Business Structure

• Some legal business structures protect you from personally absorbing business debt. If your business is a corporation or a limited liability company, in general, your business activity and debt are separate from your personal credit and assets. If you own a sole proprietorship or partnership, there is no legal distinction between you and your business and you are personally responsible for repaying your company debt.
  
  

Personal Guarantees

• Although your personal assets and credit are usually protected when you own a corporation or limited liability company, an exception applies if you personally guarantee the credit card at the time of your business application. A personal guarantee means you take responsibility for paying the credit card balance if your business fails to do so. In these cases, a business credit card debt will show up on your personal credit report. Many new business owners must personally guarantee business loans and financing because the company does not have existing credit. Check with your credit card company if you're unsure of your personal guarantee status.
  
  

Benefits of Relationship

• The benefit of obtaining business credit that is linked to you personally is the potential for boosting your personal credit worthiness. When you make monthly payments on time and use your business credit responsibly, you may be able to increase your own credit score. With a stronger score, you may be eligible for lower interest rates that save money for your business -- and your household.
  
  

Negative Effects

• When you personally guarantee business debt, or operate a company that does not offer legal separation of your personal and business obligations, you put your household income and assets at risk. A serious default on a business debt can lead to personal lawsuits and garnishments or liens on your property.