CORPORATIONS AND SHELF LLC'S
BUILD CORPORATE CREDIT
A. KEEP YOUR BUSINESS CREDIT SEPARATE FROM YOUR PERSONAL CREDIT.
There are two groups of businesses that build
1. Business credit that is only
under the business name. In building and using business credit,
only the business is responsible for the loans of the company.
Business credit, or corporate credit, using an corporation or LLC is
best for this objective. Personally, you're better off protecting
your personal assets from any possible business failure.
2. Business credit that is
associated with your business name and your personal name. In this group,
your business is responsible for paying back the loan and so are
you--personally. This means that you will be held
responsible for the loan obligations of the company. Although you
may enjoy some liability protection as a stockholder, there's no
liability protection as far as the outstanding loans are concerned.
Incorporating offers the benefit of
limited liability. The liabilities of the corporation, or LLC,
remain in the company. The stockholders are not responsible for
the liabilities of the company. Many lenders prefer that you sign,
as a guarantor, for the company's liabilities. In essence, you are
forfeiting the limited liability benefit of incorporating so you may
obtain the financing on the banker's terms. In doing this, you are
personally responsible (again) for the financing obligations of the
Also, consider ordering copies of your
personal credit reports from Experian, Trans Union and Equifax.
Check with the UCC to see if there are any outstanding liens or claims
B. WHEN POSSIBLE, OBTAIN A SHELF
The second decision in building
business credit (corporate credit), is whether to incorporate a new
company or obtain a shelf company.
|INCORPORATE NEW COMPANY
||OBTAIN A SHELF CORPORATION OR SHELF LLC
||Company with 2-3 years of age.
- If you were a lender, would
you prefer to lend money to a 2 year old company or a 2 week old
- If you leased equipment, would
you prefer to lease to a 2 year old company or a 2 week old
- If you were a customer, would
you prefer to buy from a 2 year old company or a 2 week old
|Wait for the articles of
incorporation to be filed with the state.
||Instant access to a company.
C. OBTAIN AN EMPLOYER IDENTIFICATION NUMBER (EIN)
The EIN is obtained from the IRS. It's the tax identification
number for a company. Contrary to what others may promote, you
cannot tell the age of the company by the EIN. There are many
promoters, using shelf corporations or shelf LLC's, to build corporate
credit. Many of them are NOT truthful. They are
claiming that by obtaining a shelf company with an existing EIN (aged
EIN), that you're better off in terms of obtaining and building business
credit (corporate credit). This is false. Since the EIN is
assigned by the IRS, and it's a random number, then there's no method to
determining the age of the company to build business credit.
In addition, a company without an EIN is more likely to be
free of unseen liabilities, loans, obligations and other issues since it
hasn't engaged in business. A company with an EIN is more likely
to have been involved in a business transaction that hasn't been
completed, or back taxes are owed. Who would sell a two or three
year old company unless it went out of business? A two or three
year old company with NO EIN is much safer than a company with an EIN.
Without an EIN, a company cannot obtain a bank account or apply for
credit. This means obtaining a company without an EIN is safer
than a company with an existing EIN.
There are times when the bank, where
you're opening the bank account, would like to see the EIN application.
If so, provide them a copy. Further, the EIN application should
use a business address as the address of the company on that
application. Questions on how to apply for an EIN may be found
D. OBTAIN A BUSINESS BANK ACCOUNT
Keep in mind that the business bank account may change.
Lenders, when extending credit, ask you to open an account with their
bank. For example, Bank of America will ask you to open a new bank
account with their bank, even if you already have an account with Wells
Fargo bank. Why? Banks like to keep the money flowing
in-house. Although you may set up an account with one bank, expect
a second account to be opened after you obtain financing. This is
normal. This first account is used to start the business, get it
going, buy supplies and build credit as necessary.
E. HOME BASED BUSINESS?
A home based business is less likely to obtain business credit.
