Business Entities Explained

Hello, and welcome to this module Business Entities Explained. I am super excited to be covering this information with you because as a business owner, as an entrepreneur is so important that you have the correct structure. And many of us, which is nothing wrong with this, starting a business without being structured properly. Now I’m going to cover this now because this is going to be pivotal as it relates to getting funding from the banks and having the correct structure, not only to get money but also to make sure you reduce liability as much as possible. And when you start making money or if you’re already making money, reduce tax as much as possible. So here is what we’re going to cover. So the first thing I’m gonna break down is choosing a company, a company structure. I’m going to break down just, if you are currently operating as a Sole Proprietorship, how that actually works, I’m going to break down C Corporations, the normal corporation, many people form and have S Corporation.

And what that necessarily means. If you have one of those, or if you’re considering that Limited Liability Company, the LLC, if you have one of those. So really the common corporation or entity types that many people operate as business owners. And then, and this is just going to be good for you, even if you have a business entity so you can know how they are and what changes you may need to make, then how to choose which state to incorporate one in. Now, this one is a biggie. Now I wish I would’ve knew this information up front. When I first started my Corporation. And then I’m also going to break down for Incorporation. So if you have an out-of-state entity, assuming you form an entity in a different state, when this actually comes into play with a Foreign Corporation and really had to avoid it, and then lastly, a Commercial Address and why this is so important.

So this is going to be a jam packed module. So don’t skip ahead. You want to pay attention to this, even if you already have an existing business entity. So let’s go ahead and start off by explaining Business Entity. So when you establish a Business Entity or Business Structure, what you’re doing is you’re using your EIN, which is essentially your business Social Security Number with the IRS instead of your personal Social Security Number. And this is going to be that first part of separating personal from business. And you’ll be able to maintain a separate corporate credit file and protect your personal assets. So that’s why it’s so important that we have this knocked out also in order to get an EIN number, you must have either an LLC, a Limited Liability Company, an S Corporation, or a C Corporation, others, other entity types that you can use for a separate EIN.

But typically these are going to be the common three that you use when it comes to getting an EIN. And the other thing is you won’t necessarily be able to get, or won’t necessarily matter to get an EIN for a Sole Proprietorship, which is what I’m going to agree to get into because a Sole Proprietorship is essentially you, you are the Sole Proprietor. Now, this is also important because Business Credit Bureaus, Dun & Bradstreet, the main one, I’m going to be showing you how to build up, want to ensure that all of the businesses within their database are properly structured corporations. So that way they can. So that way they can make sure that when they’re reporting that data, they’re reporting that data to their partners about accuracy, about your company. So they have very, very strict requirements and they do manual reviews when it comes to the legitimacy of your particular entity structure.

So that’s why we want to make sure we have the correct structure EIN set up. I’ve even seen where people will set up a business entity, but not necessarily register with the IRS and have an EIN number. So we want to make sure we have an EIN number because it’s going to be important when it comes to getting your Dun & Bradstreet number. Now, it’s also important that when you create your entity with the Secretary of State, that you establish and you register that information efficiently. And then also if you’ve already registered information, you want to make sure it’s all up to date. This is another thing. This is another biggie. I’ve seen people, even existing clients and customers they’ll say, Yeah, I incorporated my business 15 years ago. And then we’ll go pull the Secretary of the State. And it’s been dissolved for five years, but they’ve still been operating because they, they were just at that place when it didn’t go into the details, we have to make sure if you have established a business entity that it’s still active, it’s still up to date.

You’ve paid your filing fees. And if it’s not, it may have been dissolved and you’re not necessarily operating an entity that can offer you any protection from a liability perspective. It can, it can even give you any potential tax advantages, assuming you don’t even have the EIN set up. So we want to make sure that all of this information is up to date. It’s so important that we do this. Now, here’s something else that you want to understand, and I’ll get into this in more detail. So let’s just say you have a corporation that’s operating in the State of Missouri. You form that Corporation in Missouri, but you’re doing business in Georgia. Depending upon how you’re doing business. And we’ll go into more detail later on in this particular module, depending upon how you’re doing business, you may have to form a Foreign Corporation. Assuming you’re doing business in Georgia.

