Bootstrapping · Business credit card

When should a startup get company credit card?

MUX Tech Entrepreneur - looking for cofounder

February 1st, 2018

A newly minted startup which has no revenue and no funding yet, when should it get a company credit card. Or should it get company credit card at all? Should the founder use his personal card till there is revenue/funding?

All startup founders who have been through this, please enlighten !

Paul Garcia marketing exec & business advisor

February 2nd, 2018

The company should never use the founder's personal credit card if there's any way to have a company card. It gets murky when trying to separate company expenses from personal expenses, even if you're accurate. And when you have to show your balance sheet to someone else, you don't want to see a lot of reimbursements to the owner.

Here's what I would do. I'm sure other financial people have their own opinions. Get a company card and a company bank account set up right away. If you are investing your personal money into the company, write a check and deposit it in your business bank account. Charge all directly related business expenses to your company card or write a company check. If you need more money, write another personal check and deposit it in your company account. Keep a log. Pay your company card bill from your company checking account.

You need to decide up front whether the money going into the company is a loan to the company that will be paid back in the future or if it is an investment in the company that is at-risk (not expected to be paid back).

When it comes time to file your taxes for your business, even if your company structure makes it a disregarded entity and all the income(if any) and losses go on your personal taxes, it is going to be much easier to track and record if everything is separated from your personal resources. The most significant business expense that you would have a lot of trouble recording if you use your personal card is the amount you pay in interest on any carried credit card balance.

The last benefit is that when you get a company card, you start developing a credit history for the business. This may become important in the future, and starting a company card now initiate that record so it's there in a couple years when it may become necessary. Those separate accounts also develop a business relationship with your bank, and they become more willing to help you in the future when you've developed a credit history and history of deposits.

Good luck!