Sole Proprietor Credit Cards

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The Internal Revenue Service considers a sole proprietor as someone who works for himself in an unincorporated business. A sole proprietorship has no separate existence from its owner, according to "Entrepreneur" magazine. That allows the sole proprietor to use personal credit cards for business. Sole proprietors can also apply for business credit cards in the name of their business, but they remain personally responsible for the debt. Many people run sole proprietorship businesses out of their home. Examples includes tutors, writers and editors, painters and plumbers.

Liabiility

Sole proprietorships are easy to set up but offer no protection from credit card liability. Usually, the sole proprietor is 100 percent responsible for all charges on a credit card if she uses her Social Security number to open the account. That is significant, because personal responsibility for business credit card debt can drive a sole proprietor into personal bankruptcy if the business fails. Other business structures such as a limited liability company offers business owners greater protection from credit card debt incurred by the company. Owners of limited liability companies are usually not responsible for business credit card debt – unless the owner signed a personal guarantee for the credit cards.

Easy Approval

A sole proprietor with good credit is more likely to gain approval for a credit card than a new business without an established credit history. Banks are unlikely to approve credit cards with large credit limits for a new limited liability company, for example. A new company applying for a credit card may have to start with a card from an office supply store and build from there. However, a sole proprietor using her own Social Security number could receive approval on a full-feature MasterCard or Visa in just minutes.

Types

Sole proprietors can use any type of personal credit card in their business and freely mix business and personal charges on the cards. The sole proprietor can choose personal bank credit cards such as MasterCard or Visa, or special charge cards that require full payment at the end of the month.

Payments

Sole proprietors who want to accept credit card payments can do so by opening an account with a credit card processing company. The sole proprietor can use a personal checking account to establish the account. The card processing company processes the payment and transfers the money to the sole proprietor’s checking account after subtracting a transaction fee.

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