What is the biggest problem facing business owners? It's
simple. Not enough money. Money is the lifeblood of business.
The goal of creating a business is to make money, but before you
actually make money, you need to spend money.
You need to spend money to get started. Depending on your
business, your start-up costs can range from minimal to enormous.
An internet business doesn't take much to get started. A brick
and mortar business requires substantial capital investment.
Buying a franchise can cost tens of thousands of dollars.
Whatever your business, you need money to get started. Most
businesses start out undercapitalized and never catch up.
You also need money to run the business. "The cost of doing
business" is more than a phrase. It is a harsh reality. You
have to pay for facilities, personnel, sales, marketing,
advertising, supplies, licenses, taxes, fees, and myriad of other
expenses. Most businesses start out anemic and end up bleeding
to death. There is simply not enough money to create a
profitable business.
So what do you do? You can apply for bank loans and venture
capital. You can borrow money from friends and relatives. You
can use your own money. Each of these methods has advantages and
disadvantages.
One of the easiest and most effective ways to get money is to use
cash advances on credit cards. Yes, the interest rates and fees
are high. But it all becomes a matter of economics. If a cash
advance keeps you in business, it buys you time to create a
profitable business.
How do you get lines of credit on credit cards? One of the most
important business decisions you can make is to set up a business
structure that will allow you to build business credit.
One option is to do business as a sole proprietor. This is a
truly risky proposition, since you are mixing your personal and
business finances. Under a DBA business structure, you cannot
build corporate credit apart from your own personal credit. A
failure in the business means a failure in your personal
financial life.
A second option is to set up your business as an LLC, with income
and expenses offsetting your personal taxes. One great
disadvantage of the LLC structure is that you cannot build
corporate credit to an LLC because the LLC is simply an extension
of your own personal credit.
A third option is to do business under a C corporation. The
huge benefit to having a C corporation is that you can use the
federal tax ID of your C corporation to build corporate credit
apart from your personal credit.
One of the reasons people are scared off by C corporations is
that they think they will be liable to double taxation. In
reality, a C corporation pays taxes only when it is profitable,
and even the IRS acknowledges that double taxation rarely occurs.
With lines of credit on corporate credit cards, which are
completely separate from your own personal credit, you have
immediate access to money when you need it. The borrowed money
buys you time to create a profitable business.
Another great advantage of using lines of credit to finance your
business is that borrowed money is not taxable. You can build
your business, with borrowed money, and write off the interest
and fees as expenses. This is yet another tax benefit available
to corporations. Although you cannot deduct interest on
consumer credit cards on the personal tax return, you can deduct
the cost of business credit card interest and fees on the
corporate tax return. With corporate credit, borrowing money
becomes a deductible cost of doing business.
Will the borrowed money cost you money? Sure, cash advances on
credit cards cost money. But the real question is not how much
does the money cost, but how much does the borrowed money allow
you to make?
|