Now one way around this though, and this is the way that I’ve gotten around it is if you have a digital product or service, this keeps all the transactions of your business within that businesses incorporated state, which means you don’t necessarily have to do that high level. So the reason why I don’t have several Foreign Corporations in all the states I do business in is because I have a digital product and a digital service. And technically all of the transactions happen at this particular location in the way in which the state I’m incorporated in and not in that physical state. Now, more on that later on this module. Now, before making any type of decision, when it comes to which business entity structure to go with, you want to make sure you do your research. Now, what I’ve done is I’ve done a lot of research.

I’ve been in a business, I’ve been a full-time entrepreneur, 8 going on 9 years. And then I’ve been in a financial services investment, and just consulting industry, financial consulting industry for about 14 years now. And I’ve seen several different entity types. I’ve seen the structures, I’ve seen the protection of understand the tax. So, although I’m still telling you do your own research, I’m also giving you the fact that I’ve been doing this for awhile. And even I practice what I preach personally and I I’ll be able to give you some additional some, some guidance here, but I’m still saying, make sure if you already have a current CPA, you consult with that CPA because they would know your situation a lot more intimately than the information that I’m giving you. However, it’s still important that you understand as a business owner, this information, because it’s going to impact three things.

Again, number 1, your liability. If something happens. Number 2, how you pay tax. Taxes are arguably going to be the biggest expense that you pay as an entrepreneur and business owner. And the number 3, the thing is going to attack is the amount of money that you can get from the bank. So this is so pivotal and it’s so important. So now I’m the go ahead and give you an overview of everything. So let’s start with the first one. If you have not created an entity and the first one, you are defaulted as a Sole Proprietorship. Now let me just explain the Sole Proprietorship and why it’s here. And essentially a sole proprietorship is the easiest type of business to establish or take part in due to lack of government regulations. So essentially when you say I’m in business, you become a sole proprietorship. So these types of businesses are very popular amongst.

So owners of businesses, individual self contractors, and consultants. Many Sole Proprietors do business under their names, under their own name. So let’s just say I’m Kenney Conwell. I’m operating as Kenney Conwell, not to be confused with Kenney Conwell as an entity and creating this business is basically the same exact as them. So it’s not necessarily for them to do all that other stuff. Now, a Sole Proprietorship is very different and this is the distinction. So because once little fun fact is the United States Government is a Corporation. You’re a Municipality is a Corporation. Everything around you is Corporations. So a Sole Proprietorship is very different than a court because, and also Limited Liability companies because, or any type of business entity LLPs whatever, because there’s no separate legal entity created. You are the entity, right? So as a result, the business owner is a Sole Proprietorship and it’s not exempt from any liabilities incurred by the entity.

So many people don’t operate as Sole Proprietorships for a number of reasons. So for example, let’s just say a sole proprietorship. You are the sole proprietorship and you have debts of the sole proprietorship and the profits of the sole proprietorship are also the profits of the owner. And then all profits flow directly to you as a business owner. Now this, from a tax perspective, I just said a lot there, but from a tax perspective, that could be problematic, but from an actual liability perspective, uh, this, this essentially puts you at a disadvantage. Now, one of the benefits that people like as a sole proprietorship, which again, I’m not recommending this is that it’s the pass-through tax avoided. So that way the entity itself doesn’t to pay taxes. Like I was saying before, however, then however, the sole proprietorship has unlimited liability, meaning whatever happens, let’s just say a slip and fall happens, or somebody chooses to sue you or you’re selling supplements and somebody gets sick or whatever happens.

And that person chooses to sue you personally. Well, if they choose to sue you personally, everything you personally own is now subject to the lawsuit and you, you cannot separate yourself from that. And then also for it’s, it’s very difficult to get capital funding, especially through established channels. Like we’re going to break, break, break down, and you really can’t issue equity. So, or get lines of credit because again, the business is being viewed as you, as a person and as individuals, if you’re the only person in that business, that technically means you don’t really have a business, you have a job you’re just operating and you’re getting transactions whenever you’re able to work. So least favorable of all the business agencies, it’s not recommended that you form an, if you are attempting to build business credit as an sole proprietorship, you do not need to do that because you won’t be able to.

