We hear the question all the time: “How can I get a business credit card with no personal guarantee?” People want to avoid bringing their work home with them, not only mentally and emotionally but financially as well. They want their business spending to be their business spending and not be in any way connected to their personal finances. That way their family’s financial well-being will not be at risk should their venture fail, as so many small businesses unfortunately do. However, unless you own a large company, there is no escaping personal liability for business spending. No matter how you finance your purchases—be it with a business credit card, a personal credit card, or even a loan—both you and your company will ultimately be held responsible for any misuse or inability to make payments.
It’s merely a common myth that business credit cards provide personal liability protection by limiting responsibility for debt and default to one’s business. The falsity of such a belief is evidenced by the fact that business credit card applications require you to provide your Social Security Number (SSN) in addition to your company’s Federal Tax Identification Number, or Employment Identification Number (EIN). Additionally, most business credit card applications clearly disclose liability policies. Take, for example, the Ink Cash Business Card from Chase. Within the “Pricing and Terms” section on its application is the following passage:
“Individual and Company Liability: You understand that by responding to this offer you agree to be personally responsible for payment of all balances incurred on all cards and accounts issued pursuant to this application now or whenever such additional accounts may be established in the future, and that the Company is jointly liable for all balances on all accounts in the Company name. You understand that if you leave the employment of the Company, you will continue to be responsible for the outstanding balances on the accounts. You must notify us immediately to close the accounts and prevent further usage.”
Small businesses are just not large enough entities to warrant limited liability. They are generally funded by one person or a few individuals whose personal finances are directly connected to the company’s. Banks therefore view joint liability between a company and its owner(s) as more than justified. With a larger company, on the other hand, ownership as well as responsibility for the misuse of credit are likely far more segmented and the business’ financial assets far more substantial. This dynamic makes limited liability, in turn, far more appropriate for a larger company than for a small business.
The moral of the story is that, as a small business owner, you’re not going to find a business credit card with no personal guarantee. While you cannot mitigate the significance of providing your own personal guarantee, you can decrease the chances that it will come into play by approaching business spending strategically and opening credit cards with the best rates and lowest fees . After all, the best defense against liability problems is perhaps intelligent business decision making.