Common Financial Mistakes Part 2

The longer you delay establishing business credit,
the longer you delay taking advantage of business loans.

— Wells Fargo Bank

Putting personal assets at risk

Each time you provide a personal guarantee for any type of credit extended to your business, you jeopardize your personal assets, such as savings and investment accounts, your car and even your home. If your business can’t pay off its debt, the bank will come looking for you to make good on the loan.

A business entity established as a sole proprietorship is most susceptible to this risk. Although you can build business credit as a sole proprietor, you will be completely liable for all personal and corporate debt.  Your credit history will be based solely on activity associated with your social security number because you will not have a corporate tax ID number.  As a sole proprietor, you also have no legal means for separating corporate and personal credit.

The System for Protecting Your Personal Assets

The best way to protect your personal assets is to incorporate your business. You’ll shield yourself from personal liability for the company’s debts and typically will also reduce your tax burden.

If you need help incorporating or building good business credit, click here for a complimentary business credit consultation and to obtain our free e-Book, “Unlimited Business Financing – Without a Personal Guarantee” – a step-by-step process for building a business credit asset.

Flickr photo credit: wwworks