And you’re going to get into a lot of red tape. So that’s sole proprietorship. Now let’s get into the next one. The next one is C Corporation. And this is what we call the Standard Corporation is called a C Corporation. It’s the most common, common structure in the United States, and many other countries. But for this particular purpose, we’re going to be discussing the United States. Now why it’s the most expensive of all the options. It also offers the most protection from liability, right? And then also there’s something called double taxation. That’s one of the caveat, is, is what, what most people don’t like, but because they don’t like it, they don’t understand how taxes work and owners end up paying both taxes for at the business level. So the corporation is going to have to have its own tax record and at the shareholder level, if you own, or you’re part shareholder in profit to the business, I’ll report it and then tax at the entity level

first. Now there’s a number of ways to make sure that even though those business taxes are being profitable, I mean tax, how do we make sure we reduce tax even at that level? So a corporation distributes, let me just break it down at corporation distributes to any portion of the remaining profits, to shareholders in a form of dividends, and then the shareholders pay their taxes on the individual level. In some cases, this is the best way that the corporation will pay. If there’s additional profits and then C Corporations are easier to be formed in an S Corporation there’s less paperwork when you filed the articles of incorporation. And by default states that you’re given a C Corp status. Now, one thing I do want to get into here, because many of you understand that I help people improve their credit, but you may not know.

I have a really, really keen perspective on reducing taxes, eliminating taxes and avoiding taxes. Now, one thing I do want to speak to, so yes, there is double taxation as a C Corporation. However, when you do become a C Corporation and there are profits, yes, you do have to pay profit tax. However, if you distribute a portion of those profits in the form of dividends, and let’s just say, you are the 100% owner of that C Corporation, that means you, you own all the shares. Well, there’s something called qualified dividends or dividends. And dividend income is not taxed the same exact way it’s earned income. So your earned income tax rate can be, is significantly higher than a dividend income tax rate. So that’s why even if, yes, there’s double taxation, you know, if you’re not passing through that profit to another entity, so to speak, and you’re paying a dividend tax, that’s a lot less. Case

in point, 1 year, I pay it myself over a hundred thousand dollars in dividends, but only paid $7,000 in tax. Had I pay myself a $100,000 in income as another entity, I would have been paying 15% to 25% in tax depend upon Self-Employment tax, Medicare tax, all that stuff. And it completely avoids that. So just a small little tidbit to get into. I won’t make this about taxes. However, that’s the C Corporation is a couple of more things I want to explain about this. So the other thing about a C Corporation is a Sul Juris, which means it’s owned by the shareholders and it’s viewed as a separate person, right? It’s, it’s a separate person. And because of this, the shareholders can not be held personally liable for the debts of the corporation. So the shareholder’s personal liability is typically limited only to the amount of shares invested in the company.

Okay. Now, one of the benefits is shareholders are typically not responsible for the debts of the company. And even if you are viewed as a shareholder, depending upon how it’s structured, you can still not be held personally liable for the debts of the company. Although one of the things I broke down is the ability to ensure that you know how to make money. Now, C Corporations have unlimited shareholders. So let’s just say, you, you start growing this thing and you want to get other people, other investors that makes it easier for them to want to get a portion of that corporation because it’s cleaner. And then it can get, get actual shares and have that structured with a company or a law firm to help you do that. Another thing is ownership is easily transferrable through the sale of stock. So again, it’s not that easy.

It’s not that difficult to transfer ownership. Because all you have to do is just share that stock. So again, all of this all sounds all like, man, I might have a fortune 500 company, but you want, you want to be thinking about all of these things from a legality standpoint, ownership standpoint, tax standpoint, profit standpoint. Because it’s going to help you in the longterm. If you have intentions of being in business 5 years from now, let’s go and make sure we set it up correctly. Business is a marathon. It’s not a sprint. Now C Corporations have an unlimited life extended behind illness or death. So what’s one of the things. So when there’s an actual corporation, it’s viewed as its own separate entity. So that’s why companies can be in business for hundreds of years and still to go still continue to work. Still continue to like Ford.

