The beginning entrepreneur is tempted to start with just themselves, and to do a simple Schedule C tax filing using their social security number. I know. I have one business that way. But I’ve learned it’s better to establish the business with it’s own identity as soon as you get clear in your mind what the business purpose will be, and before you start incurring too many expenses.
The first thing you need is a Tax ID (Employer ID Number, or EIN). This is like a social security number, but belongs to the business, and is formatted as 2 numbers, then a dash and then 7 more numbers. Get in the habit of using it as often as you can. If you offer a service where you have to certify your small business status, use the EIN instead. And when you file taxes, use the EIN on your Schedule C.
As soon as you can, establish business credit in the business name. At first, it might be your own name, but once the business is established, and the vendor knows your reputation, either transfer (“sell”) the account to the business, or create a new credit account in the business name and quit ordering in your own name.
Business credit is usually based on how fast you pay, so even if your personal credit is poor, if you can separate the business credit from your own, you should.
The way most solo entrepreneurs start to build business credit is by finding a local supplier, like the office supply store or printer, if they will do business credit reporting. Buy something low value ($20-$50) on 15-day credit, then get them a check within a week. Do this every few weeks, even if you might get a slightly lower price at the big box store, because the purpose is to build a credit profile. If you ship anything by FedEx or UPS, get a membership in the business name. You will be paying on each shipment, but the business gets known as a separate entity.
Once your credit is established, then apply for a business card at the chain Office Supply store, using the EIN, and don’t use your SSN. The business is getting credit, not you.
Do this consistently, and you should soon be able to start buying the larger orders on credit. This will help with planning cash flow, such as getting event flyers where you get paid sign-ups, and then pay the bill after the event.
Just be sure to pay the bill on time. Even if you have to pay with a personal credit card.