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If I have a personal credit card that is only used for business expenses, is there any disadvantage? The company is a sole prop.

If the company becomes an LLC, will that make any difference?

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Early on, one might not be able to get credit for their business. For convenience, and the card perks, it makes sense to use the personal card. But for sake of a clean paper trail, I'd choose 1 card and use it exclusively, 100% for the business. Not one card here, one card there.

  • Thanks. This is the same as I'm thinking but wasn't sure if I was missing something since it seemed like a no-brainer. – 4thSpace Jun 26 '16 at 18:53
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    As long as you have good personal credit, you can get a credit card for your business. For small companies, you always need a personal guaranty for a business card. – gaefan Jun 27 '16 at 12:24
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Do you have a separate bank account for your business? That is generally highly recommended.

I have a credit card for my single-member LLC. I prefer it this way because it makes the separation of personal and business expenses very clear.

Using a personal credit card, but using it for only business expenses seems to be a reasonable practice. You may be able to do one better though...

For your sole proprietorship, you can file a DBA which establishes the business name. The details of this depend on your state. With a DBA, I believe you can open a bank account in the name of your business and you may also be able to open a credit card account in the name of the business. I'm not sure what practical difference it makes, but it does make the personal/business distinction clearer. Though, at that point, you might as well just do the LLC...

  • When you go LLC, can you still use the personal (dedicated) credit card for the LLC or does it requires a card in the business name only? – 4thSpace Jun 27 '16 at 1:27
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    There is no law against using a personal credit card for your LLC, but your accountant will hate you for it, and you have to worry about piercing the corporate veil. It is so easy to get a card for an LLC that you should do it. – gaefan Jun 27 '16 at 12:27
  • You should add your comment about piercing the corporate veil to your answer, as it specifically applies to the 2nd question. – TTT Jun 27 '16 at 16:05
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If you are just starting out, I would say there is no disadvantage to using a personal card for business expenses. In fact, the advantage of doing so is that the consumer protections are better on personal cards than on business cards.

One possible advantage to business credit cards, is that many (but not all) will not show up on your personal credit report unless you default. This might help with average age of accounts if you have a thin credit file, but otherwise it won't make much difference. Issuers also expect higher charge volumes on business cards, so as your business grows might question a lot of heavy charges on a personal card. Whether this would ever happen is speculation, but it's worth being aware of it.

  • LLC is you so credit report still points back to you. In that case, I don't see how the biz card is an advantage. – 4thSpace Jun 26 '16 at 18:52
  • This is true only if you're personally guaranteeing the debt of the LLC. The LLC itself can have liabilities/debts that are not personal to you. To achieve this, you sign for credit as an officer of the LLC, not as you the individual. If you guarantee it yourself then you're correct, the business structure wouldn't matter. Still, the point as far as this post goes is that it's not a good idea to mingle your debts/money with that of your business entity. Keep them separate. – Daniel Anderson Jun 29 '16 at 2:23
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You should be careful about mingling your personal money and that of the business, even if it is a sole prop right now. It is a good habit to keep separate business and personal bank/credit accounts just so that when you change to an LLC, it is simpler for you to separate what belongs to the company and what is yours personally. What you're doing makes it more difficult (although only marginally so) to itemize business deductions that were paid with an ostensibly personal credit account. The better habit to get into now is keeping that distinct separation between personal and business.

That being said, there's nothing illegal in what you're doing, but it would make an accountant cringe, that's for sure. (chuckle)

Hope this helps.

Good luck!

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