This has been in business 100 of years. I mean not a 100, but over a 100 years. And several other companies have been in business past the original founders because it’s actually viewed as a, as a separate corporation. Additional capital can be raised if you choose to share stairs of C Corporation stock. So let’s just say, Hey, look, I want to share some shares of my stock. I can go out and raise capital and do that. And then also customers may perceive you as a more professional entity rather than especially as being a Sole Proprietorship, Partnership or an LLC. And then they’re typically all that it less frequently than sole proprietorships. And then certain business expenses may be tax deductible because you’re viewed as an actual corporation. nd then forming a corporation can result in a result of self-employment tax savings. Because again, that’s one of the taxes you have to pay as a, as a normal sole proprietorship, independent upon if you’re a schedule C you have to pay that self-employment tax.

So they’re viewing you as self-employed, but when you’re a C corporation, you’re technically forming a corporation, a business entity, and then it’s going to help you from an actual standpoint of lowering taxes and reducing liability, and then may provide a number of income tax savings. Actually, it will provide a number of income tax strategies. I know personally. So, that’s the C Corporation and that’s how it works. Now, a couple of things that you need to understand about S corporation. So the only difference between an S corporation and a C corporation is that there’s a special tax election that you have to file, its called form 2553 with the IRS. And S corporation special tax statements, tax status eliminates what we call the possibility of double taxation. But let me be clear when I talk about double taxation, all this means is that whatever profit that corporation shows flows through to your individual tax return.

So yes, you’re avoiding double taxation, but that income flowing through to you personally, is still going to be subject to earn income as opposed to dividend income. So yes, you are avoiding tax, but not necessarily the most effective way. I’m not saying it’s not. But when you start making lots of money, I would say, half a million, a million dollars, you really want to start getting into tax planning and destruction. But the point I’m making here is that the difference between the S and the C is that the S has the form file that form 2553 with the IRS, and then the profit and losses of the corporation are passed through to the shareholders and or owners individual 1040 or tax returns, right? So, and you still have to, and you also have to pay yourself a reasonable compensation. So because it’s going to avoid self-employment tax.

So one of the benefits is the same benefits as a, as a C corporation from a, from a structure standpoint. And then as corporations avoid the possibility of double taxation. But again, I’ve already broken down that just because I have to pay taxes as a shareholder, doesn’t mean I pay taxes as a shareholder on earned income. Earned income and dividend income are taxed two totally different ways. All right. So that’s the biggest thing you have to understand here about the whole taxes. Now, let’s go ahead and get into Limited Liability Companies. Now, the LLC is, is a whole different structure, as we know, and they’re popular because similar to a corporation owners do have personal limited liability for the debts and actions of the businesses. And LLCs operate more like a partnership, providing a management, providing more flexibility for the management, and then also pass through taxation, very similar, like an S Corporation and owners of an LLC are called members and not necessarily owners.

So that’s why you, you may see, and I’ll cover this later on. You have articles of incorporation, which has to do with S and C, and S Corporations, then articles of organization, which has to do with LLCs because it’s viewed as an LLC and it has members, and then whether you are individuals and then those members can be individuals, corporations, or other LLCs and foreign entities. So that means that that corporation or this LLC, so to speak can be owned by another LLC. When there are rules of thumb, when, and again, want to make this all about structure is I’d rather have a corporation own LLCs versus having an LLC because my corporation could be an owner or a member of that LLC, so to speak, but I don’t to start getting all this high-level stuff. You just need to understand that an LLC is it can, its viewed as members, not necessarily shareholders.

