Small Business Credit Cards

Are you currently operating a small business? If so, you probably make a lot of purchases with your personal credit card. Honestly, there is nothing inherently wrong with using your own personal credit card but you are definitely putting yourself at a disadvantage. As such, it would be much better to look towards a small business credit card as the solution to your needs. Of course, this raises the question as to what a small business credit card is. Really, it is exactly what its name would imply...

A small business credit card is a card that is not taken out in the name of an individual. It is taken out in the name of the business. Yes, the person who owns and operates the business is responsible for making the payments. However, the card is based on the credit rating of the business and not the individual. This can have a number of benefits. One of which is the tax issue associated with the business.

When a business files a tax return, it will pay taxes based on profits. If a business costs $100,000 a year to operate and earns $75,000, it has lost money. When you file such information on a tax return the business will need to prove its losses. If all the expenses of the business were charged on the small business credit card (or as much as possible is charged) there is documented evidence of what was spent on the business.  No, this does not mean that you can avoid any audits but you do have clear documentation and that is much better than piecing together scores of different documents.

Then, there is a more ominous component to small business credit cards that makes them - for lack of a better word - helpful. How so? If the business loses a great deal of money and enters into bankruptcy, depending upon the format of the business (LLC, corporation, etc), it will be the business that enters into bankruptcy and not the individual. As such, the personal credit of the individual will not be ruined when the card is in the name of a business. Yes, this is a rather broad description and it is best to discuss all issues of taxes and bankruptcy laws with accountants and lawyers.

Are there any negatives associated with a small business credit card? Well, are there any negatives with individual, personal credit cards? Ultimately, the answer will depend upon the particular card that you procure. Some small business credit cards have high interest rates and annual fees. These are certainly not positives but such cards do proliferate. Also, it can sometimes be a little tougher to find small business credit cards with excellent rewards programs.

On the flipside, there most definitely ARE credit cards that come with solid interest rates and rewards programs. That is why it is best to look for cards that have excellent competitive deals as opposed to taking the first card you come across and applying for that one. As always, shopping around has its benefits.