What’s the Best Credit Card for a Small Business?

Truthfully speaking, there isn’t one. Just like how you chose your own personal debit or credit card, you’ll want to look for a card that has no annual fees (keeping in mind that you’ll want to minimize your annual expenses). Many credit card companies offer incentives for cardholders, including cash-back rewards, points, and frequent flyer miles. Choosing which of these benefits is entirely up to you.

Make Sure the Credit Card is Widely Accepted

One thing you’ll need to make sure of is that your credit card is accepted in most places of business — both domestically and internationally. This is why I always stick with Visa: it’s the most widely accepted card in the world, followed by MasterCard. I have never gone for American Express, as it is not as worldly as the two aforementioned credit cards, and it does require an annual fee. While this annual fee is minimum, it’s never shameful to admit that you pinch pennies as a new business owner. Those saved bucks can be used toward buying more domain names, or something else that might help make more money or improve your business in some way. Like Ben Franklin said, “A penny saved is a penny earned.”

Know Your Bank Account Before You Get A Credit Card

This is an important tip: the business bank account you opened most likely has several measures you’ll have to fulfill in order to avoid a monthly charge, such as minimum balances. Another is to own a business credit card. Since you most likely won’t want to spend an average of $15-20+ per month to simply own a business checking account, it’s in your best interest to apply for a credit card for your LLC as soon as possible. Your bank will most likely require you to get a credit card sponsored by them (for instance, I opened a Chase account for my LLC, and had to get a Chase Visa card in order to avoid the monthly fees). Be sure you are aware of your bank’s rules and regulations for opening a business bank account, as they typically have monthly fees unless you fulfill at least one requirement.

As you may already be aware of, these three main credit cards come available in multiple bank brands: CitiBank, Chase, Bank of America, Capital One and many others. Each of these banks offer their own perks and rewards, and they are usually outlined in black and white on the credit card’s website. When it comes to selecting a sponsored card, minimize frustration and go for a bank that won’t be running into the ground in this bad economy: typically, banks that have not been loaning money are your best bet.

What the Bank Will Need to Process Your Business Credit Card

When you visit a bank representative, be prepared with your EIN, social security number and driver’s license plus one other form of ID just to be safe (it doens’t have to be a birth certificate, but usually is in the form of a recent bank statement or existing credit card). If you’ve registered your LLC with a company like LegalZoom or Incorporate.com, simply bring in the entire LLC kit you’ve received in the mail.

Your business card should always include the name of your company above your own name. As the founder and president of your LLC, you’re the official card holder since you directly act on behalf of the company, and have the authorization to sign the back of the card.

What Should My Desired Credit Limit Be?

This is entirely up to you. Think ahead about what expenses your company will occur in the short-run and within a year. Will you be purchasing a server? New computers? An office space? Make sure that your credit limit is more than sufficient for these costs. I typically like to start off low: my LLC’s credit card started off with a $5,000 limit. From there, you’ll build a positive credit history and will be rewarded with higher credit limits. I’ve found that this is good component in your strategy to getting a credit score in the upper 700’s to low 800’s.

You Will Probably Get Rejected After You Apply!

Don’t worry, though – it’s completely normal. Keep in mind that new LLCs are a brand new business entity with no credit history. It’s most likely that your credit card application for the LLC will be rejected, and the letter of rejection will state that it’s due to this fact. In this case, the bank teller may ask you to get a credit report on yourself (if you’re in the USA, you are entitled to get this for free each year) and will manually apply for the card with his or her supervisor’s signature. The likelihood of your approval for the card is high with their personal re-submission.

Where to Go Next: LLC Banking

Don’t Claim Anything that Isn’t A Business Expense!

This is the most obvious point of advice. Unless you can justify that a purchase is necessary and to be used solely for the LLC, don’t claim it when doing your taxes! When claiming business expenses, be sure that they follow all the following elements set forth by the Internal Revenue Service (IRS), under Section 162(a):

As you claim a business expense, a good rule of thumb is to ask yourself if your claim truly is business related, and is necessary to conduct business. While it would not make sense to claim a new dishwasher for your home, it might make sense to claim the lunch you’ve purchased after taking a client out yesterday afternoon, or the combination fax machine & printer you’ve just purchased. Use extreme care and discretion, while keeping all receipts or other documents handy. If you should happen to be audited by the IRS, these documents will be a vital and valid paper trail to help the auditor understand what your expenses were, what they were used for, and why they were necessary for your business. Claiming purchases as business expenses is an extremely beneficial right given to you by the government. Never abuse the system or give into the temptation of claiming purchases that are above and beyond the scope of your LLC’s operation!