Now there’s no maximum number of members for an LLC. However, having more than one member will classify the LLC as a Limited Liability Partnership. And there are special rules for LLCs for information on the kinds of tax returns to file on how to handle employment tax in the possible pitfalls, please refer to Publication 3402, Tax Issues for Limited Liability Companies. I’ll include that publication below, but just know that when it’s an LLC, it can be taxed. That’s the, that’s the thing about the LLC, before I explain this next thing. The LLC has flexibility from a tax perspective, the LLC can just be Limited Liability Company. You could be viewed as a single member, LLC, and it can be taxed as a individual on your individual tax return. It can be taxed as a partnership. It could be taxed as a corporation, meaning the LLC itself would pay tax.

And then you as an individual will pay tax and it can be taxed as an S corporation, meaning it just passed and flows through. So the LLC from a tax perspective is very, very flexible, but here’s, here’s one of the things you need to understand about an LLC, which is why I said what I said before about, about limiting liability. Now, a negative to the LLC is that in some states LLCs can’t dissolve until the debts are paid off. And in every state, there’s an option to negotiate and get an agreement from creditors to settle for a lesser amount. But the average is $250,000 in total debts before the state allows disillusion and the debts are negotiated, they can be negotiated a lot lower, but you may be able to close account, but you may not be able to close any accounts before dissolving. So what does this mean?

This means if your LLC has debts, that’s over $250,000 and for whatever reason, worst case scenario, you’ve, you’ve got to go out of business. Well, you won’t be able to dissolve that entity without putting a new agreement in place, right? So that’s why that’s, that’s the distinct difference of, of the LLC versus the Incorporations. You can dissolve that corporation if the corporation has debts, right? You could just go ahead and dissolve it. Now, I’m not saying to do that, but that’s, that’s one of the things you have to understand when it comes from a liability perspective. But one of the benefits that you have to understand is that it’s cheaper to Incorporate than a C Corporation or an LLS or an S. And then there’s a little bit less paperwork meetings and all that stuff. However, again, that’s one of the things you have to consider.

So that’s why I was saying, when it comes to structure and forming business entities, I’d rather you have a corporation own your LLC, because now if something happens that corporation I becomes liable and then that corporation, again, you can dissolve the corporation. And then all of those debts that was owned by the LLC can now be owned by the corporation and then boom, the corporation can be dissolved and then relations you. So it’s almost like you want to be thinking about like a web. So again, this is just the LLCs perspective on it, and I’m not trying to give you any legal or tax advice. I’m just breaking down how it works. So that way you have a clear understanding, but it’s so important. Many people don’t understand this whole thing about being able to dissolve the corporation and just to be clear, dissolve the corporation means in the corporation and no longer be responsible for any of those debts.

So to speak personally. And that also has to do with if you personally, guaranteed or not, which is another thing we’ll get into, but, and then that’s how the LLC works. Now, a couple of things, Also, about the LLC. So owners/members of an LLC are typically not personally responsible for debts and liabilities for the business up to $250,000. So what this is meaning is that first 250, like I was saying, it is, if anything over that, they’re going to be like, Hey, look, bro, what’s going on? Now, another thing it’s going to do is avoid double taxation because it’s going to give you the ability to pass through to your individual tax return. And then there’s no restriction on the number of owners that can have. So LLC is, again, I’m not here to point fingers at the LLC. And the LLC is a very, very powerful entity.

It’s very, very powerful, especially if you’re doing like business with other people involved or other transactions, you don’t have no issues of issuing stock is really good. And then flexibility and distributing profits. Like I was just saying, so it’s a lot easier to distribute profits without being required to ship with them equally and accordingly to ownership percentages, because I can have an LLC and I’m not necessarily an owner, but I could distribute a profit percentage based off what our operating agreement states, um, owners have more choices on how to run a business and make decisions. And that really are some of the benefits of the LLC. Now, that’s how that works. Now, how do we choose a state to incorporate it? Now, a few things, the corporate credit building process is going to remain the same, regardless of which state you incorporate in, right?

