The answer is – unless the survival of your company depends on it – absolutely not.
Although by definition venture companies are majority funded by equity, ongoing operations will offer some form of working capital either in the form of credit card debt or vendor credit. A company credit card line will always require the personal guarantee of the primary owner or officer; these are unavoidable.
At times vender credit applications will require a personal guarantee. Try to avoid these guarantees by simply not signing that part at first and see if it gets rejected. If it is rejected consider another vendor. If not signing the document is not an option, you will have to guarantee it. Secured installment loans or leases will normally require a guarantee. Always keep a copy of the guarantees or the applications that include the guarantee and an easily accessible list of all guarantees for two reasons. First, you can use this information later on when cash gets tight and you need to prioritize who to pay. You will probably want to pay the guaranteed debt forest. Second, as your ownership in the company goes down in the future or if the company is acquired, you will need the list to remove the guarantees.
If you have a co-founder who also must guarantee debt, remember that most guarantees cover all of the debt if something happens and the company can’t pay the debt. The creditor will go after both co-founders for the total amount until the debt is paid off, which may mean you pay 100% and your partner doesn’t pay anything.
In conclusion, one of the biggest challenges is determining how long you should continue to guarantee debt as your ownership percentage decreases. That is a hard call and you should be prepared to discuss this issue with your board of directors to determine what is expected of you when you become a minority.
Posted by efaservices 
