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So, you have your idea and you are ready to set up your business. If you are like most businesses, you are probably going to need (or at least, greatly benefit from) good credit options; all of which come from sound business principles and having a good credit score. So here is a good, basic run-down of how business credit is built, from conception with your advisors to getting a credit card for new business.
First you will need to form a corporation or company. In addition to giving your business legal protection, these entities also qualify you for the business credit system and allow you with many more options that you may want later if you choose to expand. Typically there are two kinds of business entities: c-corps and LLC’s. C-corps are harder to set up, require more regulated minutes and meetings and cost a little bit more in fees to maintain, however they enjoy the benefit of being more stable (C-corps are perpetual), and the ability to go public later on. Limited liability companies are easier to set up and more flexible, but are more subject to dissolving and cannot go public. Of course, it all depends on your individual business needs, and you should consult a legal professional and/or business colleagues to decide on which is right for you.
Now you are going to want to set up your business. You will have to submit a form to the IRS through your newly-formed LLC or c-corp for an Employer Identification Number (EIN), which will be the number you use to identify your business when it comes time to do your taxes. You will then need to set up a bank account and a telephone line in the new business’ name, and start a few merchant trade lines with the new business. Once this is done, it is time to register your business with Dun & Bradstreet or Experian (two of the main credit reporting bureaus for business). This will break you into the business credit system. You will now have a Paydex score (similar to the Fair Isaac score, except weighted on a scale of 0-100 for businesses) and will be able to start building business credit.
Finally, it is time to get a credit card for new business. This part may be tricky, as most credit card companies are very reluctant to offer credit cards to start up businesses. You will want to be sure that the credit card is tied exclusively to your business credit score and not your personal credit. Though there may only be 50 to 60 of the 500 business credit cards that allow this, it is a critical requirement for your first credit card. (For small business, it is, again, absolutely essential that credit remain tied only to the business). From here, it is standard business practice; be responsible, and keep good profits and stability. These are the two biggest variables in the determination of your business credit score.
