establish business credit

flipitbig · #1 01-18-2008, 02:01 PM

Few simple steps to establish business credit.

First step: form a LLC which is the easier and least expensive way to go while still offering you protection.

Second: apply for an EIN (employer identification number). This can be done for free on IRS.gov website.

Three: establish a phone in the company name. Make sure the address is not the same as your home address and make sure it is listed with the 411. Call your local phone provider to see what packages they offer.

Four: after you receive your first phone bill go to staples.com and apply for business credit. Fax a copy of your application along with your phone bill. Please not to use professional letterhead and coversheet when sending these requests in. You should not have to personally guarantee this.

Five: go to dnb.om and register your business for free with them. in a month or two you will receive a D & B number.

This brings you onto your way to establishing a good PayDex # which is similar to a personal FICO score.

Hope this was easy enough to establish corporate credit.

JaredfromIndiana · #2 01-18-2008, 02:22 PM

Thanks for the info Big G. Question to you... what are the major differences between LLCs and SCorps? When I formed Blue Star Homes I went SCorp pretty much because my business partner was more familiar with them.

flipitbig · #3 01-18-2008, 11:44 PM

Jared,

just for you I put this page up....Check it out..its a comparison on entities

http://flipitbig.com/index.php?pageid=entities

Stevebuyshouses · #4 01-19-2008, 01:03 AM

Jared, there are two different types of LLC's and the default is taxed as a S Corp. You can opt for your LLC to be taxed as a C Corp. This is an election that you must take.

The main easy difference that you can set them up and manage them easier than "normal" corporations. You do not have to manage the meetings and minutes, etc. as much with them, and they are easier to set up.

That being said there are a lot of advantages to corporations as well. Especially when it comes to deductions and things that the company can do. For example, a C Corp can stand on its own (unsecured by you) and an LLC cannot.

C Corps give you the negative of the "double taxation" issue. Many people have problems with this conceptually. Basically, if the company makes money, it is taxed on the income, then so are the recipients of the salary from the company. This is not a big deal if you understand how to structure expenses for the business.

S Corps pass the income through to the owners of the company. This can be a detractor as well, especially where disqualified company expenses are concerned. Any money made by the company is passed through to the owners as income at the end of the year (minus expenses of course). This can push the owners tax basis around like crazy every year.

An upside to LLC's taxed as S Corps, or on default, is that in our business, if you have rentals, the income from those is considered passive, so by putting that with a flowthrough entity, the income your receive is only taxed at the capitol gains rate. This income will flow through to your personal return, but still afford you with the barrier of the entity for asset protection purposes.

Basically there is not a perfect entity for everything that you do, but there are advantages and disadvantages to each one. You must sift through those and figure out which one is best for your situation.

Aaron85 · #5 02-04-2008, 06:02 PM

Good info Steve and thanks for the chart FLIPITBIG

Stevebuyshouses · #6 02-04-2008, 08:37 PM

Let me warn you now the key to this business is access to capitol. The guy with the money will win every time. The other key is the corporate credit side, if I had figured this out earlier in my career, I may be retired already.

ProfessionalHomeBuyers · #7 02-09-2008, 09:27 PM

Finally a forum that gives useful information

Thanks

JaredfromIndiana · #8 02-09-2008, 09:29 PM

Well thanks PHB!! That's what we strive to do! Steve's a smart guy that has been doing this for some years now, a great asset to the site. How about heading to the new members forum and telling us a little about yourself?

heidifromindiana · #9 02-16-2008, 09:54 AM

One of my investors just has a huge line of credit with the bank...this way every offer we make is cash and they avoid closing costs...

Stevebuyshouses · #10 02-16-2008, 10:24 AM

That is the only way to go!!

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