So I want to make that clear. It doesn’t matter what state you go in. However, if you live in a different state than the one you plan to register, and for example, you live in California and you plan to register in New York, you must have a commercial address in a registered agent in that state you plan to incorporate it. So the credit bureaus will check this information. Now I’ll get into the weeds of this, but essentially what I’m communicating is if, and I’m going to recommend the best states to incorporate in, if you don’t incorporate in your state, I’m going to show you how to make sure you have those details. So I’m going to recommend in this, in this actual module, this section, building a business entity, the best states to incorporate in, and I’m also going to break down the fees in order to incorporate in that state and compare the cost.

And then when running a business, for example, and making money, I’m going to seek out. I’m going to also break, break down or help you understand to seek out that that state doesn’t have any taxes, to pay state taxes. So states like this, Florida, Alaska, Nevada, South Dakota, Tennessee, Texas, and Washington. They don’t have state taxes. So this is huge. And again, hindsight being 2020 Georgia, man, Georgia beyond my behind, and, and now have essentially figured out how to not pay Georgia state taxes because I’m incorporated in the state of Georgia. So anyways, not to get into the weeds of it, these other states forming a corporation in will avoid state taxes, but it doesn’t mean that you have to physically be there, but you just have to have the proper documentation to show that you’re there in order to be incorporated in a particular jurisdiction. Now, and let me explain a little bit more on that. So essentially what I’m saying is let’s just say I form in a corporation, I find a Nevada registered agent and I find a commercial address in Nevada, but I’m technically in Georgia.

Well, I can still technically operate that foreign entity and be subject from Georgia to Nevada’s particular jurisdictions, but not necessarily because again, from a tax perspective, federal taxes is the most important, and then we can avoid paying state taxes. If that makes sense. So technically I can own and control a Nevada corporation and not be subject to all the requirements of Nevada state tax because Nevada doesn’t have state tax, even though I have a Georgia residency, hope that makes sense. Now, a Foreign Corporation. So out of state entity. So what does this mean? Now, Corporations and LLCs incorporated in one state and doing business in another state may be required to file a foreign corporation.

Also known as a foreign qualification to do business in that state. A corporation or LLC is considered domestic only in this state in which it was incorporated. And so going back to that example, so and I already, already kind of explained this. So if I am a Georgia resident, but I have a foreign corporation, no, excuse me. If I, if I’m a Georgia Corp, if I’m a Georgia resident, but I have a corporation formed in the state of Nevada, but all of those transactions happen in that state. So to speak physically or it’s, that’s where it’s viewed. And I’m saying, Hey, look, my place of business for this foreign corporation is the Nevada isn’t is Nevada where everything is registered in Nevada. So that’s the why, that’s why I would avoid state tax. But let’s just say, I start transacting physical business in the State of Georgia.

Like I’m doing physical things in Georgia. Now I’m going to have to, I’m going to have to create, depending upon the number of transactions I’m doing a foreign corporation, which is now going to be subject to Georgia state tax in this example. So, in all those states, a company registered as a foreign corporation or LLC, for example, I just wrote this down. If you have an office in Georgia, now I have to file a foreign corporation. Now, a couple of things you want to consider here. So there’s many factors when transacting business in the state, that’s going to take into consideration. And again, this is just something for you to understand. So the first thing is, does a company have a physical presence in that state? Right? So if I have a physical presence in the state of Georgia, but I’ve, I formed a Nevada corporation, that’s one thing to consider.

The other thing to consider is does the company have employees in that state? Okay. So does my company have employees in this state that I’m doing foreign transactions in. Chances are probably would be no. Does a company accept orders in that state. Physical orders, not digital orders and does a company have a bank account in that state? Okay. Did I create a bank account in that state or did I form the bank account in the other state? So all of these things are going to help you determine if you need to form a foreign corporation or not. Now, keep in mind, Corporations and LLCs are subject to taxes and annual fees in both states of formation, in any states where the company has qualified as a foreign entity. So what this means is if you are a corporation, going back to this example in Nevada, okay, you, you you’re a Georgia resident, but you formed a Nevada corporation.