Claiming a Home Office or Home Work Space

Larger claims, such as office space, room rentals and other costly expenditures, are looked at more closely by the IRS, and have the highest chance of prompting an audit. Be sure to justify these claims by keeping records that include square footage, mortgage and utility bills, and even photographs of the premises. Here are several best practice guidelines for claiming your home office and utilities. Do keep in mind that it will most likely result in a guaranteed audit. However, if approved, the benefits will be significant for your tax return:

Claiming a Home Office: Roadblocks

Since claiming a home office is a very touchy subject in the eyes of auditors, you may come across certain roadblocks as to how much you can claim. For instance, claiming utilities including electricity and heat will most likely be based on rent paid per month, or a percentage of how your home office room uses per month. It’s also important to note that if the home owner or person paying the mortgage is not you, some difficulties may arise in claiming utilities.

When it comes to claiming a home office space, those with “internet-based” businesses have greater justification than those who do not spend the majority of their business time in their designated home office.

Claiming Travel Expenses

Use your discretion when claiming expenses such as gasoline, air travel or any other commuting expense. Remember, if it wasn’t used solely for the business, nor can this be proven, then, you should not claim it. However, if you drove 50 miles to buy a new computer for your LLC, you most certainly can claim all commuting expenses from gasoline to tolls and even lunch. When claiming gas, be sure to reference the internet to note the current claimable cost of gasoline per mile, and simply multiply that by the number of miles driven. Keep the receipt from the gas station as proof.

Where to Go Next: LLC Accounting

LegalZoom’s Company Seal

LLC registration company LegalZoom will create a company seal for you with the purchase of their “Standard” or “Express Gold” LLC registration packages. Seals typically have a price tag of $20, and they must be branded to include your LLC’s official name, year of inception and state of residence.

How to Assemble a Company Seal

This may seem like a trivial topic, but company seals come in two parts, and it can be rather enigmatic to figure out how to put it together. Look at the following picture, which shows how a company seal from LegalZoom is assembled. Simply insert the tongs into the center, with the “peg” end facing the top of the clamp. Push the tongs into the clamp until it “clicks” into place.

Where to Go Next: Back to LLC Maintenance

LegalZoom is an online service founded by several high-profile lawyers, including Robert L. Shapiro, offering low-cost options for LLC, Corporation, Trademark, Copyright, and Patent registrations. The service is devised for any person to simply answer a series of questions about their business, while LegalZoom’s system fills out and files all appropriate forms on their behalf. Unlike hiring a lawyer, the fees you’ll pay through LegalZoom as substantially less (as stated in their “up to 85% less than lawyer fees ad campaign). When registering LLCs through LegalZoom, the business owner will receive detailed automatic emails that chronicle the registration process of their LLC. Depending on the registration package chosen, a helpful LLC Kit will be sent, including various documents and tools needed to finalize registration and maintain the LLC.

The LegalZoom LLC Registration Process from Start to Finish

This section will take you through the steps involved in registering an LLC with LegalZoom. In short, you’ll answer a series of general questions online, as LegalZoom retains your answers and uses them to manually fill out all of your registration forms with the Secretary of State. Each step of the process is communicated to you via email, until your registration is complete.

Selecting an LLC Package

Before you begin your registration process with LegalZoom, you’ll have to choose one of their three packages: Economy, Standard and Express Gold. We highly advise that you do not choose their “Economy” package, as it will not include the Deluxe LLC Kit (something you’ll really need, since it includes an official metallic company seal) nor does it include 20 stock certificates or a membership transfer ledger. Therefore, choosing the “Standard” package minimizes your costs while giving you an invaluable LLC Kit.

If you cannot wait up to 35 days for your LLC package to arrive and would like LegalZoom to complete your Federal Tax ID application for you, go for the Express Gold package. Important: note that if you choose the Standard package and elect LegalZoom to complete your Federal Tax ID application for an additional $70, you’ll actually be losing out by paying more money while not enjoying the additional inclusions of the Express Gold package, such as the 40 Business Forms CD-ROM and priority rush service.

