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Attorneys Say Corporate Credit is OK, Need a Plan

I met with two corporate attorneys at a highly respected (and very expensive) law firm today. I ran my idea of borrowing money via my corporation and using the capital for future deals, as well as, borrowing from the corporation to refinance/settle my existing debt.

My corporation would be used to continue doing real estate and other types of investments with the added asset protection, tax advantages and borrowing ability that I did not have as a sole proprietor.

As far as the legalities of borrowing from the corporation… They said as long as I am not lying on any applications and the personal loan from the corporation to me is legitimate (promissory note, payments, reasonable interest rate, etc) then there is nothing wrong with borrowing money from the corporation.

The attorneys said that public companies have rules against the directors/officers borrowing money from the corporation, citing Sarbanes-Oxley Act. However, with private companies engaging in this practice properly is OK and is not too uncommon.

The corporate attorneys also gave me lots of good advice on how to structure things the right way and general tips for doing business through a corporation – properly capitalizing, dealing with shareholders, buy/sell agreements, officer and director duties, etc. I took good notes and have a list of homework to do.

The corporation brokers have been doing a great job helping me with the process of setting everything up. The process is taking longer than I thought but things are finally starting to happen. I’m almost ready for the next step.

But before I take on a bunch of new debt, I need to have a good plan for repayment…

I have come to appreciate the power of leverage. I’ve said it before and I’ll say it again… leverage is a beautiful thing. However, I must treat it with great care, unlike I’ve been in the past. This is my chance to show that I am finally learning my lessons.

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