I get asked this question quite often and thought I would clear the air on what business entity selection is best for building business credit. This step by far is the most important because it’s the foundation of your business credit. Not to mention all the other important areas that entity selection affects such as taxes, liability, asset protection and so on.
As a business owner, you have four real choices when it comes to business structures for building business credit, and two bad choices:
* C Corporation
* S Corporation
* Limited Liability Company
* Limited Partnership
* Sole Proprietorship
* General Partnership
You can learn more about your four good choices by listening to my FREE Business Corporations Seminar.
CLICK HERE to listen
To learn why Sole Proprietorships and General Partnerships are so dangerous to you and your family, read on.
A Sole Proprietorship is bad…
Have you heard the saying “You get what you pay for?” Well, you normally don’t pay anything to start either a Sole Proprietorship or a General Partnership. Of course you don’t get anything, either. Unless you count the following as valuable business assets:
* Lots of personal liability
* No protection from your business creditors
* An increased risk of being audited
* Problems with valuation for a subsequent sale of the business
The reason for this lack of protection is because neither of these structures is considered a separate legal structure. Instead, they are considered personal extensions of you, if you are operating as a Sole Proprietorship, or you and your partners, if you’re operating as a General Partnership.
And, because these business types are considered personal extensions of you, you don’t have any protection from them.
But a General Partnership is Downright Ugly!
It gets even worse if you are operating with a partner as a General Partnership. That’s because not only are you responsible for all debts and agreements you enter into in the name of your business, you’re also on the hook for all of your partner’s actions in the name of your business as well. This can be devastating if your partner is financially irresponsible, and, because either of you can bind the partnership; you have zero protection from your partner.
If You Don’t Choose a Good Entity, the Government Will Choose a Bad One for You!
If you’ve been doing business up to now without a business structure, both the IRS and your state government have defaulted your business into either a Sole Proprietorship or a General Partnership.
And that means you’re exposed.
Use a Proper Business Structure – If you want to build business credit and you want to protect yourself from personal liabilities.
CLICK HERE to join my business credit community today and discover what cash credit and financing opportunites you can obtain for your business entity.
Remember – There is one thing stronger than all the armies in the world and that’s an idea whose time has come ~ Victor Hugo
To Your Success!
About the Author
Marco Carbajo is a business credit specialist, author, speaker, and founder of the National Entrepreneur Club. Click here to visit his blog and signup free to get strategies, resources, and credit building tips with blog updates, news, and more! To start building business credit join his business credit community today and Click Here.