You've probably wished many times that you knew ahead of time how to avoid the mistakes that are going to cost you money. When it comes to your business, these can be so costly that you may lose thousands of dollars if you make them. My goal is to help you avoid some of the important ones so that you stay on the right track to making money, instead of losing money.
1. Not setting up your business in the correct Business Structure. Many individuals dont think they need to set up their company as a legal business entity because it's only them working. They dont consider it an issue when they combine their business accounts with their personal accounts. Unfortunately, this combining of funds and expenses can cause a huge crisis for the business owner. However, by keeping their business activity separate from their personal activity, they are presenting to the tax collectors a clear picture that they are acting as a business and not as a hobby.
Remember, when banks lend to individual sole proprietors its considered a personal loan and is reported to the personal credit bureaus like Equifax. By setting up your business as a corporation, partnership or LLC, the lending institutions will report your business creditworthiness to the business credit bureaus, and your FICO scores are not affected - if you used your Employer ID number (EIN) on the account with the lender. You will also look more professional in the eyes of a bank or other financial institution if you are set up as a business entity.
2. Not presenting your business as an established business. This means your business has its own address and own phone number. That doesnt mean you cant work out of your home, it means that to the business credit world you must show your business as having its own address. Your business absolutely must be listed in the national 411 directory. Small business owners sometimes use their cell phone number as their business phone number. Unfortunately, a cell phone number is not acceptable for most financial institutions. A lender calls 411 to verify a business and expects to find a specific address and matching business phone number. They dont want to see P.O. boxes or UPS addresses. If you run your business out of your home, it must be a separate phone line that appears in the 411 directory as belonging to the address listed in the 411 directory. It must match the address listed with the State in which the business is registered because the financial institutions will also go onto the States website and verify the business information.
3. Not checking your credit report. You should already know how important it is to regularly check your personal credit reports for accuracy, but its also important that you check your business credit as well. Have you noticed that when you are a new business and you try to apply for business credit, financial institutions generally ask for a personal guarantee before extending business credit to your company? You may lose your ability to get business credit because of negative data on your personal credit report. This holds true for business credit. If false or negative information is reported to D&B (the most well known business credit agency), you may be denied credit. Financial institutions are looking to lend money only to businesses that are a good credit risk. It is critical that your personal and business creditworthiness are reported accurately with all the credit agencies. It is up to you to verify the accuracy on a regular basis. - 15359
1. Not setting up your business in the correct Business Structure. Many individuals dont think they need to set up their company as a legal business entity because it's only them working. They dont consider it an issue when they combine their business accounts with their personal accounts. Unfortunately, this combining of funds and expenses can cause a huge crisis for the business owner. However, by keeping their business activity separate from their personal activity, they are presenting to the tax collectors a clear picture that they are acting as a business and not as a hobby.
Remember, when banks lend to individual sole proprietors its considered a personal loan and is reported to the personal credit bureaus like Equifax. By setting up your business as a corporation, partnership or LLC, the lending institutions will report your business creditworthiness to the business credit bureaus, and your FICO scores are not affected - if you used your Employer ID number (EIN) on the account with the lender. You will also look more professional in the eyes of a bank or other financial institution if you are set up as a business entity.
2. Not presenting your business as an established business. This means your business has its own address and own phone number. That doesnt mean you cant work out of your home, it means that to the business credit world you must show your business as having its own address. Your business absolutely must be listed in the national 411 directory. Small business owners sometimes use their cell phone number as their business phone number. Unfortunately, a cell phone number is not acceptable for most financial institutions. A lender calls 411 to verify a business and expects to find a specific address and matching business phone number. They dont want to see P.O. boxes or UPS addresses. If you run your business out of your home, it must be a separate phone line that appears in the 411 directory as belonging to the address listed in the 411 directory. It must match the address listed with the State in which the business is registered because the financial institutions will also go onto the States website and verify the business information.
3. Not checking your credit report. You should already know how important it is to regularly check your personal credit reports for accuracy, but its also important that you check your business credit as well. Have you noticed that when you are a new business and you try to apply for business credit, financial institutions generally ask for a personal guarantee before extending business credit to your company? You may lose your ability to get business credit because of negative data on your personal credit report. This holds true for business credit. If false or negative information is reported to D&B (the most well known business credit agency), you may be denied credit. Financial institutions are looking to lend money only to businesses that are a good credit risk. It is critical that your personal and business creditworthiness are reported accurately with all the credit agencies. It is up to you to verify the accuracy on a regular basis. - 15359
About the Author:
Find out more about setting up your business structure correctly, and learn additional secrets to present your company to the business world as well established. Get the information you need so you can obtain lines of credit and vendor credit cards for your business without risking your personal FICO scores.
