How to Establish Credit for a New Business

When starting a business, it can be beneficial to create a distinct credit profile apart from your personal credit.

Difficulty: Moderately Challenging

Instructions

How to Establish Credit for a New Business

1. Protect your personal assets by forming a Limited Liability Company (LLC) or Incorporating. You can build your credit profile by having a separate entity and position yourself for the benefits accompanying a LLC or Corporation.

2. Apply for a Federal Employer Identification Number (FEIN), which identifies a business in the same way that a Social Secutiry number identifies individuals. When registering your business with federal or state agencies, a FEIN is required.You can apply online at irs.gov (the IRS website), call 800-829-4933, or by mail. If you choose to apply via mail, download Form SS-4 from the IRS website and mail to the address on the form. After completing the form, be sure to sign and date.

3. Keep your personal and business finances separate by opening separate bank accounts.

4. Comply with your state’s business laws by obtaining the necessary permits, business licenses and other documentation required to do business your area.

5. Apply for business lines of credit and/or credit cards. Some companies/creditors will give credit to new businesses without a personal guarantee requirement and through various credit agencies will update your credit profile.

Tips & Warnings

• When applying for credit, lenders will evaluate your repayment ability, the loan’s intended purpose and your character (whether they see you as a trustworthy borrower).

Resources

• Form a LLC