Building up your business credit as a corporation or limited liability company is a much better option. It allows you to separate your personal assets and liabilities from those of the business. If your business incurs a debt that it is unable to repay, you will not lose your personal assets (house, car, belongings, etc.).
Given below are advantages to forming a corporation or LLC:
Five Reasons to Establish and Separate Personal and Business Credit
Establishing your business as a separate entity is a necessity; not just from a personal standpoint, but from a financial one as well. By establishing a separate business credit profile, you will be strengthening the purchasing power of your business and protecting your personal assets from claims of potential creditors.
1. Access To Greater Funds: Business Credit will give you access to funds that are likely to be beyond the scope of your personal credit. It will, therefore, help a newly established business to stay afloat longer and expand.
2. Saving Money: A good corporate credit profile will help business owners lower the interest they pay on loans and leases, thereby resulting in more liquid capital. This will allow them to take advantage of prepayment discounts with vendors, add employees, and build up inventory.
3. Enhanced Business Image: A company with its own credit history has increased credibility and is perceived to have a higher level of professionalism with the government and other businesses. Business associates will refer to your company's credit report to see if they want to do business with you.
4. Personal Credit Rating is Lowered: Absorbing business expenses into your personal credit lowers your personal credit rating, thereby making it more difficult for you to get a loan for personal expenses.
5. Unlimited Personal Liability: Without business credit, if your business does not take off, you would be legally and personally liable to make good on all the debts you have run up, thereby jeopardizing your personal future.
As advantageous as it is to separate your business credit from your personal credit it is not so easy. However, there are lots of services that offer help with developing business credit services. Signing up for these programs will give you access to a personal Business Coach, who through regular phone conferences will help you build your business credit profile. Working with your business coach, in six months or less, you should be able to build a business credit score of at least 70, which is equal to a FICO score of about 700. This will enable you to obtain loans and funding from a variety of sources. Building up your business credit as a corporation or limited liability company is a much better option. It allows you to separate your personal assets and liabilities from those of the business. If your business incurs a debt that it is unable to repay, you will not lose your personal assets (house, car, belongings, etc.).