I have been scanning AOC, credit.net, and creditboards.com for some time to try to figure out the best way to handle our situation. There is much advice available at these sources, and I'm VERY grateful to all who contributed their expertise! I found http://consumers.creditnet.com/straighttalk/board/showthread.php?s=&threadid=16341 and http://www.creditboards.com/phpBB2/viewtopic.php?t=7571 especially helpful. At the same time, the advice I've found that would apply to our situation is often inconsistent, and many of the claims aren't justified, and seem unsupported by anything other than anecdotal evidence or conjecture. So, I'm trying to make sure I have good information before concretizing some of these decisions... While I would of course welcome longer answers tailored to the specifics below, I certainly don't expect them. For example, links to threads or articles that you've found especially helpful would be extremely welcome, as would suggestions on how to revise or break down this lengthy post, perhaps posing portions of it in different places. My situation first. I have a sole prop real estate business (3 years) and wife has a small law firm (2 years, also sole prop for the moment.) Both are currently operated from our two offices at home, but have a UPS store mail box so as to maintain the privacy of our personal residence. The business license and business credit cards (Amex, advanta, a couple others) all have this as our "address." We have business phone lines and soon will have business 411 (thanks accessline.com) for both as well. The RE business has a DUNS number, neither has an EIN number as of yet. We will be converting the law business to an S-corp before year's end, and I'm considering incorporating the RE business. I'm tempted ot make that a C-corp and have it help manage the properties and provide us principals with health insurance, but that decision's still a ways away... Anyway, our goals are to accumulate as much no or low-fee, competitively priced (prime or thereabouts) revolving credit as possible for growing the businesses and picking up new RE assets. Fixed loans would of course be interesting too if the price were right, especially now that the deficit looks to keep growing (and hence rates will likely be rising). Ideally this credit wouldn't report to our personal credit so as to keep utlitzation low and scores high (I'm not as worried about liability on this.) Here are our specific questions. -Business address: should we use our home address, or the UPS address we're currently using in our 411 listing and with DUNS? The conventional wisdom seems to be that home addresses are bad, but that UPS store addresses are worse...although I've read conflicting opinions on this. What are the pitfals of each choice? -Corporate entity formation: should our desire for credit have much effect on what entities we form? I get the liability limitations, and know that we don't want to stay SPs for long. But while there seems a general sense that usually, corp entities are more desirable to credit grantors, I've seen little that speaks to this convincingly. -Bank accounts. This article at http://www.imrecom.net/10steps.htm suggests that you want at least $1,000 in a business bank account for 3 months, and other requirements, and even implies that they report somehow. Well, I know they don't report to credit, so I'm not sure how much stock to put in this opinion. But we have one bank account for the law business, which we deliberately keep a low balance in. And the RE business's proceeds are go into paying down and paying off equity lines of credit, and since the proceeds of those go on our personal tax returns, we haven't kept a sperate account for it--we've just used the accounts tied to our various lines of credit. Is it important that we fix this? them are you should ideally show a history with that account. -Business name. Both our business names are about 35 characters long, and I'm discovering this is a PITA. No business credit cards or accounts can fit the whole names on their cards or statements, for example. I don't know how big of a deal this is, but we're getting different accounts that have different abbreviations of our name in them, which makes me a bit uneasy. But changing names now, if I understand it correctly, means that D&B might not reflect the true age of our businesses, which also makes me uneasy. Suggestions? -Offering PGs. Our personal credit is quite good, and I am not overly concerned about giving PGs to get our credit going. Obviously, no PG is better than having one, but some have implied that giving a PG means that you'll effectively be doing less to build you business credit profile. Is that really the case? It seems to me that if I can get $50K LOC by giving a PG and a $15K with no PG, and both report to D&B, for example, wouldn't I be better off having the bigger line show? TIA for any and all knowledgeable help, suggestions, and comments!
Have you talked to your CPA? You may also want to establish relationships with 1 or 2 local bankers, to grow for when you need more capital in the future. CC accounts will establish a credit history, but not an ongoing relationship with a banker. What will your capital needs be 1 or 2 years out, and will this likely exceed what you can do via home equity or CCs? I would think that if your businesses are under your SSNs, the credit records might end up on your personal credit reports, but I don't know this for a fact. As long as your payment record is good, I would not think this is a problem unless the debt level due to business borrowing starts to make you look like a poor consumer risk, but again you might want to go over this with your banker. Personal guarantee or not, as long as you are a SP, in the end you are on the hook.
Your CPA may want you to have separate business accounts, since it simplifies tracking business expenses, particularly if you are audited. You may need to if you receive payments made out to your business name.
