About Credit Cards & Bankruptcy - What Small Business Owners Need to Know

If you are reading this, chances are that you already know that you should not mix your personal credit and your business credit for a wide variety of reasons.

• Business credit is deductible. Failure to separate it from your personal credit makes it huge drag to keep track of.
• Business creditors treat their customers much better than they treat people who behave badly with their credit cards. When a business fails to pay its American Express bill for a couple of months, American Express just stops letting them charge on it. Pay the bill, and you can go back to using it.
• Businesses get a lot more credit a lot faster.
• Finally, it really just doesn't make sense that you personally should be accountable for your business when it may well be the case that you share your business with others. It really limits your business if you are reluctant to hand an employee or a contractor a personal credit card or give them a personal check.
  

Failure to establish a separate set of credit cards and bank accounts for your business under its own name, and with no tie to you, is usually something that will result in personal bankruptcy sooner or later. A bad year will pull down not only your business, but you personally. You'll have no port in any storm.

So, assuming you have 10-15K, you should use it to quickly and efficiently establish your business credit.

There are a million ways to do this. One way to do this is to:

• Set up an LLC, preferably in a state with no state taxes required.
• Put some money into an account at a bank.
• Get a Dun & Bradstreet number.
• Tell the bank you need a credit card in the businesses name. If you have money in the business bank account, they are likely to do this.
• Buy something and pay it off over a period of months.
• Keep 10-15K in the business bank account for a period of months.
• When time permits, ask the bank for a line of credit.

The result? A good credit rating and a line of credit you can draw on for business expenses that is separate from your personal account.

You can do this more quickly, for just a little more money, by purchasing a "Shelf Corporation" which is literally a business set up by someone else specifically so it could be sold to people who want to establish credit quickly.

Now that you've reviewed this short article, you should be able to keep your business and personal credit separate which will dramatically reduce the chance of personal bankruptcy.