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LLC vs Sole Proprietor for biz credit

Discussion in 'Business & Tax Advice' started by jedediahd, May 20, 2009.

  1. jedediahd

    jedediahd Junior Member

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    I am in the process of getting this set up to form an actual business as opposed to just getting everything personally when it comes to being paid, accounts etc. My question is this, one thing I have been exploring is business credit, particularly business credit with no personal guarantee, because my personal credit sucks fbecause of past sins lol. My question is when it comes to getting business credit, does whether you are an llc or a sole proprietor make a difference? I have found some resources for no personal guarantee credit, but wanted to ask about this piece of it first. Thanks
     
  2. shocker101

    shocker101 Newbie

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    I too have been exploring business credit. Everything I have been reading has said it is better to get a corporation in establishing credit. So I would assume that an LLC would be better. A good resource that I have come across is the businesscredit blog. (I can't post link because I am too new to forum- but just do a search and you will find it) I found a lot of really helpful info, and all of it was free.

    I hope this helps.... and good luck to you. :)
     
  3. Grandslam

    Grandslam Senior Member

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    Regardless of credit benefits, NEVER and I mean NEVER form under a sole proprietorship OR a general partnership! you are asking to lose everything in a lawsuit... definitely form an LLC or LP. There is little if any corporate protection for a SP or GP, you will be held personally liable if anything within the business causes a lawsuit.

    When building business credit, the creditors are looking at the credibility of the business (do they pay on time, do they have any outstanding balances, etc). Depending on the credit you are seeking, they may or may not look at your personal credit. However, if you can prove that your business (entity) is competent and reliable, as far as credit goes, you should be able to get lines of credit for certain expenses.

    Keep in mind, it does take time to build good business credit, but it's entirely possible to do so. Just make it a point to form an LLC. Sole proprietorships mean certain death if legal issues ever arise.

    Hope this helps

    GS
     
    Last edited: May 21, 2009
  4. fafala77

    fafala77 Registered Member

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  5. ccc23

    ccc23 Newbie

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    In almost every business entity I have owned creditors have "tapped" my personal credit profile. This doesn't mean it goes on my personal credit profile but they have always looked into my personal credit. FYI. Currently own one C-Corp, and an LLC.

    Heed Grandslam's word, sole proprietorship is pretty much a DBA when it comes to legal protection. If you get sued they can pierce a SP corporate veil with ease.
     
  6. tonydecarlo

    tonydecarlo Newbie

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    I used to be an independent agent selling unsecured business financing. I can tell you this... Depending on what type of services you're offering online, you can still be a sole proprietor as long your terms are clear. It's still not worth the risk, headaches, court dates, fees, lawyers etc... LLC is the way to go. If you're just starting out, your personal credit will be taken into account along with any tangible assets (house, cars, cash) you may have. You have to build business history first before the bank or any financial service will let you borrow money. Even if it's unsecured, you're still a risk to them. Go for the friends and family plan (which i wouldn't recommend), sell some jewelry, sell your car, or something else that will get you off the ground. My 2 cents... make that 3 cents with the economy these days.
     
  7. Thenewrich

    Thenewrich Newbie

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    1. For business credit establishment Sole Propriotorship (SP) is BAD Corp (LLC, C, or S) is good. If you are a SP you have to PG (personally guarantee with your credit/SSN) no fun
    2. People typically have to PG business credit because they set up a business entity and a week later try to get a AMEX or a 50,000 business loan.
    3. Start small, office supply card, Staples, etc. If you follow a few rules you will not have to PG. Also look at net 30 terms to start establishing trade lines and good payment history.
    4. When you get a Paydex score, or a DUNNs score, the higher it is (80 for example) the more ish you can buy without PG the score.
     
  8. mr.breakit

    mr.breakit Jr. VIP Jr. VIP Premium Member

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    you will need to clean up your credit they will always look at your credit so there is no such thing as a no pg. trust me this is what I do for a living I fund personal and business loans. the 80 paydex helps but you can go up to a 100 paydex just as easily. I think I will start up a thread about that for you guys. if you have more questions please feel free to ask me, also any place you go with should have no upfront fees(I know we don'thave upfronts )