Keep your Business and Personal Credit Separate
Many small business owners co-mingle personal and business finances, but it’s not a good idea. Building business credit can help you get a loan when you need one. It’s important to the future of your business
Why Keep Your Personal and Business Credit Separate?
- Not separating the two puts your personal assets and savings at risk if your business is sued or fails.
- Separate business credit helps you identify business tax expense deductions at tax time.
- Having business credit protects your personal credit score. Instead of maxing out your personal credit to run your business, you use business funds.
Get Started With Business Accounts
The first thing to do is to make your business its own legal entity. You should discuss your options, sole proprietor, LLC or S-Corp, with your tax advisor. Then, file the correct paperwork with your state to be an official business.
Once your business is set up with its own identification, set up a business checking account. Use this account for all business activities. Pay yourself out of this account to show that you have income. If you need a loan, business lenders can look at the bank statements to see how your business is performing.
Build business credit by opening a line of credit or credit card in your business name. Always pay on time or early to build business credit. Make sure the lender reports to the business credit bureaus, not personal ones. Trade accounts are another way to build business credit. Open accounts with businesses that report to the business credit bureaus.
Monitor the credit of your business just like you do your personal credit. Check it annually for accuracy and correct errors. By staying on top of your business credit, you’ll be ready to take out a loan when your business is ready. For more information about lending opportunities, contact Artemis Commercial Capital.