There are pros and cons to both New Entities and Seasoned Entities. Before you can start building business credit you are going to need a corporate entity. If you choose an LLC or Corporation, it is entirely up to you. (Most of our clients choose LLC’s)
New Entity: Creating a new corporate entity is nice because it is relatively inexpensive. Another benefit of creating a new entity is the fact that you have full knowledge of the history of the entity – because it is brand new.
Seasoned Entity: Purchasing a Seasoned Entity a more expensive option. Most of our clients choose to purchase a Seasoned Entity. Having a Seasoned Entity (3+ years old) will usually open more “Non Personally Guaranteed”/”No Personal Credit Check” vendor credit options. If you purchase a Seasoned Entity be sure that you ask for a background history report on the entity.
Businesses structured as sole proprietorship or general partnerships are not acceptable when building business vendor credit. Most vendors will not give “business accounts” to either of these business types. Credit is granted to either of these businesses, it is almost ALWAYS personal guarantee.
Warning: Never purchase a Seasoned Entity with bank or vendor credit attached. The truth is, banks and vendors will withdraw credit from a company within 30 – 90 days after they realize the entity has transferred hands.
Note: If you choose to purchase a Seasoned Entity, it is always important to be honest with banks and vendors about how long you have been associated with the entity. If the entity is 3 years old and you have only been associated with the entity for 6 months your standing with the vendor and entity is usually not compromised. Just be honest with everyone!