You have a commercial address, which I’ll cover next. You done the registered agent, you structure correctly, and all of your transactions are technically viewed to be happening in Nevada. And you form a physical presence in the state of Georgia. You have an office in Georgia, you have employees in Georgia, you’re physically transacting, separate transactions in Georgia. Then you would have to form a foreign Georgia corporation. And then now be subject to file Georgia state tax on that transaction business, to keep it simple. In my opinion, I just have a, if I, if I did this, I just would not do a physical presence in that state. Right? I mean, if I did, I just need to understand how this works, right? And I want you to understand how it works. So you’re clear. Now, commercial address, this is a very last thing that you have to understand, and you have to get now from a commercial address standpoint, um, business, this, this, this is probably one of the biggest red flags that throw people off when it comes to building up corporate credit.

Now, if your business is running a home-based business, which, which many people do nowadays, we understand it’s the easiest to form, but just like everything else in the corporate process, we want to separate our personal from our business. So this is the biggest reason why businesses fail to get funding is because the creditors don’t want to lend to home-based businesses because home-based businesses tend to be smaller corporations and lenders feel they don’t need as much credit. So I’m not saying that you’re not making over a million dollars from home. Hell I am. But from the public perspective, my corporation has a commercial address physically. And that’s what I use for everything. I don’t use my personal address. So what we want to make sure we understand is going into this, we have to establish a commercial address. Now there’s a few ways we could do that.

Again, the reason why is because we want to make our business appear as large as possible because your business address is a part of your credit profile and the credit bureaus. Absolutely. And lenders will want to know what type of address you’re using, residential, industrial or commercial zoned. And they’ll be able to know if it’s residential, because it’s going to be a residential address. So for example, Dun & Bradstreet, the main credit bureau we’re going to be building up. What mentioned, Hey, look, businesses occupies a two-storey building with a 2,000 square foot office space. So using a home address in line is not a wise idea. So what it does basically describing is if you put your house down, they’re going to describe your house. Okay? And most credit bureaus and creditors will not accept P.O. Boxes at all on credit applications and some lenders entirely rule out home-based businesses completely.

Okay. Completely. So we don’t, we just don’t want to bark up this tree. So again, going back to the beginning of this particular section, this module, that’s why I said, if you have a current business entity, you want to still review this because you may have a current business entity using your current home address, which is not what you want to do. Now, you need to have a separate physical address that can receive mail. Even better if it’s commercially zoned or industrial zone, banks can use and see this info. So let’s review the options. So you can still have a commercial address. And there’s a few ways you could do this. So a commercial address. Now, why is this important? It’s already zoned with the, with the, with the mailing services as a commercial address, which is what we want because commercial means business.

Now, a regular commercial zone address for commercial or commercial office space is best and will result in the most credit approvals based off my experience and a small commercial office for a couple of hundred dollars a month is what I would recommend you do even if the square footage is not there, where we don’t care, what we’re really looking for is the address. Now, there’s so many different options that you can do when it comes to sharing an office or renting an office mailbox. I’ve been doing this for years, literally years. So I have had the same commercial address since 2014. At this point, I’ve had that address for seven years. And if you don’t, if you don’t, you know, have one, then there’s a few options here. You can ask a friend or family member who may have a business address. Hey, look, can I, you know, can I use your commercial address?

Or you can use something called you can go and search on officespace.com or loopnet.com for office space. And then ask them and say, look, if you just find a commercial address, that’s close to you. Just say, look, can I pay you 20 to 50 bucks a month just to use your address? Do I just want to use your commercial address space? I’ll pay you some money. And then when the mail comes is telling me, I’ll come pick up the mail, right? And then just let them know I’m going to have mail come there. Now you could also use, or you can go to your business district and, you know, in the state you’re registered in and then ask the property manager or owner, if you can pay them to use one of their unused mailboxes. So there’s a lot of different options here. You can get real flexible when it comes to getting that commercial space.

