Business Credit And Corporations

Incorporating is the first legal step you have to take in order to establish credit for your business. It does not matter if you are a single individual, a small enterprise, or an established business; everyone knows that incorporating offers you and your business many advantages. You need to separate personal and business dealings and assets to protect yourself personally in the event you get sued. Hopefully you realize that the benefit of obtaining more credit (overlooked by most) is also a major reason for forming a corporation. Or even better, form several corporations and use the combined leverage for even greater purchasing power.

Note: A corporation is the equivalent of a new person separate from the one who created it.

A Corporation is a stand-alone legal entity. It is governed by state law of the state where it is registered. It operates through bylaws and resolutions adopted by its shareholders. The corporate entity legally separates the owner from any on-goings or ownership of the business. This new legal entity can on its own operate as a business, own property, sign contracts, have employees, pay taxes and establish credit.

In addition to building business credit, there are many additional benefits of incorporating. By starting your own corporation(s) you will legally and ethically protect your business and family from losing everything in a frivolous lawsuit or through unnecessary tax burdens. Properly structured, the business will pay a small percent of the tax bill that would have been generated if the owner had earned the same money without a corporation. Note that the corporation needs only to have one person. The same individual can function as all the officers and be the employees as well. Many entrepreneurs have a multiple corporate entity strategy where several corporations are used in conjunction with each other to maximize credit, expenses, liability protection and tax savings.