LegalZoom LLC Questionnaire

Once you select the option to form an new LLC, LegalZoom’s LLC Questionnaire will begin the process by asking you several simple questions:

• “I would like to…” – Choose “Form a new LLC”
• “Would you like us to help your LLC apply for a federal tax identification?” – By selecting yes, LegalZoom will help fill out the additional paperwork required in obtaining your Federal Tax ID #, which is the key identifier for your LLC. It’s an additional fee. Once you register for your LLC, your state government will automatically send you a letter in the mail containing your Corporate ID Number, as well as a web address pointing to the registration form for your Tax ID. You may either take the chance and fill out the form yourself, or simply have LegalZoom do it for you (recommended). Personally, I prefer the peace of mind in knowing that LegalZoom is completing all of my paperwork to perfection, rather than chancing it on my own.
• “In what state would you like to form the LLC?” – Be sure to do some research here. Best practice dictates that you should form an LLC in the state where you reside, as doing otherwise will result in being classified as foreign qualification. In these cases, you will have to conform to taxation requirements for both your current state of residence, as well as the state in which your LLC was registered in. This can prove to be more costly, even if the LLC laws appear to be more beneficial! To be safe, it’s highly advised to select your current state of residence here.
• “What is the proposed name of the LLC?” – This is important, as it will be the official name of your LLC. Everything counts, including punctuation and capitalization! Be sure that you have typed out the name of your company as you’d like it to appear, as it will be printed on the shares of stock, your official metallic seal, and other documents that will be mailed to you. Below this field, you’ll be able to provide alternate names that you’d use in case your initial choice is not available.
• “What is your LLC’s business address?” – This is where it helps to have a P.O. Box (read more about this). If you don’t have one, simply use your home address, as your home will be your base of operations.
• “Are you a doctor, dentist, lawyer or other licensed professional seeking to form a Professional LLC?” – Answer this in the manner that it applies to you.
• “Would you like the LLC to automatically dissolve on a certain date?” – This is basically an absurd option in most cases. Be sure to choose “no,” unless you have a pre-determined reason not to.
• “Who will act as the LLC’s registered agent?” – Let LegalZoom be your registered agent. Basically, they will be processing your forms for you, which is why you chose them in the first place.
• “Would you like ownership in the LLC to be expressed in percentages or in units?” – In mostly all cases, people elect to express ownership in percentages if they are running a small company (especially if they are the only person in the company). The opposite applies for larger LLCs, where “units” are a more optimal choice for growth and expansion.
• “How will the LLC be managed?” – The answer to this question depends on if your LLC is being run on your own, or if you have other shareholders being declared. Also, you’ll need to know that a “manager” is someone elected by members to manage the company (like a director-level professional), whereas a “member” is a subordinate within the company. If you elect to have your members manage the LLC, then the top executive (that’s you, and/or your CEO, CIO, etc.) are directly responsible for running the company. If you’re the only person in your LLC, simply choose to have it be run by “its single member.”
• “Will the LLC have officers?” – If you’re the only member of your organization, choose no. Otherwise, choose yes, and you’ll later be required to define who they are, what their capital/$ contribution is, and what their ownership percentage or units are.
• “Please select one of the following statements regarding transfer of ownership interests” – As the tip suggests, most states default the option where the majority of other members must consent to any transfer. You’re safe to choose this option. If you elect to make them be freely transferable, you will have the ability to transfer ownership as you please, as will your officers – with or without your consent. Choose whichever option you are personally comfortable with, keeping the relationship you have with your officers in mind.
• “The IRS Code requires each LLC to designate one member as the “tax matters member” who will represent the company in connection with all examinations by tax authorities. Who is the tax matters member?” – Input your name here.
• “What member or manager of the LLC may the IRS contact if they need more information on your application for a tax identification number?” – Input your name and information here.
• “How do you want your LLC to be taxed?” – Here, you can exercise the right given to you by the government as an LLC owner. You can be taxed as either a “pass-through entity” or a corporation. A good rule of thumb is to always choose the first option, “pass-through entity,” as it enjoys single taxation. If you choose to be taxed as a corporation, you’ll need to fill out an 8832 form with the IRS, and if you elect to be taxed as an S-corporation, you’ll also need to fill out a 2553 form.
• “What is the end of the LLC’s fiscal year? (You are free to choose any date you wish, but for simplicity most people choose December 31.)” – Go with LegalZoom’s suggestion, and choose December 31st, unless you have any alternate reason not to.
• “Will the LLC operate under a trade name which is different from its legal name?” – You don’t actually have to publicize your business as your registered LLC name. For instance, if I run Blue Widgets LLC, I can do business as WidgetMan as my trade name. WidgetMan, however, is Blue Widgets LLC. If you desire to do business with a trade name that is different than your LLC name, select “yes,” and LegalZoom will fill out a Trade Name Application for you. Otherwise, most people select “no,” and simply publicize their business as their registered LLC name.
• “Does the LLC anticipate hiring any employees in the next 12 months?” – If you don’t know if you’ll be hiring in the next 12 months, it’s always safe to just say “no” here.
• “Do you expect to have $1,000 or less in employment tax liability for the calendar year? (If you expect to pay $4,000 or less in wages, you can select Yes.)” – Simply follow these directions – most people will choose “no.”
• “Does your LLC own a vehicle with a taxable gross weight of 55,000 pounds or more? Only include vehicles that were designed to carry loads on the highway.” – Once again, follow the directions here, based on the nature of your business.
• “Will your LLC operate a casino, or does your LLC’s business involve gambling or wagering?” – You guessed it! Follow the directions.
• “Does your business need to file Form 720 (Quarterly Federal Excise Tax Return)? Note: This is not common.” – This truly is an uncommon form that only applies if you are selling gas or fuel, tractors, air or trip transportation services, insurance policies issued by foreign companies, fishing equipment, electric outdoor motors or bows & arrows. Download the Form 720 here.
• “Does your business make or sell alcohol, tobacco or firearms?” – Another simple answer question.
• “Which of the following best describes the company’s primary business activity?” – Be sure to select the most relevant business category that applies toward your business, as it will help define what industry you’ll be classified within!
• “Please describe your primary business activity.” – Borrowing closely from the previous question, this is your opportunity to write a brief yet highly descriptive statement of what your business is about. Your best bet here is to be broad, but not vague.

