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A Note on Business Credit
Incorporating your business is a fundamental step to starting a business. You do not have to be a large business to incorporate. Your local county or state goverment office can inform you as how to incorporate. Incorporating a business I.E. My Business, Inc. has many advantages.
It creates a separate enity in itself; therefore, protecting you as an individual. If there should ever be a lawsuit created for an action of the business, the business is sued, not you personally. Incorporating PROTECTS YOU AND YOUR PERSONAL ASSETS and keeps them separtate from the corporation.
Now that we have determined a bit about what a corporation is and the number one reason to incorporate is to protect you as an individual, let's discuss Credit. A Corporation can also get a Tax Identification Number, a social security number for a business, by filing a ss-4 form which can be found at www.irs.gov. Once you have incorporated a business and filed and recived your Tax identification number you are now able to begin business credit.
Business Credit is separate from your personal credit. Your personal credit is recorded under your social security number with the local credit reporting agencies. Business Credit is done the same way under it's tax identification number. When your business is new, it does not have bad credit, is has no credit history at all, kind of a blank page. The easiest way to establish credit under your business is with a secured loan or a secured credit card.
Building business credit gives you the flexability of borrowing under your business to build your business rather than borrowing under you personally.
Author's Note:
I personally know someone with average income(75,000) and average credit that has borrowed 7 million dollars. They currently own 12 gas stations, each gas station has a 750,000 loan to purchase the business. Each Gas Station is it's own Corporation with its own Tax Identification Number and can get its own loan. So he owns 12 corporations with 12 loans, but when the bank checks his personal credit under his own Social Security Number he has no loans. A real life example of the power of business credit.
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