Send Lynette a Confidential E-Mail
Two years ago, I wrote a four-part series, You Can Build Awesome Business Credit, which was read by many owners of small businesses. While I updated the series last year, major changes in small business credit require an in-depth information overhaul.
After decades studying economic history, Charlotte Phelps, a behavioral economist from Temple University says, “2010 is the year to start your business. Entrepreneurs are at the vanguard of social economic change. They are the leaders of the economy.”
You need to construct a firm foundation for your new company before you establish credit. Basic business decisions will affect your ability to garner credit later.
Choose Your Company Name Carefully
It’s never been more important to select a company name that’s easy to read, spell, understand, and is immediately recognized by search engine optimization (SEO) software. Think about how the name will be used. Your website, business cards, advertising, packaging, news releases, signs, Twitter account, etc. Let your imagination soar; visualize uses of your business name.
After you decide on a company name and determine that it’s available in your state, be certain it’s also available as a web address. Remember: You want customers or clients to find you easily. Purchase the URL. Reserve the name with your state.
Use the same business name on every document you fill out. Don’t alter it in any way, ever. Either it’s Inc or Inc. or Incorporated. It’s LLC or Limited Liability Company. Make these decisions before you register your enterprise. Why? Because everything is stored in computer databases. Slight variations on names can mean your business is not recognized in Web searches.
You want to be found. You want to create your brand. You want an accessible credit history. In addition, success that causes competition may mean other companies will select names similar to yours. If you’ve been fanatical about using the same precise version of your business name from the beginning, there will be far less confusion later.
Where Will You Locate Your Business?
If this is a home-based business, will you be staying at your current address or will you move? Do you want your home address to be known? Will tax advantages motivate relocation to another state? If you know you are likely to move, you will want to establish a stable business address history. Consider using a mailbox rental location as your business address. In addition to providing an ongoing location, most of those businesses will accept deliveries. This will mean you can have UPS and FedEx deliveries made without incurring residential delivery charges. Whatever decision you make, use the same business address on every document and application. Think long-term before providing your address to any entity.
What Company Structure Is Best?
There are pros and cons to each enterprise structure. See my column, Business Legal Structures: The Credit Implications. To build business credit that is completely separate from your personal credit, you must form a corporation or a limited liability company. Laws differ from state to state. Seek professional advice in your state before making this important legal and financial decision. If you’re bootstrapping with limited funds, contact your local SCORE office. Their successful business advisors provide free consultations to small businesses. Or, colleges often offer entrepreneurial services for their communities. You may need the advice of an attorney or CPA, who specializes in small businesses similar to yours.
With forms and instructions available on Secretary of State’s websites, it is now easy to complete and submit paperwork in most states. If you need assistance, it should be readily available through community resources.
Secure Your Employer Identity Number (EIN)
Your EIN is your business’s social security number. You must have an EIN to secure credit in your business’s name without a personal guarantee. The IRS makes it easy to apply online. You’ll receive your EIN via email. You may also mail, phone, or fax your application.
Establish Your Business Phone Line
Many start-ups decide forgo a traditional business landline. You might consider Magic Jack, another VOIP service, or a dedicated cell phone number for your business. Your number needs to be accessible to your customers. Read my column, List Your Alternative Phone Line.
Select a Business Bank
Interview community and regional banks in your area to determine which institutions provide the best services for your needs. Details are included in my column, Four Tips to Select Your Business Bank.
Apply for Licenses and Permits
Different city and state regulations govern requirements for conducting business. You want to be certain you comply. As you build credit, you will be required to show your business license. The attorney or CPA you consult regarding your business structure should be able to provide you with the correct information for your business.
This business foundation needs to be established before you start building credit. In the next column I’ll walk you through the 2010 account opening process.