- July 7, 2015
- Akshay Mishra
Involving third parties in relationship matters doesn’t solve your problem, it compounds the issue. If you discuss your private affairs in public, it is going to backfire. Managing relationships by committee condemns them to a premature death. The best approach is to allow time, patience and the human conscience a moment to work. Besides, only you and the person that’s involved posses the ability to actually solve your problem. Once you put people in your business, you never get them out. It’s human nature for people to hold on to negative preconceptions about people. This is especially true as it pertains to your friends and family when you immerse them in your relationship.
It’s better to keep your business to yourself, others just want to do you pain.
Be wise and hold your mouth, the worst that will come out of it is staying the same. – morayo
There is an old saying, “A dog that brings a bone carries one.” In other words, people that have an eager ear to hear your business cant wait to tell it. Using your as the example, don’t you have at least one person you share information with? Other people are just like you! The juicier the gossip, the harder it is for someone to hold it in. There is a ninety percent chance that anything you say will be repeated to someone. Not only are you needlessly exposing your relationship to unnecessary scandal, you’re betraying your mate. Long after the two of you get past the problem, friends, relatives and those in your social circle will still be whispering about you and your significant others past issues. i.e. Don’t get pissed off at your relations when you put them in your business to begin with.
So, you get it: Keep your business and personal credit separate. But how do you get started?
1. Establish your business as a separate legal entity.
This could be as a sole proprietor, LLC or S-Corp. Sit down with your tax advisor or financial planner to determine which legal entity fits your business and financial situation. Sites like LegalZoom and Rocket Lawyer can take care of the legwork. You just complete an online questionnaire and pay a small fee. The websites fill out the documents and file them with your state. You can receive your official formation documents in about seven to 10 days.
2. Set up a business checking account.
This keeps your business financials more organized and allows you to get a clear picture of where your money is going. It usually takes just 30 minutes to set up an account at your local bank.
Use the business account for all business-related expenses. When paying yourself, deposit the money into your personal checking account. Your business checking account also allows your business to use employee payments as tax deductions from income, while letting you show personal income for the purpose of loans, credit and taxes. Business lenders will want to see your bank statements to get a true picture of how you’re performing.
3. Build a business credit history.
Start by opening a business credit card and always paying on time. The business credit bureaus will add this positive payment history to the credit file dedicated just to your company. Unlike personal cards, you may be able to deduct interest from business credit cards. When applying for a business card, just be sure to verify that the card provider reports to business credit bureaus and not to personal ones.
One of the biggest mistakes new businesses owners make is relying on personal credit cards to fund operations. Not only do you take on liability, you can damage your personal credit. If you have a personal score of 800 and max out your cards, your score will drop below 700. A 100-point drop will definitely cause your odds of getting credit to tank. It’s that severe.
Along with getting a business credit card, you should also open credit lines with your vendors and suppliers. This is known as trade credit. It gives you extra time (net 15, 30, or 60 days) to pay for your supplies and services. Depending on what type of industry you’re in, you can open accounts with businesses like Office Depot, Staples, UPS, Home Depot, etc. These companies are usually willing to establish a small credit line for your business without reporting or checking on your personal credit information.
As you establish a consistent history of on-time or early payments with these suppliers, your business credit scores will improve. This will allow you to access even more credit with even better payment terms. It’s a snowball effect.
4. Monitor your business credit regularly.
After establishing healthy business credit, you’ll want to stay on top of it. According to the U.S. Small Business Administration, the credit score of 33 percent of businesses may decline over just a three-month period. That’s why your lenders and creditors reassess your company’s creditworthiness on an ongoing basis. If your credit deteriorates, terms can be adjusted or stopped altogether. Without notice, you could be forced to pay cash on delivery for your supplies in place of your normal 30 days payment cycle. Regular monitoring helps avoid these nasty surprises.