Starting your own business – and maintaining it – requires a lot of hard work, critical thinking, and smart decision making (unless you’re Staples and have an “easy” button, which is lazy) Any decision that requires spending money, such as purchasing a vehicle, must be done with tact and care so as not to put your collective piggy bank in a coma. This leads us to a most important, pressing question: should I, or shouldn’t I, put the vehicle in the company name?
Let me first preface this by saying that business credit, like personal credit, can put you in very favorable positions if utilized correctly; likewise it can create massive headaches if mishandled. Reporting agencies, for example, are much stricter on late payments in a business name than they are on a personal bureau. They might give Michael Smith 30 days to get current on their late payment, whereas Michael’s Mad Mac And Cheese, Inc. could get dinged on their credit for being 24 hours late. The horrors of business credit, however, can be avoided by treating it like normal credit: by watching your credit utilization ratio, making timely payments, and using good judgment.
With all that boring negativity out of the way, let’s get down to the cream filling of this piece: The Benefits of Business Credit
- It’s Your Credit, But It’s Not…And That’s Good!
Let’s use Michael and his macaroni empire to demonstrate the first joy of purchasing a vehicle with business credit: it doesn’t affect your personal credit. When Michael’s company was in its infant stages, he had to run a lot of the expenses up on his own dime. At first, this wasn’t an issue, but as his business expanded and grew, so did the charges and it wasn’t long before his maxed out credit cards were having a major impact on his personal bureau.
Financing a vehicle on business credit allows Michael to get the macaroni-mobile of his dreams, while keeping the inquiries and hits off his Experian; this frees up his personal credit and allows him to focus on what’s important i.e. what ten cheese blend to use on his Mac Du Jour.
- Happy IRS, Happy Life
Dealing with the IRS is kind of like rubbing up against poison sumac: you never want it to happen, and if it does, you want it handled as quickly and efficiently as possible. One giant pet peeve come tax time is when personal and business expenses are not kept separate. Charging business expenses on your personal credit might seem simple at the time, but trying to write off mixed expenses can lead to audits or worse. Sure, it would SEEM like purchasing a 25 foot papier-mache macaroni noodle would tie into Michael’s business, but who really knows?
Make life easier for yourself by purchasing your vehicle in your business credits name, thereby keeping the tax lackeys at bay.
- Don’t Make a Bad Situation Badder
Our county has been through great depressions, recessions, and other ‘essions’ to know one universal truth: what’s good today might be gone tomorrow. Michael could spend his Tuesday crafting the ultimate mac and cheese draft beer, and wake up Wednesday morning to creditors blowing his phone up over late car payments. While this situation is not ideal, having your personal credit involved is much more dire than being in the business’ name. If you’re between a rock and a hard place, it’s better to have your business credit take the hit.
If you’re a business and would like to enjoy first hand the spoils of business financing, come on down to LaFontaine Cadillac Buick GMC and let us show you what it means, to get the family deal (maybe we’ll even throw in some mac and cheese)