But, you know, the one thing I do want to make, make sure you understand is commercial, because there’s, cause you’ve got the, you got this option here where you could do sharing like officespace.com or you can use, what’s another one? Regis there’s several different offices.com. There’s several different space. I think it’s called spaces. There’s several different ones that you can use, but the, the easiest one is if you already know a business owner that you have a relationship with, just walk up to them and just ask them, Hey, look, I’m looking to build instruction. I just need to use a commercial address and I’ll pay you cause I’m trying to, and the way I would position is I’m trying to separate my personal from my business. And I don’t want any of my business stuff coming to my personal address for a number of reasons.

So I just want to use a commercial address, right? Because again, the other thing about businesses is that this is public record. So another reason why you don’t want to put your home address on your business entity is because someone can just easily Google that and just come see, see about you. Again, you want to eliminate failures and option. So this breakdown as we’re wrapping this up commercial mail receiving agencies and virtual offices. So a commercial mail receiving agency is a private business that accepts mail from the postal service for recipients IEU and its customers. The office keeps a mail for collection and review, and sometimes it’s emailed to you depending upon the service that you go with and or mail to another post mail to another location with newly paid postage, a virtual office gives a physical address without needing a long lease and staff.

So this is what I’ve been doing for years. So what the virtual office employees can work from anywhere if you have employees and it doesn’t necessarily matter, but still have a mailing mailing address, phone answering service, if you choose that in video conferencing services. So I’m frugal. I just have the address that I use and I don’t use a phone answering service because I’ve set up a phone insurance service separately, but you can get that. Now it’s so pivotal that if you do a commercial mail receiving agency or virtual office, that you verify that the address is a real commercial address with an actual suite number rather than a personal mailbox. Okay? Because when you, you know, because you don’t want it to say PMB on the front, so you want to call that particular company and ask, Hey, if I rent a virtual space from you, will my address be exactly the same as your actual commercial address rented on the physical office space?

Is it going to be the same or will it have PMB in the front of it? So if they say, yes, it’s going to be a virtual office and not a personal mailbox, then you can move forward. If they say something like, well, we have to like, for example, UPS, I do not recommend using the United States Postal Service or UPS because they’re going to say, Hey, look, it requires that we use a term PMB in front of our address, but we do have a suite number. This means it’s going to be viewed as a personal mailbox, which means it’s going to, to drop a red flag with the Dun & Bradstreet. So, and that’s what you want to avoid. Now, there is a website called anytime mailbox, but anytime mailbox has a mixture of addresses that are personal mailbox addresses and some do not.

So we want to make sure we avoid any address any mailbox that has PMB. So what am I saying? If you do go down the road of using any town mailbox, just make sure that particular location that you’re seeking does not have PMB in front of it. Okay. So this is an example, if I’m showing you, so if you went to this one and this particular address, notice it says PMB, we do not want to use this at all, because it’s going to be a red flag, because like I’m saying, it doesn’t matter what you go with, but when you go and you start doing, in building the credit, they’re going to do a manual review. Now, as we wrap up here from an entity perspective, it doesn’t matter what option you go with, whether it’s an LLC or a C corporation, it’s just important that all the information that you have is lining up.

It’s all, it’s all important. And we don’t want to exaggerate or make information up on our credit bureaus because they are going to do a manual review. And if any type of information shows up, like, let’s just say you have a PMB, a personal mailbox, because you didn’t do your due diligence on the front end and your stuff isn’t lining up. It’s a, it’s a home address. Now you’re going to go into the high risk review section of Dun & Bradstreet, and your name is going to be associated with that. And once you get into the high risk review with Dun & Bradstreet, good luck on getting out. You do not want to go there because they’re going to be like, this person is sleeping around. So we need to, we know red flag, this person, and even years ago, random tangent, when somebody refers first for his broke down business credit to me, like back in like 2008, I was still in college.

She used to work for Dun & Bradstreet. And she said, yeah, we used to red flag people all the time. And then once we, once that person’s red flag, they red flag. Right? So I don’t want that to be you. It’s important to us to be transparent and honest. And the way we do it is we just take the proper precautions and the proper steps on the front end to ensure that we’re structuring everything legally and ethically and correctly. So that way we, we do all the necessary steps that they’re going to want to view us as a larger corporation. Okay. So hope this helps. And I will see you in the next module