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Assuming business under $1 million and in the US

Is it possible to start/buy a business without risk to personal finances or personal property?

And What would one need to do to have a no risk business in this case, I.e grants, investors, SBA loans?

  • Define "risk to personal finances". This may mean "not loosing anything", or it may mean "not loosing more than you can easily afford". The later also needs definition. I.e. I would be quite challenged by a 1 million USD loss - but it would not be the end of the world. Some people may balk at spending business capital to stock a shop, and others would need to declare bankupt when loosing 5000 USD. There is a difference here. – TomTom Feb 16 at 17:12
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There are different business models to chose from, and some offer Limited Liability, which means that - unless you act illegally or grossly negligent - only the money in the business is at risk; not your personal money.

However, founding or buying a business takes an initial investment, which is from your personal money, and that piece is obviously 'at risk' - you can just limit your risk to this part.

  • Also, even if you don't provide any seed capital, any compensation for your work in starting the business is at risk – Ben Voigt Feb 16 at 6:15
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I think it is very possible to start, own, and operate a business without risk to one's personal finances. There are two keys to this: cash only, and sufficient structure/liability coverage.

Despite what some social media personalities claim, it is not really possible to borrow funds to start a business without pledging your own assets. You cannot simply default on loans and walk away with no liability.

The solution to this is to bootstrap a business. Lets say you desire to own a landscape company, and currently work as a graphic artist. One can simply buy the necessary for equipment out of savings. It need not be new, and it need not be carried around in a 40K truck. How many lawns can be mowed on nights and weekends? A whole lot.

Bootstrapping in this manner will allow you to make mistakes without much pain, and you will make mistakes. You might be able to pick up used equipment from others going out of business and can make good decisions on what to buy new/best and what can be bought on the cheap. When you have too many clients you can then make a decision. Do you hire someone? Do you quit your day job? Or do you fire some poor clients?

Additionally with limited funds and time you focus on what is important. Most successful business are both limited in time and funds. In the 90's Apple was really struggling. Steve Jobs returned and turned the company around. One of his changes was to limit his product line. A good book on this subject is "The Lean Startup". While it does not specially talk about bootstrapping a business, it does discuss how business put too much time and money into things that are unimportant.

Having liability insurance protects you in this litigious society. You need sufficient insurance to protect you from being sued.

  • In your example of the landscaping company, you need to invest your own money in the equipment needed to start the business. Everything you invest is at risk - there's no guarantee you'll ever make that money back. It's possible to start this company and wind up with less money than you started with if it fails - this certainly is not a risk-free investment! Sure, there are ways to limit your risk by incrementally growing the business, but there's always a risk that you won't make back any dollar you spend. – Nuclear Wang Feb 15 at 19:56
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    @NuclearWang that is not the question that was asked. "without risk to personal finances or personal property". A couple hundred of lawn equipment, that can be resold if need be, is insignificant. Many waste that on coffee each month. – Pete B. Feb 15 at 20:01
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    Exactly. Personal finances or property at risk would indicate a size that is relevant given my personal income etc. If I, i.e., start a taxi company and lease a couple of taxis for that - this would not put my personal finance at risk. Worst case is I have to pay up on them, sell them and take a loss. Yes, THIS money is on risk - but it will not make more than a (agreeable non trivial) dent on my finances. Personal finances at risk would indicate "risking to declare bankrupty or retirement savings" - something significant. – TomTom Feb 16 at 17:10
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Well, one could imagine pleasant fantasy scenarios. Like, an investor offers to put up all the money to start the business, and all he wants from you is your time and talent. A rich relative promises to cover any losses. Etc. Is it POSSIBLE? Sure. Does it happen? Sometimes. But not often.

Even if someone else is putting up all the money and you're just giving your time and talent, you presumably still have to quit your regular job. And if the business goes broke, you might find yourself scrambling to get another job. And is the rich partner paying you a salary while the business gets off the ground? Again, could happen, I'm sure it has happened to someone in the history of the world, but it's not likely.

As Aganju notes, there are ways to limit your liability. In the United States, you can make the business a corporation or a limited liability company, which means that your risk is limited to the amount you invest in the business. If the business goes broke, creditors can't go after your personal assets. But you normally still need a sizable investment to get the business started. And you often have to go without income while the business gets off the ground. Few businesses start making a profit from day 1.

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One can imagine specific examples. If you're academically gifted, private tutoring:

  • requires no special permits or licenses
  • can be done at the client's home, public libraries, your home, etc.
  • requires no special equipment or other fixed costs
  • can make you $10-$50 per hour depending on subject and location, for single students
  • if you find study groups, $100-$500 per hour is not impossible

I have done this successfully on a small scale. There are probably other examples of personal services where you can sell you skill (or others' skill) with essentially no risk. Ever heard of a student successfully suing a tutor for not doing well in a subject? Let alone whether the amount was more than a full refund.

It probably would not be hard to form a group of senior/executive tutors and then start hiring junior tutors who you pay more than the big sites. Steady work if you're near some universities, can't speak for K-12.

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