What type of small business investment is best for you?
Want to gain financial freedom for you and your family? Statistically, a majority of Americans desire to or are now considering starting up their own business. As such, opportunities abound. When it comes to investing in small businesses, there are two types of investments you can make, equity investments, and debt investments. Joshua Kennon, Investment Expert at About.com‘s money section, has written a great article explaining the differences between the two types of investments, as well as their relative advantages.
Investing in a small business is one of the most popular ways families begin the journey to financial freedom. It isn’t uncommon, at least in nations with an entrepreneurial history such as the United States, for someone to have never owned a publicly traded share of stock or a mutual fund, but have their own restaurant, dry cleaning business, or sporting goods store. Frequently, this grows to represent the most important financial resource the family owns, other than their primary residence. In today’s economy, these types of small business investments are often structured as either a limited liability company or a limited partnership, with the former being the most popular. In years past, sole proprietorships or general partnerships were more popular, which provide no protection for the owners’ personal assets outside of the company. Whether you are considering investing in a small business by founding one from scratch or buying into an existing company, there are typically only two types of positions you can take: 1.) Equity, or 2.) Debt. Though there may be countless variations, all investments come back to those two foundations.