This is unfair, biased and unfortunate. Although this is the case,
adjust your plan to take this into consideration. Banks are very
conservative. Anything that deviates from the "cookie-cutter"
profile they seek, is considered suspect. We're not saying it's
right. How do you deal with this if the business is home-based?
Seek out a business address to hang your address. At the moment,
there are many insurance agents and real estate agents who seek to
reduce their office expenses. If they have a business address, you
may be able to pay them a monthly fee to receive mail at that address.
In essence, you're sharing a desk in their office. If your
presence is minimal, and you're there to only pick up the mail, then
paying $60-100 per month may be worth it for them.
NOTE: 411 SERVICES AND YOUR
A business address should be used
with yellow pages, and yellow book. Registration with 411
should match the same information as the directories, internet
searches, Secretary of State and other sources of information.
NOTE: VIRTUAL OFFICE
ADDRESSES V. REGULAR OFFICE ADDRESS
A virtual office is a low cost
alternative that allows you access to phone, fax, mail, other office
services. Although these services are an excellent idea, they
are not advisable as an address for your business. You may use
a virtual office for faxes, meeting clients, and other activity.
The problem lies with the address. That address, as a virtual
office center, has the liability of having too many companies using
the same address. Since other companies used that address and
also applied for financing, then the address may become "flagged."
In other words, if too many companies applied for financing and
didn't pay the loans, then the address may be flagged as a virtual
office, shared office with too many companies, or an address where
fraud has occurred.
F. UNDERSTAND THE LIMITATIONS OF MANY BANK EMPLOYEES
Many bank employees don't have any real business experience--other
than through a bank. Often times, a bank representative will
obtain their primary training at that very bank through in-house
training programs. Unfortunately, many of them don't go to
business school. And many bank representatives, that lend money to
businesses, cannot tell you what is a corporation, how it is formed, and
what are resolutions. It's okay if you don't know these factoids
for now, but you would expect a representative of a reputable business
lender to know these fundamental issues. As a result, understand
their limitations and work with them. They are rule oriented.
And they need all issues to look normal, cookie-cutter, usual, boring
and without surprises. A long story doesn't fit into their model.
So, make sure that questions are answered clearly, concisely, and
truthfully, while meeting their requirements. If they don't follow
their internal rules, as nonsensical as they seem, just work with them
to complete what's necessary. Remember, you're there to obtain
financing while providing truthful information. You're not there
to re-organize the banking system or conduct a training session on your
G. STAY AWAY FROM CONTROVERSIAL BUSINESS NAMES.
Since banks have lost much money on real estate, due to speculators,
then don't incorporate with a names such as Real Estate, Holdings,
Investments, or Investors. Instead, use words such as Enterprises,
Associates, Services, Group, Management, Technology, Methods and other
like words in the business name. Again, we're referring to the
bias of individual persons at the bank. Biases are important in
lending and they exist. Your goal is to be aware of these biases
and to get by them the best way you may. They key is to
incorporate a name, or to obtain a shelf company, that is suitable to
build corporate credit and has a name that is not on the banks' bias
What about a name change? For some reason, the banks consider
name changes as a new company. This means that a two year old
company may be considered a new company upon changing the name. To
avoid this, consider a Doing-Business-As (DBA) or trade name on a state
or local level. This should be done before you take steps to build
the business credit profile and build corporate credit.
H. DOMAIN NAME REGISTRATION AND
CORRECT USE OF EMAIL.
If you have a domain, use it for email.
If you intend to obtain financing, then stay away from email addresses
such as gmail.com, hotmail.com and the like. Use your domain name
for your email. Make sure that the registration information for
your domain name matches the information reported to the Secretary of
State and the banks.
I. THE BASIC BUSINESS CREDIT
BUILDING CHECKLIST: ARE YOU READY?
- Your company is filed.
Better yet, you obtained a clean and aged shelf corporation or shelf
- EIN obtained with the IRS, using a
- Checking account for the business
- Your name, and your business
address is on the public record with the Secretary of State where
the company was formed and where you intend to do business.
- Internet Domain registered.
