Only put in money you can afford to lose; don't touch family savings or borrow to open
Grade BBig benefitMoneyFreeLittle timeSome willpower
Debts of a sole proprietorship come out of assets in your name. If it's unclear whether the whole family ran the business, creditors can reach family property. A company doesn't fully shield you either: when the company can't pay, what you promised as subscribed capital but haven't paid yet can be called in early. Size your stake by «I could lose it all and still pay the mortgage and medical bills».
- Cost
- No money. Before you start, set a cap: you could lose every yuan of it and still pay the mortgage, support the kids, and see a doctor. Don't invest above that cap. Family money and borrowed money don't count toward the cap. The hard part is when the business looks like it's picking up and you want to pour in more.
- Benefit
- Losing money isn't the only risk. For a sole proprietorship, if you ran the business alone, debts are paid from property in your name (personal property). If the family ran it together or who ran it is unclear, debts are paid from family property. Debts both spouses signed count as joint marital debt; later assent by one spouse counts too. A loan in one spouse's name still counts as joint debt if the creditor shows it went into the couple's shared business. For companies there is another rule: subscribed capital is what a shareholder promised at registration. When the company can't pay a due debt, creditors may demand early payment of the portion not yet due (nationwide).
- Notes
- «Affordable to lose» means losing it all wouldn't force you to sell the home or borrow from relatives to plug the hole. This round found no verifiable official statistics on how many firms survive or how long they last on the National Bureau of Statistics or State Administration for Market Regulation sites, so the text gives legal consequences only, not headcount figures—grade B.
Sources · 2
- 全国人大 (2020). 民法典（第五十六、一千零六十四条）. spp.gov.cn/spp/fl/202006/t20200602_463888.shtml
- 全国人大常委会 (2023). 公司法（2023 年修订，第四十七、五十四条）. gov.cn/yaowen/liebiao/202312/content_6923395.htm