As a mortgage loan officer I encounter so many professionals who do not qualify for a home or business credit because they have not legitimized their side hustle!
How do you legitimize your business? How do you build credit if you are starting a new self employed business?
Here are my tips on setting you business up for success!
1. Choose a Name
You should always create a business name for your services or product separate from your own name. This will be helpful establishing financial accounts. Even if you are branding using your own name, a separate business name for accounts etc is important. ( Once you have decided on a name - check for email, social media, and secretary of state to be sure the name is available)
2. Purchase a business license.
Once you have decided on a name and it is available, go ahead and purchase a business license!!! Why is this important? If you chose to ever use business income for credit or a home loan etc.. WHEN you obtain a license is when the bank would consider your business official "start". For example.. let's say you have been selling a product for 2 years. After 2 years you decide to take out a business license. To the bank.. you are not established yet. There is even more to this, depending on how you file taxes!
3. Apply for an EIN Number.
An EIN number is simple and free! The IRS will issue you an EIN number that you will use to open a business bank account. VERY few banks will allow you to open a business account with out a separate EIN number. This number also will be used for your tax returns when documenting your income.
4. Open your business bank account
You WANT to have your business income separate from your personal income. Commingling funds is a dangerous practice and you should avoid at all costs.
For a more detailed and in depth checklist sign up to receive "10 Steps to a Solid Business Set Up"