes down to at least two years before you can get rid of that debt, not counting the interest. How does that make any sense at all, is your credit rating worth 20K and two years of your life to you?
- damoncali 16y ago
  Because I have more HN karma than I need anyhow... First, no. I'm not suggesting that he do that. I'm suggesting that it's an option on the table. Different strokes for different folks. My primary income requires that I be able to secure large amounts of non-recourse debt, for example. A guy might have a wife who expects to be able to buy a house in the near future. Some may not care that the lawyer they hired worked 10-12 hours without getting paid. Others will. For some people $17k may take two years to pay back. Others, not so much. Some people just want to make good on their commitments if at all possible. Not everyone takes the by-the-numbers view of debt (legitimate though it may be). Those who don't will consider you a deadbeat for walking. What's the cost of that? The answer is different for everyone, and counseling someone to consider the aftermath is just plain sensible. And a serious question: Where can you get a merchant account for a new business that does not require a personal guarantee? I'd love to know.
  - tptacek 16y ago
    This is argument is so silly. Stipulate that everything you say is true. The possible outcomes are: the guy goes hugely into debt, or the guy can't open a merchant account on his own. You know what's worse than not being able to open a merchant account? Personal bankruptcy.

jacquesm 16y ago

Let me get this straight, because I'm getting confused here, there is '0' proof for or against him being on the hook for his credit, but just for the sake of the argument let's assume that it is his personal credit that is linked to the merchant account (that would be spectacularly stupid, but ok). You are suggesting that he take out a private loan even though he's already committed his savings to this venture to the tune of $17K in order to protect his credit rating? Worst case he won't be able to borrow money for a while, and he might not be able to get a mortgage or other financing. Would you borrow money in order to be able to borrow money later? It makes very little sense to me, to pay back $17K privately (so that's after taxes) means that you'd have to be earning roughly double that just to get rid of this debt, at a regular salary and expenses that comes down to at least two years before you can get rid of that debt, not counting the interest. How does that make any sense at all, is your credit rating worth 20K and two years of your life to you?

damoncali 16y ago
Because I have more HN karma than I need anyhow... First, no. I'm not suggesting that he do that. I'm suggesting that it's an option on the table. Different strokes for different folks. My primary income requires that I be able to secure large amounts of non-recourse debt, for example. A guy might have a wife who expects to be able to buy a house in the near future. Some may not care that the lawyer they hired worked 10-12 hours without getting paid. Others will. For some people $17k may take two years to pay back. Others, not so much. Some people just want to make good on their commitments if at all possible. Not everyone takes the by-the-numbers view of debt (legitimate though it may be). Those who don't will consider you a deadbeat for walking. What's the cost of that? The answer is different for everyone, and counseling someone to consider the aftermath is just plain sensible. And a serious question: Where can you get a merchant account for a new business that does not require a personal guarantee? I'd love to know.
- tptacek 16y ago
  This is argument is so silly. Stipulate that everything you say is true. The possible outcomes are: the guy goes hugely into debt, or the guy can't open a merchant account on his own. You know what's worse than not being able to open a merchant account? Personal bankruptcy.