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I Bought a Small Business. How Do I Get a Business Credit Card? – Eve

“Dear Steve,

I recently bought a small business that my father established before his death about a year ago. The business consists of intellectual property (music he composed, books he wrote, a piano teaching method, and audio CD’s to accompany same) created and marketed solely by my father.

For the past year since my father’s death, my brother has “unofficially” been running the day-to-day operations of the business. I assumed ownership because my brother refused to, officially, and the Executor of the estate was going to close the business if no one stepped up before April 15.

My brother removed all business related property from my father’s house just before and soon after his death. We are not communicating. I am now the official owner of that business-related property. I need it, yet he is ignoring my written requests to transfer even minimal materials needed to reproduce and ship products to fill existing orders. So, I need to establish credit in order to purchase needed materials, so I can fill orders and keep the business running.

What is your advice for establishing first time owner/small business credit? Where can I order a free business credit report? And, any words of wisdom as to how to interact with my brother in this regard will be greatly appreciated … many, many thanks!

Eve”

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The Answer

Dear Eve,

I Bought a Small Business. How Do I Get a Business Credit Card?   EveRunning a successful business is hard enough when things are working in your favor. In this case the person you really need to help you make this a go, your brother, is fighting against you.

There are so many potholes and problem areas here that I’m not sure where to start.

I’m concerned about the fact your brother removed all the business related material, you bought the business, and he refuses to give it to you. When you bought the business did you obtain clear ownership of all the intellectual property and ownership to all works produced?

Before you even think of filling orders you need to resolve the issue of what you actually purchased as a business. Did you get the masters and artwork to even reproduce items?

It would be easy for your brother to make a claim against the business or hold you back or sue the hell out of you later if what you bought is full of holes. Heck, with all the business property in his possession he would be able to sell the business to someone else or continue it on his own.

Nobody is going to give you a loan as a start-up business with no track record. They might give you a business loan as an existing business but I’m not even sure if you have the historical business records to show the strength of this business as collateral for a loan.

Most startup companies are required to have their owners or officers personally guarantee the line of credit and so it’s just easier to use a dedicated personal credit card for business transactions. If you were willing to personally guarantee the loan you could look at LendingClub.com.

There would be no business credit report to pull if the company was not a registered corporation, LLC, etc. Did you get the business tax ID number?

Before you do anything I would strongly suggest you follow this three step approach.

Step 1 – I would suggest you make sure your purchase agreement successfully transferred all the intellectual property and exclusive right of ownership of the intellectual property to you. Without that, you’ve got nothing.

The best guy I know for intellectual property issues is:

Fred Samuels, Esq.
Cahn & Samuels, LLP
CahnSamuels.com
202-331-8777

If you contact Fred, tell him Steve said “Hi.”

If your business purchase agreement cross the intellectual property hurdle then move on to step two.

Step 2 – you will need a local attorney that is licensed in your state to make sure your business is organized and registered properly in your state for you to conduct business.

If the local attorney says you are kosher and good to go then move on to step 3.

Step 3 – you will need a qualified accountant to help you make sure the business does not have any lingering tax liabilities and who can prepare a balance sheet or profit and loss statement to help you when you apply for a business loan or line of credit.

Frankly, if you don’t follow that reasonable path to deal with this the odds that this will wind up poorly are exceedingly high.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

I Bought a Small Business. How Do I Get a Business Credit Card?   Eve
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If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Eve

    Huge thanks, Steve. To address your questions/concerns: (1) with regard to clear ownership/business track record – the business is an established partnership w/EIN #; the “partners” were my father and his friend, the now Executor of the estate, who is also an accountant. When I agreed to “buy” the partnership, the Executor forwarded to me a Bill of Sale, I drafted an “Amendment” to same wherein I listed, in great detail, property received (my brother did, when he quit, send to the Exec, templates (written and recorded) to reproduce works), I also included a detailed account of my brother’s actions, the property removal, etc., and included an email from him to the Exec, bowing out, and advising he’d shipped “all materials necessary to continue operations of the AJMP,” and I created a footer with the title “Bill of Sale and Amendment to Bill of Sale AJMP (partnership name) w/ pagination “1 of 12,” etc., added signature lines for buyer and seller on the first page, which is the original Bill of Sale and on the second to last page, the end of the Amendment, as well as language incorporating the Amendment into the Bill of Sale, and added notary blocks for each state, and forwarded same to the Exec. He signed and notarized in his state, WV, has forwarded same to me, and upon receipt I will sign and notarize in my state, PA. My hope is this is a legally binding agreement. If you are willing to peruse, I am willing to send that document …. (2) My brother never signed a Bill of Sale and stated in emails (forwarded to me by the Exec) his non interest in owning the business (he does not want a paper trail evidencing income); (3) the partnership is registered in WV, with a PO Box in MD; (4) and the Executor is now preparing tax forms to file timely and will forward same to me when complete. I think that addresses your questions. Please know that your feedback is extremely valuable and greatly appreciated. Now, that you know this is a registered partnership with an EIN, what is your advice re a business credit report? Additionally, there is at least one credit card account in the name of the business with a 0 balance and a $10,000 credit limit. Does it make sense for me to contact this company, once I have my ducks in a row? Again, many, many, many thanks … I’ve sent your info to a BK attorney in the area, encouraging him to consider joining the BK education team. Anything I can do to return the favor of your generosity, please let me know.

    • http://GetOutOfDebt.org Steve Rhode

      You can upload the agreement to me at http://getoutofdebt.org/confidential-tip-form/

      As far as payback foes, please comment on reader questions when you can to add encouragement and/or feedback. That means the world to readers.

      The two state issue is interesting. If you are using the MD address for the company you’d need to make sure it is registered as a foreign corporation in MD. Otherwise just use a WV address.

      If you have an EIN you and/or your accountant should check with the IRS to make sure there are no lingering taxes owed. That’s a surprise you don’t want.

      On the credit card, you will need to make sure who is the authorized party on the card. If it was the business, great. But may times the card companies have the officer personally sign for it. In that case you would need to let the bank know he passed away and you want to take it over.

      On the business credit report you can go to http://www.dandb.com

      So was your brother never an owner?

      If your brother was never an owner I would contact a local attorney and have them contact your brother and make a demand for the prompt return of the intellectual property you now own.

      Better to get it back than have him trash it.

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