One look at the current financial market is enough to make anyone run away screaming. Money is insanely tight. It is also incredibly difficult to get banks to issue loans on decent terms. This can lead to a project failure, but there may be another option for funding your project.
The law is pretty inflexible in most areas. Business entities are not one of those areas. Everyone is aware of the standard four business entities - the sole proprietorship, partnership, limited liability company and corporation. While commonly used, none of these is particularly pivotal to a commercial project financing alternative strategy. The limited liability partnership, however, is.
Let's first discuss a general partnership to get some perspective. A general partnership is a business venture with two or more owners. The advantage of this approach is it is highly flexible and has favorable tax treatment. The downside to the partnership has to do with liability. All the partners are liable for any of the debts of the partnership. That is not good.
A limited partnership is an improvement on the general partnership. The limited partnership is formed with one general partner and a number of limited partners. You can have 5, 10, 15 or however many limited partners you like. The general partner runs the day to day business of the limited partnership.
The limited partners cannot be involved in the decision making of the general partnership. They basically kick in money for a limited partnership interest and then receive distributions from the profits. In exchange for this, they are shielded from the debts and liabilities of the partnership. This arrangement makes limited partnerships the business entity of choice for higher risk businesses like restaurants.
So, how does this help you with coming up with alternatives to commercial loans? Well, let's assume you have a project that needs to get going but the banks are not lending money. For instance, like NOW! You can form a limited partnership. To generate money for the project, you sell off limited partnership interests to wealth individuals. The downside is you lose some of the equity in the project. The upside is you now have cash on hand and still have control of the business.
In the current financial market, picking up financing is no sure thing. If you have a project you believe in, a limited partnership may be the key to getting it done.
Stephen Teak is with CommercialLoanStop.com - your resource for commercial loans in easy and tough markets.
Article Source: http://EzineArticles.com/?expert=Stephan_Teak
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