As entrepreneurs, we have different credit needs than consumers. Unfortunately, the credit industry is not designed for business owners. Empower yours…

“Building a credit record for your small business is imperative. The tricky part is doing it without endangering your own.”
Source: Business Week, March 2006

Corporations are the oldest business entity in the United States and have the most case history. Credit card companies have designed credit cards just for corporations. Venture capitalists and banks will spend more time with the owners of a corporation than with sole proprietors. Corporations are taken more seriously in business. Some companies will not hire another business unless it is incorporated.

There are several types of corporations, but the two that are most commonly used are the “S” and “C”. To decide which of the two is best for your situation, consult a tax professional.

A corporation when filed with the state uses Articles of Incorporation. At the point of filing, the document of a C-Corporation has been created. To change to an S-Corporation, a form 2553 must be filed with the IRS and some states require separate forms to be filed as well.

Advantages of the C-Corporation:
A corporation is a citizen in the state wherein it was created and does not cease to be a citizen of its state of domicile by engaging in business or acquiring property in another state. Since corporations are solely creatures of Statute, their powers are derived from the constitution and laws of the state in which it is incorporated. As a legal person, a corporation is considered to have its domicile in the state where it is incorporated and the place where it has statutory presence.

For the purposes of raising capital and building credit for a small to medium sized business, corporations provide the best chances for gaining approval and are recommended. A corporation is a separate legal entity from the owners and officers of the business. It files an SS-4 form with the IRS to obtain a federal tax ID number that will be used to file taxes and can be used to create the company’s own credit profile.

It’s easy. Just do it! For more information: MassiveCorporateCredit.com

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Do you get offers in the mail from creditors telling you you’re business has been pre-approved for a business line of credit? So easy! All you have to do is provide your social security number on the application and it’s yours!

Personal guarantee.

It’s like a 4-letter word in the world of personal asset protection! As tempting as that LOC is, don’t do it!

Every time you provide a personal guarantee for any type of business credit, you put your personal assets in danger. This includes your savings, your investment accounts, your car, and even your home.

How? Well, if the business somehow can’t pay off its debt, the lender/ bank will come looking for you to make good on the loan. A business entity established as a sole proprietorship is most susceptible to this risk. Although you can build business credit as a sole proprietor, you will be completely liable for all personal and business debt.

Furthermore, as a sole proprietor, you have no legal means of separating corporate and personal credit. Without a corporate tax ID number, your credit history will be based solely on activity associated with your social security number. Yikes!

The best way to protect your personal assets is to incorporate your business. This will shield you from personal liability for the company’s debts and typically will also reduce your tax burden.

For more information: MassiveCorporateCredit.com

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Do you pay for business expenses with your personal credit cards? Do you borrow money from your personal checking or savings accounts to put into your business? Do you obtain personal loans to finance your business expenses?

If you answered yes to any of these questions, then it’s a good thing you’re here and read on!

Using your personal credit to finance your business is probably one of the biggest mistakes one can make as an entrepreneur. For one thing, it’s dangerous! You should NEVER use your personal credit for business expenses because….

you will destroy your personal credit.

When you personally guarantee business-related financing, the lender will perform a personal credit check. As you probably know, every time an inquiry is made, your personal credit score takes a hit. The lower your score, the more difficult it is to secure financing.. especially financing with the most favorable terms.

Then as you continue to seek more financing, you reduce the amount of credit that is available for personal use. Plus, the more credit you have personally guaranteed for your business, the higher your debt-to-income ratio soars… and the less lenders will be willing to give you for personal use. Getting that loan for your business could prevent you from getting a mortgage on the new house you want to buy next year.

Bottom line… When you use your personal resources or credit to finance a business, you chain your financial security to your company’s success. If the company fails, you go down with it. You’ll never recoup the “loan” you took from your savings to get your business started. Creditors will call you for payment and if things get bad enough, you may have to declare bankruptcy.

To protect your financial security, don’t use your personal credit to finance your business activities. Instead, take action to secure credit in your COMPANY’S name without risking your personal assets, lowering your personal credit score, or damaging your personal credit history.

For more information: MassiveCorporateCredit.com

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