If you’re thinking about applying for a business credit card, it’s essential to understand the steps involved based on your business structure. Whether you’re a sole proprietor, an LLC owner, or running another type of business, this guide will walk you through the process of getting started.
Sole Proprietor
A sole proprietorship is the simplest form of business ownership, and many freelancers, consultants, and side hustlers fall into this category. Here’s how to get started with a business credit card as a sole proprietor:
Step 1: Assess Your Business Activity
- Identify Your Business: Determine whether your side hustle, freelancing, or consulting work qualifies as a business. If you earn income from these activities, you likely qualify.
- Estimate Income: Be prepared to estimate your business income. Even if your business is new, you can use projected earnings.
Step 2: Check Your Personal Credit
- Credit Score: Since sole proprietorships often rely on the owner’s personal credit, check your credit score. Aim for a score of 670 or higher for the best chances of approval.
Step 3: Gather Information
- Personal Information: You’ll need your Social Security Number (SSN), business name (if using a DBA), and business income details.
- Business Name: If operating under a business name, ensure it’s registered, though this isn’t required for all sole proprietors.
Step 4: Apply for a Business Credit Card
- Choose the Right Card: Look for cards that offer rewards tailored to your spending habits, such as those with higher cashback on office supplies or dining.
- Complete the Application: Use your SSN as your tax ID and provide your business name (if applicable), estimated income, and other requested details.
Limited Liability Company (LLC)
An LLC is a popular business structure that offers personal liability protection while maintaining flexibility in management and taxation. Here’s how to get started with a business credit card as an LLC:
Step 1: Register Your LLC
- Legal Formation: Ensure your LLC is legally formed in your state. You’ll need to file Articles of Organization and pay the required fees.
- Obtain an EIN: Apply for an Employer Identification Number (EIN) from the IRS, which will be used for tax purposes and when applying for credit.
Step 2: Establish Business Credit
- Separate Business Finances: Open a business bank account to separate your business finances from personal ones. This is crucial for establishing business credit.
- Check Your Personal Credit: While an EIN is used, your personal credit score still plays a role in approval, especially for newer LLCs.
Step 3: Gather Information
- Business Details: Have your LLC’s EIN, legal business name, and business income ready. You may also need to provide your business’s address and contact information.
Step 4: Apply for a Business Credit Card
- Choose the Right Card: Look for cards that offer rewards and benefits tailored to your business needs, such as travel rewards or cashback on office supplies.
- Complete the Application: Use your EIN and provide all required business details. Be honest about your income projections if your LLC is new.
Partnership
A partnership involves two or more people who share ownership of a business. Here’s how to get started with a business credit card as a partnership:
Step 1: Register the Partnership
- Legal Formation: Ensure your partnership is legally formed and registered with your state. You may need to file a Partnership Agreement.
- Obtain an EIN: Apply for an EIN from the IRS, which will be used for tax purposes and credit applications.
Step 2: Separate Business Finances
- Business Bank Account: Open a business bank account under the partnership’s name to keep finances separate from personal accounts. This also helps establish business credit.
Step 3: Gather Information
- Partner Details: You may need to provide information on all partners, including their SSNs, income, and credit scores.
- Business Information: Have your partnership’s EIN, legal name, and business income details ready.
Step 4: Apply for a Business Credit Card
- Choose the Right Card: Consider the spending habits and needs of all partners when choosing a card, as rewards should benefit the business as a whole.
- Complete the Application: Use the partnership’s EIN and provide the necessary information. Be sure to include details about all partners if required by the issuer.
Corporation
A corporation is a more complex business structure that offers strong liability protection but involves more regulatory requirements. Here’s how to get started with a business credit card as a corporation:
Step 1: Register the Corporation
- Legal Formation: Ensure your corporation is legally registered in your state and that you’ve filed Articles of Incorporation.
- Obtain an EIN: Apply for an EIN from the IRS for tax and credit purposes.
Step 2: Establish Business Credit
- Separate Finances: Open a business bank account under the corporation’s name to keep finances separate. This helps build business credit independently of the owners’ personal credit.
- Dun & Bradstreet Number: Consider obtaining a D-U-N-S Number from Dun & Bradstreet to further establish your business credit profile.
Step 3: Gather Information
- Corporate Details: Have your corporation’s EIN, legal business name, and financial details ready. You may also need to provide information about the corporation’s directors or officers.
Step 4: Apply for a Business Credit Card
- Choose the Right Card: Look for cards that offer benefits like travel rewards, large credit limits, and employee cards with spending controls.
- Complete the Application: Use the corporation’s EIN and provide all required business details. Ensure that the application reflects the corporation’s financial standing.
Ready to Apply?
Getting started with a business credit card depends on your business structure, but the process is generally straightforward. Whether you’re a sole proprietor, run an LLC, or operate a corporation, having a business credit card can help you manage expenses, earn rewards, and build credit. By following the steps outlined in this guide, you can confidently apply for the card that best suits your business needs.
