What Business Structure Is Best for Building Business Credit?

Another question from a reader:

From my understanding of what I read on your website, if you want to build business credit, you need to form a corporation or LLC. And that business credit cards help establish your corporate credit. I am considering starting an LLC instead of a corporation. Therefore, I am wondering if your program is more geared towards corporations, or does it equally apply to LLCs as well? When you say establishing corporate credit, do you also include LLCs in regards to this statement?

Lastly, does your program go into any detail about when it might be best for a particular type of business or situation to form a corporation (c or s corps) versus an LLC? For instance, if one wants to do an online business only, or if one wanted to sell products wholesale to other retailers, ect.

Answer:

You can build business credit with any type of corporate structure, though it can be easier with an S or C Corporation. But business credit should not drive your choice of entities. We do discuss the different types of structures in our program, and our program also includes an audio interview with Garrett Sutton on the pros and cons of different entities. However, this is an important choice for your business.

To choose the right entity, I recommend you should talk with both a firm that specializes in setting up corporate structures, as well as your tax advisor.

Watch our for "one size fits all" solutions. There are some advisors, for example, who say "Everyone can use an LLC" but the wrong structure can be costly in the long run. The same thing is true of the companies that will help you incorporate for a very cheap fee. If you aren't in compliance, and don't stay in compliance, the benefits of having a corporate structure are lost.

I'd recommend you take advantage of the free 15-minute consultation offered by Corporate Direct to discuss which structure is right for the type of business you are planning on starting. Don't worry, you won't get a high pressure sales pitch.

If you do decide to join the Business Credit Success program, you'll enjoy a discount on their services.