If you are self-employed, working as freelancer or in the services industry, you may be considering whether you should switch from being a sole proprietor to registering as a business. There are pros and cons of doing so and the answer is not clear-cut, which is why I ran my business as a sole proprietor for 12 years.
Despite doing the same number of transactions as I had as a sole proprietor, I was now paying double in bank fees. All because I was now a “business”. While banks are happy to hand out credit like candy when you open a personal account, when it comes to having a business account, they are more conservative. So, while I had a credit card with a substantial limit as a sole proprietor, which allowed me to book flights and accommodation when I travelled for work, this was not available to me once I opened a business account. This is because my personal credit record became irrelevant.
While extremely frustrating, I do recognise that small businesses carry significant risks. Losses on loans tend to be higher for small businesses than personal loans. Certainly, if one is applying for a large loan, the documents and vetting process are necessary, but for a small credit card limit, it appears excessive.
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