The final steps in your application review a couple promotional options that you are free to accept or decline, and finally, a review of all of your answers. I’d advise you to print this particular page for your records, in case you need to reference it again in the future. Once you’ve confirmed your information, you’ll be able to finalize your order. A confirmation email will be sent to you with your order number.

Final Cost of Registering an LLC with LegalZoom

All packages’ final prices will include state fees. Don’t be alarmed when a $249 price tag winds up being around $660 after taxes and filing fees! Regardless of how you register your LLC, it’s inevitable that you’ll have to pay these state fees. Here’s a breakdown of what I paid:

LegalZoom Post-Registration Process

1-2 Days After Registration

Within a day or two, an email will arrive stating if your desired company name has been taken or not, further explaining that if it is available, it is not set in stone until all articles have been filed by the state. Another email will be sent to you when your articles have been successfully filed, stating that you are now considered a legitimate LLC, able to take advantage of all benefits. Congrats!

1 Week After Registration

An important email should arrive approximately a week later, with directions to access your NRAI (National Registered Agents, Inc.) account. Be sure to use the username and password provided to you at the NRAI.com website. This account holds various tools, including 24-hour contact access to a corporate service specialist, various pre-filled forms and documents, and an administration panel that lets you access and change your company information and client reports. The “Corporate Records” tab on this website will be your friend, as it lists the vital statistics of your company and its registration status.

On the same day in which you receive your NRAI login information, you’ll also receive a reminder from LegalZoom that you’ll have to fill in some corporate minutes to safeguard your corporate standing. Doing so will protect your company from losing its liability protection, maintaining tax advantages and other benefits. In order to do this, simply visit the “Corporate Minutes Order” on LegalZoom’s website. Once again, corporate minutes are simply “meeting minutes” in which statements are made about meetings you’ve held, pertaining to your company. If you’re the only person in your LLC, it will simply be a “meeting with yourself,” as strange as that may sound.

Approximately 1.5 – 2 Weeks After Registration

Typically within a couple more days beyond this point, a final confirmation will mention that the Secretary of State has sent your articles back to LegalZoom, and that they will ship them to you.

Finishing Up

LegalZoom will send a ‘thank you’ letter within your kit, that will outline the next steps that must be taken to finalize your LLC registration. The first thing you’ll want to do is complete the SS-4 form and send it directly to LegalZoom in the provided envelope. This will create your FEIN (Federal Identification) number, which will be sent back to you.

• Next, you’ll need to register with your state’s division of revenue (if necessary). The application is usually located on your state’s revenue website (LegalZoom will provide the exact URL for your convenience).
• Your next plan of action will be to complete your corporate minutes. Much like LegalZoom’s LLC application process, this is a simple series of questions and text fields that you’ll out.
• Don’t forget – now is the time to create a new bank account, and apply for a business credit card.
• This is also a great time to consider getting a trademark on your company name, as it will protect your company name from being used by others in commerce. Learn more about registering a trademark.

