Personal Guarantees - Trump is a business amateur

[grantcart]

I started a company and grew it to 400 employees and worked for 15 years as a management consultant.

There are a few ironclad rules in business that most people have heard of like: never hire a relative, don't fall in love with your own product, whatever you think you will need for working capital times it by three and so on.

But the one hard rule in business is never ever sign a personal guarantee. You don't want to have to go home and tell your family that the family lost their home and all of their assets because a competitor has a better mousetrap.

This was exquisitely detailed in the Producers:

Max Bialystock : The two cardinal rules of producing. One: Never put your own money in the show.

Leo Bloom : And two?

Max Bialystock : [screaming very loudly] Never put your own money in the show!

The whole point of incorporation of a business is to limit your personal liability,

Your business will have a registered amount of capital and when you start your business you make a capital investment and have others do so and that captures your entire liability. If the business fails then your liability is limited to the capital invested.

It is not uncommon that at the beginning of the business your registered capital may only be 50% of the paid up capital but as you build the business you take profits as dividends and use the dividends to increase the capital until its 100% paid up. Then your liability is capped.

The one thing you never want to do is sign personal guarantees. When I had a business client who had personal guarantees it was clear that they were an amateur and needed a lot of help. The first item on the agenda was to formulate a plan to get the personal guarantees off even if it meant raising the paid up capital and diluting the percentage of stock ownership by the owner.

Now there is an acceptable exception and that is when someone is just starting off then you will need personal guarantees to get other investors aboard and to get full bank facilities but if you haven't generated enough return to get the guarantees off in three years then it is a stark warning sign that something is wrong.

If you are trying to get a big expansion in your business and the only financing available requires personal guarantees, you should walk away.

It is hard to communicate how foolish it is for anyone who has more than $ 10 million in assets to have personal guarantees. Guys like Gates or NFL owners or the guy that owns 3 body shops in your home town don't have personal guarantees.

That the President has personal guarantees that can be bought by foreign (or domestic) business entities and used for leverage is, without exception, the worst national security exposure our country has ever had, nothing comes close to it, but having $ 400 million in personal guarantees on your business (especially after generating $ 400 million in revenue from The Apprentice) is just a rank amateur move. When you here someone do that kind of thing you think "I wouldn't let that guy manage an Arby's franchise."

We don't need to know any more about the tax liabilities, just having the personal guarantees is enough for immediate removal from office.

[MaryMagdaline]

1. K&R

Excellent summary

[crickets]

2. An excellent explanation.

That [he] has personal guarantees that can be bought by foreign (or domestic) business entities and used for leverage is, without exception, the worst national security exposure our country has ever had, nothing comes close to it,

trump is not only completely unqualified to serve as president, he is financially unfit to even run for the office. He never should have been allowed on the ticket to begin with.

[grantcart]

5. Unqualified to run an Arby's.

[Enoki33]

3. Could not agree more. Suspected when the question of the

Deutsche Bank loans and personal guarantees first surfaced almost two years ago that Putin either personally bought those loans, or had his oligarchs buy them.

[Disaffected]

4. Excellent, thanks.

But, maybe he had no real choice in the matter (go belly-up otherwise)?