How To Set Up A Business Credit Card

September 10, 2020
Business Finance
Business Basics
How To Set Up A Business Credit Card

If you are a new business or a new LLC, you should set up a company credit card so that the business expenses are tracked separately from your personal expenditures. Setting up a business credit card is easy, and even easier if you have already set up a business bank account. However, setting up a business credit card can be daunting, especially if you are still figuring out the inner workings of your business. We’re here to help! Here is a breakdown of how to set up a business credit card:

What is a Business Credit Card?

A business credit card is a credit card that denotes the credit card holder as a company. A primary business owner needs to apply and be approved for the credit card, but additional partners, owners, or employees can also be added onto the credit card as necessary. A business credit card is not essential for a business to function, but it will help a company to keep cleaner records of its own expenses. For sole proprietors and LLC owners, the income and losses of a company are reported on their personal income tax (unless they file as an S Corp). Getting a business credit card or business debit card is an easy way to separate these expenses so you can properly report when filing taxes.A business credit card allows businesses to operate without the members needing to spend their own money. Because the credit card is to be used strictly for business purposes, separating personal and business-related expenses is simpler.

Why Do You Need a Business Credit Card?

A business credit card provides a number of benefits to companies, such as cheaper interest rates, higher credit limits, the ability to set spending limits or purchase restrictions for authorized cardholders (employees) at your company, and better rewards. Additionally, business credit cards often come with substantial welcome bonuses, additional bonus categories (like bonus rewards on certain purchases), purchase protection, expense management, waived annual fees for certain spending limits or for signing on, and more card options. One of the biggest reasons for getting a business credit card is to easily keep expenses separated. As a sole proprietor, single-member LLC, or small LLC or partnership, it can be easy or even convenient to pay for business expenses on a personal credit card. However, this is a risky thing to do. Not only does this eat away at your personal expenses and rack up personal interest, but it could also confuse your accountant during tax time. While defaulting on a business credit card itself can affect your personal credit report (since often your personal credit is used to guarantee that you’ll pay the business card), business credit cards might offer higher available credit and provide more spending power.

Getting a Business Credit Card

Before you decide on a business credit card company, make sure that you’ve done your research so that you can identify which card company or bank, credit card type, and credit card benefits best suit your business needs. If your current bank offers a business credit card, it may be a good idea to go with them as it is more likely that your application will be accepted. Be sure to find a financial institution that can grow with your business. They should be able to offer a number of credit card options when it comes to payment, linking bank accounts, interest, annual credit card rates, credit limits, benefits, credit card types (if getting a credit card from a bank), and also offer loans or investments in the future. A great example of growing when you grow is Divvy. A business credit card can be open with the bank of your choice, independently through a credit card company, or through an online banking company. If you sign up for a business credit card at a bank, then expect to meet with the bank's business advisor at a branch and with the members or owners that own 25% or more of the company. Meeting in-person to finalize your business credit card application is not always required. Banks like Novo and Bank of America will allow you to sign up completely online for a business credit card. Other banks may allow you to sign up for business credit cards online under certain requirements, such as having a residential address in the country of the bank, having an EIN, having filed no bankruptcy in the last seven years, or being a member of that bank already. Once your business is approved for the credit card, then you will be able to set up an online credit card profile to access the credit card online. If you want to compare business credit cards use The Points Party Credit Card Comparison tool.

Documents Needed When Signing Up a Business Credit Card

The documents you need when setting up a business credit card will vary depending on the card issuer. Some common items that you should have ready are:

  • The business structure type (i.e., sole proprietor, corporation, partnership)
  • Legal business name
  • Business number
  • Business address (which can be your home address)
  • A business phone number (which can be a personal number)
  • The annual business sales
  • Net profit
  • How long you’ve owned the business
  • The industry your business is in and the nature of the services provided
  • Your role in the business

If you are signing up as an LLC, you may also need to have the following information:

  • EIN issued by the IRS or SSN if you are a sole proprietor
  • Two pieces of government-issued ID from all principals or members of your business
  • Your LLC Operating Agreement
  • The state LLC approval forms, like the Articles of Organization

Things to Consider When Getting a Business Credit Card

Before you start spending, be prepared to track your expenses. You can do this by printing your monthly credit card statements and inputting the information into an Excel sheet. Many banks will allow you to link the credit card to accounting software so that your expenses and income are tracked automatically. Additionally, try not to cover any personal expenses with this credit card, especially if you are operating a business with other partners. Separating personal expenses from business expenses can be difficult and more burdensome come tax time. While not always required, you can apply for a business bank account at the time of applying for a business credit card. Some online banks also have payment integrations, like Stripe integration, so processing payments is quick and easy. If you aren’t signing up for a business credit card online, be sure that the financial institution has a developed online banking platform or integrations that support online financial transactions. Sometimes small banks or credit unions do not have advanced online credit card or banking platforms developed and this may cause some additional headaches. A great starter card for your business that grows with you is Divvy.

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