Your guide to applying for small-business credit cards
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Small-business credit cards are the secret tools to unlocking award travel. You can double dip to earn twice as many welcome bonuses and the accounts won’t show up on your personal credit report, so you won’t exceed your 5/24 status with Chase. And you don’t need to be a multinational corporation to be eligible.
Dozens of enterprises make you eligible for a business credit card, ranging from tutoring to consulting to selling online.
It’s important for small-business owners to understand the application process to avoid mistakes, which might cause you to be rejected for a card. Today, we’re going to tell you what you need to know to apply for business credit cards.
What’s my business structure?
If your business has been around for a while and is more formalized, you already know the answer to this question. You may have registered your business as a corporation or a partnership, and you should make sure that the information on your credit card application matches the description you report to the Internal Revenue Service (IRS).
Informal business owners such as eBay sellers, freelancers, tutors may not be familiar with this type of business designation or the paperwork. Most card issuers allow you to apply for business credit cards as a sole proprietor. No paperwork necessary. In most cases, you become a sole proprietor simply by doing business.
Can I use my Social Security Number to apply?
When you apply for a personal credit card, you give the card issuer your Social Security Number (SSN) so it can pull your credit report to determine your creditworthiness. Your business has its own line of credit. However, card issuers still use your personal credit to guarantee the account. That’s why business-card applications generate a new inquiry on your personal credit report, but in most cases the account will not show up on your personal report.
That’s a long-winded way of saying that yes, you will use your SSN on your application for a business credit card. However, you’ll also see an option for a Federal Tax ID Number or Employee Identification Number (EIN). Depending on which card you’re applying for, it might appear differently on your application. For example, The Business Platinum® Card from American Express has a box to input your Federal Tax ID Number, and the asterisk indicates that this is a required field. However, if you select “sole proprietorship” under company structure, this box disappears. Only corporations or partnerships are required to provide an EIN.
The application for the Chase Ink Business Preferred Credit Card also has a field requesting your tax identification number. If you mouse over it, you’ll see that it instructs Sole Proprietorships to use their Social Security Number instead.
What is an EIN?
If you run a small side business and never plan to grow or hire employees, you can probably skip this section. An EIN and Federal Tax ID Number are the same thing. You can think of it as a Social Security Number for businesses, which links relevant credit reports and tax filings to the correct organization. Most sole proprietors do not need an EIN (though you should consult a licensed tax professional if you’re unsure).
According to the IRS, you need an EIN if you answer yes to any of the following questions:
- Do you have employees?
- Do you operate your business as a corporation or a partnership?
- Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?
- Do you withhold taxes on income, other than wages, paid to a non-resident alien?
- Do you have a Keogh plan?
- Are you involved with any of the following types of organizations?
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Nonprofit organizations
- Farmers’ cooperatives
- Plan administrators
Applying for an EIN is relatively simple and straightforward. If you need an EIN to apply for a business credit card, you should be able to complete the paperwork and receive the number within a few days.
What business name should I put on my application?
In my experience, this is the area that creates the most problems for people. Some people feel uneasy applying for business credit cards, or think that they need to invent a name to use on their application. This is the exact opposite of what you should do. Although you become a sole proprietor simply by doing business, you need to file a “DBA” (doing business as) form to operate under a name other than your own.
For example, I can form a sole proprietorship with the legal business name “Ethan Steinberg” by selling some old books on eBay, but if I want to use the name “Ethan’s Online Bookstore,” I’d need to file paperwork with the government to do so.
It is illegal to lie on a credit card application (and claim to represent a business that doesn’t exist). Also, if your application isn’t approved instantly, you can run into real trouble here. Some issuers, especially Chase, will often ask for supplemental documentation verifying the existence of the business before approving your application. Although I could produce plenty of rent statements and utility bills with my name on them (i.e., Ethan Steinberg, the name of my sole proprietorship), I don’t have any documentation of “Ethan’s Online Bookstore.” In the past, I have known many people who end up getting rejected and wasting a hard credit inquiry because they thought they had to invent a name in order to be approved.
Further reading: The Ultimate Guide to Credit Card Application Restrictions
Earning travel rewards is all about learning new skills. One of the first times I pushed out of my comfort zone was when I began applying for business cards to support my tutoring side gig in college. The application for business and personal credit cards is almost the same. However, your answers to questions about business structure, business name and federal tax numbers may determine whether you get the card and points you deserve or end up with a confusing rejection.
The rule of thumb is to keep things simple and to never lie. Your business isn’t a corporation or a partnership unless you specifically set it up as one, and your business doesn’t have a legal operating name different from your own name unless you’ve filed the right paperwork with your state and local authorities. It can be unnerving to apply for a heavyweight card like the Business Platinum without a “real” business name, but this is a far more common occurrence than you realize. If in doubt, consult a lawyer or tax professional about how you structure your business.
Featured image by Rafa Elias / Getty Images
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- Terms Apply
- See Rates & Fees