Does having more than 1 business entity hurt your credit score?

[JasonParker]

Anyone know the answer to this? I heard this from a friend of mine but can't find anything about it.

I need to set up a separate entity for a large JV partnership.

[SageSound]

"Your" credit score is YOUR credit score. It's kept under YOUR SSN.

A business entity with it's own TIN will NEVER show up under YOUR SSN.

Or any OTHER entity's TIN. They are all completely independent.

Businesses are like people -- the information is not comingled any more than your credit might get mixed up with your siblings.

That's the whole idea. You can have a crappy credit profile for whatever reason, and if you set up a separate business entity (legitimately), you can apply for credit within the business independently of your own personal history.

Just be aware ... the credit laws like FCRA and FDCPA apply to CONSUMER credit, not BUSINESS credit. Businesses have an entirely different credit thing, and I believe that only Experian keeps track of business credit histories. But Dunn & Bradstreet factors in as well.

NOTE: once you mess up your business credit, there's very little you can do to correct it.

HTH
-David

[jaggyjay]

Jason,

I can't say with exact certainty, but I don't think it will have any affect on your score. Consider those who "nest" their corporations and other who run multiple businesses using LLPs, LLCs, etc. In my experience working with these folks, their credit scores weren't impacted one bit. I don't know the specifics of your situation and I'm not an expert - but, again, I don't think it does based on my experience.

Of course, you may wish to speak to tax pro, accountant, or asset protection professional to cross reference the facts.

Good Luck,

- Jay

[JasonParker]

Thanks guys

I didn't think it would effect personal credit. I've just been harassed by a friend who knows nothing about business to not have 2 separate LLCs lol...

[SageSound]

Originally Posted by jaggyjay

I can't say with exact certainty, ...

You CAN say with exact certainty ...

When was the last time anybody else's financial actions affected YOUR credit profile, other than in cases of fraud or identity theft?

Your parents? Grandparents? Aunts? Uncles? Siblings? Kids? Neighbors?

What about any of the companies you've worked for? Or banks you've used? Or credit card companies?

Credit profiles are restricted to one SSN/TIN. That's it. Any "bleed-through" is either from fraud or in very rare cases, the result of stupidity on the part of data entry people somewhere. However, it also happens sometimes between spouses who aren't careful in how they fill out financial applications and tax forms.

Business entities that have their own TINs are just like people -- their credit is their business.

However, sole proprietorships fall under your own personal SSN, and any actions you take for such a business fall directly on your own credit history.

I've just been harassed by a friend who knows nothing about business to not have 2 separate LLCs

Sometimes people confuse an LLC taxed as a partnership as being a 'pass-through' entity which they think also refers to legal aspects being pass-through as well. That would pretty much negate the whole purpose of setting one up, wouldn't it? The earnings pass-through for tax purposes, but not the legalities.

-David

[JasonParker]

Originally Posted by SageSound

Sometimes people confuse an LLC taxed as a partnership as being a 'pass-through' entity which they think also refers to legal aspects being pass-through as well. That would pretty much negate the whole purpose of setting one up, wouldn't it? The earnings pass-through for tax purposes, but not the legalities.

-David

I think you're right. He may have heard an LLC is just like being a sole proprietor when it's not, but seems like it when you do taxes. So to him it's probably like having 2 credit cards if you have 2 LLCs.