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Build Business Credit and Protect the Corporate Veil

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Build Business Credit

 

Setting up a corporation helps shield your personal assets and personal liability for the debts or actions of your company. It’s treated as a separate legal entity and you must treat it as such which includes avoiding the co mingling of funds, assets and credit files.

One of the reasons to build business credit that gets overlooked the most is protection of the corporate veil.

Unfortunately, corporate veil piercing is the most litigated issue in corporate law today and is more common with small privately held entities. While there are many factors that can cause this let’s focus on the alter ego theory.

Under the alter ego theory a creditor looking to pierce the corporate veil must prove that the owner did not operate his entity as if it were a separate legal entity. This includes some of the formal requirements such as required meetings and recordkeeping.

But did you know this also includes separating your personal financial affairs from your entity’s financial affairs?

By co mingling assets which involves using personal resources like your personal credit cards for business purposes and vice versa you open yourself up to the alter ego theory.

So does this give you incentive enough to build business credit for your company?

You see one of the underlying benefits is the ability to establish a new and separate credit file that is unique from your own personal profile. By doing this you can obtain trade credit, credit cards, leases and loans strictly in the name of your business.

This enables you to separate the financial affairs of your business completely eliminating both your personal credit and personal liability from the equation.

When you decide to build small business credit, the following are the first basic steps:

  1. Incorporate or form a Limited Liability Company
  2. Obtain a Business Federal Tax Identification Number
  3. Complete Corporate Compliance
  4. Open a Small Business Bank Account
  5. Get Listed with the Business Credit Bureaus
  6. Establish Business Credit History
  7. Optimize your Business Credit file and Scores

As long as you respect this separateness, your business entity will have no issues being recognized as a separate entity and will be ultimately responsible for its own debts.

Now there may be instances where a personal guarantee is required to secure a credit line or loan especially if your business has not established enough creditworthiness but make sure the agreements are properly recorded and formally authorized by your entity if in fact your entity’s management structure requires it.

Remember, proper recordkeeping is critical to protecting your limited liability even when you establish business credit in the name of your business.

Don’t leave yourself open to a possible alter ego theory because you don’t want to have unlimited, personal liability for all the debts of your business.

Ready to start building business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) => 

About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building system providing business credit without a personal guarantee. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Build Business Credit by Going Green

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Build Business Credit

 

Last week on Earth Day more and more individuals, corporations and governments made personal commitments towards creating a global green economy.

Did you know you can also build business credit for going green as well?

There are many ‘Go Green’ companies willing to extend credit to your business in an effort to help you become a green company. These credit lines give you access to various business and consumer products designated as eco friendly.

Each purchase made using your line of credit helps establish business credit because your payments are reported to the business credit bureaus.

One company takes it a step further by taking 10% of each of your business purchases and donating it to a “Green Organization.”Now that’s what I call supporting the environmental movement.

If you think going green will cost too much money then think again because in the long run it can save your business a bundle. For example, high-efficiency light bulbs will cost you 75% less than standard ones and last ten times longer.

In addition, more and more consumers prefer to do business with a company that’s eco-friendly so going green should be an important part of your company’s branding strategy.

Companies like Johnson Controls saw an increase in their sales due to its environmental efforts. By going green they were able to stand out in their industry which helped gain attention for its business resulting in increased revenues.

Before you apply be sure to have the following in order to qualify:

  1. Federal Tax ID#
  2. Minimum of two years in business
  3. Business listed in 411
  4. Business address
  5. Business bank account

Keep in mind you can get approved if your business is less than two years old but your initial line of credit will be much less.

You won’t have to supply a personal guarantee nor will your personal credit be checked but more than likely you will need to put 20-30% down on purchases and finance the rest.

One of the unique differences with some of these new business-friendly creditors offering green products is that they allow you to finance your purchases while the majority of vendors require that your invoices be paid in full usually within thirty or sixty days.

Once you get approved you can start by greening your office which will cut your energy costs. This is not only good for the environment but also for your company’s bottom line.

This new age of green financing is truly an exciting opportunity for your company to go green, build small business credit, cut energy costs and support the environment.

As the green movement makes headway into the corporate world, and small businesses like yours are taking action I believe there will be an even greater demand for green credit financing for purchasing eco friendly products so more companies like yours can go green!

Are you ready to Go Green and apply for Green Credit Financing for your business? Become a member of my Business Credit Insiders Circle and gain access to a proven step by step business credit building system? A system that provides you access to green credit sources,vendor lines of credit, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A membership system helping business owners build small business credit. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

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