9 Steps a Business Owner Should Take Prior to Establishing Business Credit
Prior to establishing business credit, you need to make sure your business is a separate legal entity that appears as legitimate as possible. To accomplish this, you must take several very important preliminary steps. Please note that these steps do not need to be done in this particular order and may differ depending on your state.
1) Register Business
You must first decide on a corporate structure and file the appropriate paperwork with your state. If you are uncertain which structure will work best, It may be best to speak with an attorney during this stage. There are also companies such as Incfile.com that will register your company for you at no additional charge. If you decide to go with Incfile, your only responsibility will be the state fee unless you decide to go with an add-on service. Please note that this information is based on Incfile’s current offer, and it is subject to change.
2) Appoint a Registered Agent
A registered agent is a person or business entity that has been appointed to accept service of processes notices, compliance-related documents, and official mail on behalf of an LLC, corporation, or non-profit. In some states, it is required that your business must have a registered agent on file. You can appoint yourself to be the registered agent for your company or you can appoint another individual or entity to be the registered agent for your company. Make sure you do your research and appoint a registered agent that will work best for your business. If you decide to appoint yourself, and you do not have a physical location, your home address may become a public record on the Secretary of State’s website. In addition, you will now be responsible for accepting service of process and will need to be available during business hours. Failure to appoint a registered agent can cause you significant legal and financial problems.
3) EIN
An EIN is your Employment Identification Number. An EIN is essentially the equivalent of a social security number but for your business. It is a unique nine-digit number that is assigned by the IRS to identify a business entity. There are many vendors that will charge you a fee for an EIN. I’ve heard many horror stories of individuals even paying hundreds of dollars to obtain an EIN. Your EIN can be obtained for free. In addition to being free, it normally only takes approximately 10 minutes to complete the process. You can get an EIN for free directly from the www.irs.gov website. Once you answer all of the questions, you will typically be able to access your EIN immediately.
4) Business Address
If you are doing business out of your home and do not want that information to be made public, a virtual address may be a good option for you. I personally have used www.anytimemailbox.com and do not have any complaints. My virtual mailbox is $9.99 per month, and I have the option of picking mail up in person or having it scanned. Prior to obtaining a virtual mailbox, I recommend you do your due diligence to find a company that is best for you. The first time I registered a company, I did not know what I was doing and ended up paying another company four times the amount that I am paying Anytime mailbox. I also did not have the option of picking up any of my mail in person due to the address not being local.When shopping around for a virtual mailbox, you should definitely also be paying close attention to its location.
5) Business Phone Number
There are many different options for a business phone. I personally purchased a separate cell phone and went the lowest monthly payment option, but I’ve also used a virtual business phone number in the past and loved the benefits. There are free options for a virtual business phone number and are also companies that charge a monthly/annual fee.
There are many companies that you can choose from such as:
Google Voice
Ring Central
Nextiva
Dialpad
Freedom POP
eVoice
Callcentric
Phonebooth
Grasshopper
Uline.com
Reliable.com
Nebs.com
Prior to deciding which option is for you, you need to research each company and what they have to offer in order to determine your business's needs. Make sure you check out the various add-on features such as live receptionist, auto-attendant, multiple extensions or phone numbers, conference calls, voicemail to email, texting, and so forth.
6) Business Website
Your business website should be professional. Your business website is going to help you to attract customers and establish credibility. Depending on the type of business you own, it can also be used for e-commerce. There are many companies that will allow you to design your website for free. Although many will allow you to design it for free, you will still typically have to pay for your domain and/or hosting.
Here are a few of my top picks:
Google Business
WIX
GoDaddy
WordPress
They also have apps such as Fiverr that can assist you with locating a developer to design your website for you. Whether you decide to design your website yourself or delegate the tasks to someone else, the goal is for it to be professional and user-friendly.
7) Professional business Email
Once you have a website, you can obtain a professional business email via your website hosting plan. Your email address should be [email protected].
8) Business Bank Account
There are many different banking options, and you must decide which bank is best for your business. Most business bank accounts require your business to be incorporated first. When choosing a bank account, take a close look at things such as the fees and how many transactions are allowed each period.
9) D-U-N-S Number
You can create a D-U-N-S number for free at Dun & Bradstreet (www.dnb.com.) This number is how potential lenders identify your business and can be used when applying for credit. Dun and Bradstreet are also responsible for generating your PAYDEX score. Your PAYDEX score measures your past payment performance and gives your business a numerical score ranging from 1–100. A good PAYDEX score is normally above 80. Your PAYDEX score is typically used by lenders, vendors, and suppliers. Just like with a good FICO score, a good PAYDEX score can give your business access to more funding with more generous terms. Your business will need at least two tradelines to generate a PAYDEX score.
BONUS
Get your business's social media pages set up! The world is changing and the first thing an investor is likely to do is to type your business name into a google search bar. Make sure you post quality content and keep your social media pages professional. In addition, registering your business with Google or the BBB can also help with credibility.
This is just a basic introduction to business credit. Please follow for more tips. If you found this article informative and would like to buy me a coffee, please visit the link below. I appreciate everyone's continued support :)