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HOW TO OPEN A BANK ACCOUNT AND BUILDING CORPORATE CREDIT

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SHELF CORPORATIONS AND SHELF LLC'S

BASIC OPERATIONS

BUILD CORPORATE CREDIT

 

A.  KEEP YOUR BUSINESS CREDIT SEPARATE FROM YOUR PERSONAL CREDIT.

There are two groups of businesses that build corporate credit.

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 company. 

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 against you.

B.  WHEN POSSIBLE, OBTAIN A SHELF COMPANY. 

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
New company. Company with 2-3 years of age.
Questions:
  • If you were a lender, would you prefer to lend money to a 2 year old company or a 2 week old company?
  • If you leased equipment, would you prefer to lease to a 2 year old company or a 2 week old company?
  • If you were a customer, would you prefer to buy from a 2 year old company or a 2 week old company?
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 here

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 ADDRESS:

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 industry.

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 list. 

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 LLC.
  • EIN obtained with the IRS, using a business address
  • 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

DON'T DO DO
Not paying bills on time. Pay 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.  Incorporate.
Don't post collateral from personal assets for business operations.  It makes them vulnerable to loss.  This risk is acceptable if you're reasonably sure that it's necessary and there's a likelihood of success.  Otherwise, it's a bad idea.
Don't commingle business and personal assets. Incorporate!

Keep company 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 information. Keep 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. Keep the family assets and obligations separate from the business.
Don't commingle credit histories Keep 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 application.  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 "0" 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 employee.
Don't think small. Lenders like to see longevity, stability, revenue and progress.`
Don't discount experience. Sell your 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 credit applications.  Use 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. The 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.

ORDER PROCEDURE

1.  Choose the shelf company for acquisition

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 receiving payment

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 account.

9.  You file the company in another state and update that information with us.

 

ASSETPROFILE.COM

SHELF COMPANIES  .  BUILD CORPORATE CREDIT  .  TRANSPARENCY

 

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