Guide to Business Credit Cards for your LLC
You most definitely need separate business and personal accounts
Separation of finances is an often overlooked factor in forming an LLC. If you fail to keep your business and personal finances separate you might run into the following problems:
- The IRS is more likely to audit you, which could result in a huge headache trying to remember whether purchases were for personal or business use
- You might get turned away for loans or business partnerships because you’ve failed to build any credit as a business
- You may actually lose the legal protection that an LLC offers you if you co-mingle your personal and business finances
Benefits of using a business credit card (as opposed to a personal credit card for business use)
You may be tempted to use a personal credit card for your business, which is completely all right legally. However, you’ll gain several benefits with a business credit cards.
- You might not need an accountant, since most companies provide detailed monthly and quarterly expense tracking and annual spending reports for business credit card holders
- Having a separate business card will protect your personal credit score (after the 2-5 point hit when you first apply for a card)
- Business credit cards usually come with a higher line of credit
- If you have employees, you’ll be able to provide them with their own card with a specified credit line – meaning you will always be able to track and control their spending
- You’ll build your business credit (similar to personal credit), which will allow your business to get better interest rates in the future, apply for loans, and reduce the amount you’ll need to prepay for products or services
The top business credit cards in 2014
You may wish to apply for a business credit card where you may get benefits such as cash back on purchases, extended warranties, no annual fee and other perks. Look below for a few of the most popular cards in 2014:
Ink Cash® Business Card by Chase
Best for Cash Back | Requires Excellent Credit
- Earn $200 bonus cash back after you spend $3,000 in the first 3 months from account opening.
- 5% cash back on the first $25,000 spent annually at office supply stores, and on cellular phone, landline, internet, and cable TV services.
- 2% cash back on the first $25,000 spent annually at gas stations and restaurants.
- 1% cash back on all other card purchases with no limit to the amount you can earn.
- 0% introductory APR for 12 months on purchases and balance transfers
- No annual fee
- Price protection, return protection, and traveler’s benefits
Starwood Preferred Guest Business Card by American ExpressBest for Travelers | Requires Excellent Credit
- Get 10,000 Starpoints® after your first purchase on the Card and an additional 15,000 Starpoints® after you spend $5,000 in purchases on the Card in the first 6 months of Card Membership
- Receive credit for 5 nights and 2 stays towards SPG elite status each year
- Only $65 annual fee with $0 annual fee for each Additional Starwood Preferred Guest Business Credit Card
- Additional Starwood Preferred Guest Business Credit Cards can earn Starpoints at the same rate‡
- Car rental loss & damage insurance and travel accident insurance
- Return protection and extended warranty
Watch out for these pitfalls
- Business credit cards are not covered by the Credit CARD Act of 2009, and are therefore prone to very high interest rates if you fall behind on payments
- Unless your business has 2-3 years of financial states and references from credit sources, you will probably need to put a personal guarantee on the credit card, meaning it will affect your credit
- If you’re using more than half of your credit limit on your business card, and you’re only making the minimum payment each month, your behavior will likely be reflected on your personal credit record