Building Business Credit Help

[LISA F.]

Hi Everyone,
This is my situation.
I have 3 (3) families properties in New York City. One of the buildings which I reside in is in my name and the other 2 I transferred into a LLC about 3 years ago so i have 3 mortgages on my personally credit history.
I'm looking to build up business credit to help me down the road purchase my next building. Should I use my current LLC to start obtaining business credit or open a new one? My next purchase I want to have in a new LLC not in my name or the current LLC.
All feedback and help would be much appreciated.
Also I manage the buildings through my own property management company which is just a DBA. Does anyone have some suggestions? :D

[J Scott]

Certainly, you should talk to a CPA and a real estate attorney to ensure that you are protected both legally and from a tax perspective. Depending on how the LLC is taxed (as well as the future LLCs you create), you may be paying much more than necessary in taxes; and you also might be opening yourself up to a good bit of liability by holding any properties outside the LLC.

I'm not an attorney or a CPA, so take that for what it's worth...

As far as your question, you probably want to create a master LLC and multiple child LLCs to hold the properties. Because you have one LLC that is already somewhat seasoned (it's been around for 3 years), you may want to make that the master LLC.

In addition, to build business credit, make sure you've done all the following as well:

- Make sure you have an EIN (Employer Identification Number) from the IRS for your LLC.

- Make sure you have a Business Phone Line. This is actually an important step. The credit reporting agency that will likely be tracking your business credit (as well as the businesses that supply you credit) will want some proof that you are actually conducting business, and will also need a way to index your business in their databases. They do this using your business telephone number. In addition to just getting a business phone line, ensure that the business (and it’s associated phone number) are listed in both the 411 Directory (White Pages) and the Yellow Pages. Most phone companies that supply business lines will do this free-of-charge when you order your phone line. Because you need the Yellow Pages listing and the White Pages listing under the business name, you won’t be able to just get a residential phone line and call it a business line; and unfortunately, a business line will cost a little bit more.

- Make sure you have a DUNS Number. Dun & Bradstreet (D&B) is to the business world what Experian, TransUnion, and Equifax are to the personal credit world — they are the single biggest business credit reporting agency in the world. By going to their website or calling them, you can set up a D&B account and get an unique identifying number that will allow you to start building business credit through their credit databases. Beware that D&B will do their best to upsell you on tools to build your credit better and faster, and if that’s what you really want, go ahead and spend the money. But know that you don’t need to purchase any additional tools from D&B to start building your credit; that’s just how they make more money.

- Make sure you have a Business Checking Account.

- Make sure you are applying for credit. Get a business credit card, open a Staples credit card, open a Dell business account, open a Home Depot account, or try opening business credit accounts at any of your preferred vendors and stores.

All these things will ultimately lead to your being able to build strong business credit in your company's name.