Obtaining a Corporate Credit Card Without Establishing a Business Entity First
For those starting a new business or pursuing a side hustle, obtaining a business credit card can be a crucial step towards financial management and building business credit. Here's a guide to help you understand the key qualifications and considerations when applying for a business credit card.
Qualifications and Considerations
Business Structure
You don't necessarily need an LLC, corporation, or other formal entity to apply for a business credit card. Many issuers accept sole proprietorships, which can be as simple as your own name with a "doing business as" (DBA) name if you have one.
Identification
When applying, you'll usually need to provide either your Social Security Number (SSN) or an Individual Tax ID Number (ITIN). An Employer Identification Number (EIN) is optional but can be used if your business is registered or you have obtained one from the IRS.
Income
While you don't need a formal business income, you must show some form of income from your business activity or side hustle. Card issuers may accept household income from your personal job, a spouse, or other sources to demonstrate your ability to repay the credit. Examples include freelance work, gig economy earnings, reselling, or any side income reported on your taxes (Schedule C).
Creditworthiness
Your personal credit score plays a significant role since your personal guarantee backs the business card. A good or excellent personal credit score improves your chances of approval.
Supporting Information
You may be asked for your business name (which can be your own name if no DBA), business start date, estimated revenue (even if zero or very small), and business contact info.
Accessibility for New Entrepreneurs and Side Hustlers
With these guidelines in mind, applying for a business credit card is accessible for new entrepreneurs and side hustlers starting with minimal formal setup. Issuers usually require your SSN for the personal guarantee and evaluate household income rather than strictly business financials in these cases.
Getting an EIN is optional but can help if you have registered your business formally. Using a business credit card for personal expenses is possible, but it may lead to extra time spent sorting through business card statements at tax time to identify deductible business expenses.
When selecting a business structure, choose "sole proprietor" if there are no employees and no legal business structure has been established. If no EIN is available, a Social Security number can be used instead. Approval is typically based on personal credit and financial history. A business credit card can be applied for without a formal business name.
Approval for a business credit card can be granted without any business income. These factors typically matter less than personal details when it comes to approval, provided they're honest.
Recommended Business Credit Cards
Here are three business credit cards that don't have an annual fee:
- Ink Business Unlimited® Credit Card: Recommended credit score: good to excellent. Regular APR: 13.99% - 19.99% Variable APR.
- Ink Business Cash® Credit Card: Recommended credit score: good to excellent. Regular APR: 13.99% - 19.99% Variable APR.
- The Blue Business® Plus Credit Card from American Express: Recommended credit score: good to excellent. Regular APR: 13.99% - 23.99% Variable APR.
Mixing business and personal expenses could potentially jeopardize limited liability protections for businesses with such protections, like LLCs. Therefore, it's essential to keep your personal and business expenses separate whenever possible.
- A good personal credit score is vital when applying for a business credit card as your personal guarantee backs the card.
- For those starting a new business or pursuing a side hustle, tools like the Ink Business Unlimited® Credit Card, Ink Business Cash® Credit Card, and The Blue Business® Plus Credit Card from American Express can be helpful in managing finances and building business credit.
- While applying for a business credit card, card issuers may accept household income as a demonstration of one's ability to repay the credit, even for side hustles or freelance work.
- Those starting a business or a side hustle can apply for a business credit card without an LLC, corporation, or other formal entity, as many issuers accept sole proprietorships, which can be as simple as one's own name with a "doing business as" (DBA) name if available.
- Mixing personal and business expenses could potentially affect the limited liability protections for businesses with such protections like LLCs, so it's essential to keep them separate whenever possible.