Where to Go Next: Take a Look at all LegalZoom LLC Registration Packages

1-7b

• In sections 1-7a, simply fill out all of your LLC’s information. If you have a PO box, be sure to include it as the mailing address in section 4a.
• Section 2 mentions “trade name.” If your trade name (the name you advertise your services under) is different than your actual LLC name, enter it here. So, if your LLC’s name is Great Stuff LLC, but you advertise your products under Total Greatness, you’ll want to enter “Total Greatness” in section 2.
• Section 3 does not have to be filled out if it does not apply to you.
• In section 7b, be sure to add your social security number, or that of whoever the LLC owner will be.

8a-8c

• In section 8a, check “Yes,” since you’re registering an LLC. 8b will simply ask you for the number of members in your LLC. If it’s just you, enter a “1″ here.

9a-9b

• This section can be a little confusing if you’re not entirely sure which option to choose. It is strongly recommended to check “Other (specify)” and enter the phrase “Disregarded Entity – Single Member LLC” if you’re the sole member of your LLC. (The answer you provide in this section will depend heavily on the type of company you’re starting – please consult a lawyer if you are not entirely sure about what to choose!)
• Since you’re registering for the EIN of an LLC, you’ll be ignoring section 9b.

10-12

• In section 10, a simple choice designating why you are applying for your LLC will be chosen here. In many cases, people will check the first box for “Started a new business (specify type),” and enter a very brief description of their business’ services.
• Section 11 asks you to select an official date in which your business has been acquired. Note that if you are starting your business at the end of a calendar year, you will be taxed for that year, regardless of how many days are left. In such a case, it might be a good idea to simply wait until the year is over, and start your business on New Year’s Day.
• Most people select “December 31st” as their closing month of the accounting year, in section 12.

13

• This question may seem a little trivial to anyone starting an LLC on their own. If you simply do not know if you’ll be hiring anyone in the next year (which many start-ups or “work from home” entrepreneurs don’t), be sure to include a zero under the three categories, “agricultural, household, other.”

14

• There is no advice that can be given in this section, as it is different for each LLC owner. The majority of people who fill out SS-4 forms select the “No” box here, according to a poll conducted by LegalZoom. However, please make sure you select the correct option if this is not your case.

15

• If you’ve never paid wages (withholding or otherwise), enter a “N/A” here. Otherwise, enter the date.

16-17

• Section 16 is a little synonymous with section 10, as well as the upcoming section 17. Here, you’ll have to select an option that best describes your business category. If none of them apply to your business, don’t worry – simply select the one that is closest to your business category, as well as the “Other (specify)” box, and type in whatever you had entered in section 10.
• Section 17 will simply re-iterate what you’ve entered in section 10 (and whatever you’ve entered if you have selected “Other” in section 16). Your answer can be a brief 5-6 word description, don’t worry about getting too technical.

18

• If you’ve ever applied for an EIN before, you’ll have to check “Yes.” The rest of us first-time business registrants check “No.”

Third Party Designee

• If someone (a LLC registration service or a lawyer you have hired) has been appointed to recieve your EIN, and, is acting as the contact person for questions regarding your form, you’ll have to enter their name, address and contact numbers here. Otherwise, you will be the direct contact in case the IRS has any questions.

That’s the final step of completing your SS-4 form! If you’re using a third party designee, contact them and ask if you should mail the SS-4 form to them, or directly to the IRS. Be sure to make a photocopy of this form and keep it for your records, as you should be keeping a file for all of your LLC’s forms and other documents in case you need to reference them in the future.

Where to Go Next: LLC Registration

Apply for your EIN

The form required to file for your Employer Identification Number is the IRS Form SS-4, “Application for Employer Identification Number.” This form will ask you for multiple categories of information, including your LLC’s name and address, entity type, reason for application, start date, principal business activity and other related information. If you’re using a 3rd party designee’s help, such as a LLC registration service or lawyer, you’ll have to list their contact information on the SS-4, too.

(Above: An example of what the SS-4 form looks like)

Since obtaining your EIN is so vital to your LLC’s inception, you’ll want to fill out this form immediately, after your Articles of Organization are complete.

• Download the SS-4 form
• Read our SS-4 form walkthrough
  

Where to Go Next: LLC Registration

Find the Articles of Organization Form for your state

Where to Go Next: Back to LLC Registration