Have Finance Questions? Ask a Financial Expert Online.
Welcome to the site. I'm PDtax, and will be helping you today.
You only owe as a guarantor for a business loan if you agreed to guarantee the debt. A review of the loan documents will indicate whether you are personally liable or not.
Thanks for your quick response
but can you explain with simple language ? sorry for that
When a company borrows money, it may be the debtor alone. If you own the business, you are not personally liable unless you guarantee the debt.
An example: You own Joe's small engine repair, Inc. The corporation buys repair parts on credit, and can't repay the loan from the supplier. Unless you guaranteed the debt, the corporation owes , not you.
so what you mean, is convertible debt is about the same with a bank loan, right ? as long the company form is LLC or corp or inc, the individual will not liable
The key is an incorporated entity, a separate entity. That corporation can borrow money on its own.
So an investor bought convertible debt of your company, and the company failed. The company is likely an LLC or corporation, so you aren't liable unless you personally guaranteed, which is not done in these situations.
but what i read about convertible debt is slightly different with what you explain. As for my understanding, convertible debt is not really a debt - but a money comitmment from investor. They expect to get high valuation from a seed company. From this, im a little confuse. IF the company failed, what is my obligation to them
OK Last question,
By law, the LLC owner (the company owner) will not liable of any debt, i can understand that.
But, if it happens, the company is "in debt" with all of those investor who do the convertible debt, right ?