You set up your email account and it works. Your domain
registration address matches your business address.
- Your business address is clean and
it not a virtual office.
- You registered the business with
411 services and other directory listings.
BELOW ARE BASIC RULES TO DEVELOP YOUR
CORPORATE CREDIT PROFILE, AND TO AVOID MISTAKES:
CORPORATE CREDIT: WHAT TO AVOID...WHAT TO DO
Not paying bills on time.
bills on time.
Don't use personal credit to
finance business operations.
Obtain credit in the company name.
Don't place your house and other
assets at risk.
Don't post collateral from
personal assets for business operations. It makes them
vulnerable to loss.
risk is acceptable if you're reasonably sure that it's necessary
and there's a likelihood of success. Otherwise, it's a bad
Don't commingle business and
assets separate from business assets.
Then place business assets in
your business. Don't commingle personal and business
assets. Separate is good.
Don't commingle contact
business contact information separate from your personal assets.
This means a separate phone number, separate fax number and
address. Efax.com and a virtual office, or mail drop, may
help accomplish this objective.
Don't use family assets.
the family assets and obligations separate from the business.
Don't commingle credit histories
your credit file separate from your spouse, separate from others
(co-signer) and separate from your business.
Don't place your home address on the loan
Using your home address will
result in a red flag against the credit score of your business.
||You need a physical location for
your business but your home address is a "no-no."
Solution: Find a local realtor or insurance agent, or
other small business, looking to defray expenses. Instead
of signing up for an expensive office lease, arrange to buddy-up
with one of them and share their office. Explain that
you'll hardly be there except to pick up mail. You'll
probably squeak by at under $100 per month to obtain a nice
commercial address for your start up.
When asked how many employees you have, don't say
||Does your best
friend, spouse or sister help you out from time to time?
If so, consider having at least four employees in your business,
even if it is only part-time. Anyone who helps out is an
Don't think small.
||Lenders like to see
longevity, stability, revenue and progress.`
Don't discount experience.
experience. "My company is two years old but I've been in
the field for ten years."
Don't use your home phone on any
a business line on all applications for credit and
registrations. After you obtain a business address for the
company, obtain the telephone number for the business. Use
the business address as the billing address for the phone
number, internet, and everything else you possibly need for that
same business. Pay those bills on time and early.
Don't use your home address for
your internet domain registration.
addressed used for the internet domain registration should match
the same business address reported to the Secretary of State,
what's provided to the bank, and what's provided to others.
Don't use a privacy protector service for the internet domain
unless you have a compelling reason to do so.
Don't mix and match syntax for
your suite number. For example, don't mix and match #101,
Suite 101 and unit 101
Always use the same syntax for your suite. For example,
"Suite 101" should always be used if that is your suite number.
Or consistently use #101.
PREPARATION FOR BUILDING CORPORATE CREDIT
- Lenders require full
transparency. This means your name is listed on the public record.
- Don't use a nominee
officer/contract officer if you're applying for corporate credit.
- Lenders prefer companies
that are at least two years old.
- File the WY company in
your home state as a foreign corporation
- Obtain a commercial
address where you intend to do business
- Obtain the phone number,
using the commercial address as the billing address
- Register the phone
number with 411 information services
- Be honest on all
applications for credit
- You're ready!
Start building corporate credit. Call
307.237.2580 for a referral.
1. Choose the shelf company for
2. We send a custom order form
3. You approve the order and fax to
our number, 702.920.8824
4. We process the order after
5. The documents we have on file are sent
via USPS Express Mail
6. We order a new set of documents
from the Secretary of State
7. You provide an updated list of
officers and the new company address
8. You apply for the EIN and the bank
9. You file the company in another
state and update that information with us.
SHELF COMPANIES . BUILD CORPORATE
CREDIT . TRANSPARENCY
109 EAST 17TH
STREET, SUITE 25, CHEYENNE WY 82001
Office 307.237.2580, Fax 702.920.8824,
All Rights Reserved