Guide to business credit cards for sole proprietors

A sole proprietorship is a type of unincorporated business owned by an individual. Because there’s not a legal separation between the sole proprietor and the company, the sole proprietor earns all of the business’s profits—but holds all responsibility for any debts or liabilities.

Even though sole proprietors may opt to use a personal credit card to fund business expenses, there may be advantages for sole proprietors to get a business credit card—like the ability to earn rewards on purchases. Keep reading to learn more about business credit cards for sole proprietors. 

What you’ll learn:

• In many cases, sole proprietors can get a business credit card if they earn money independently.
• Business credit cards for sole proprietors can help with separating company and personal expenses, provide an opportunity to earn rewards and, in some cases, help build business credit. 
• Capital One offers a variety of business credit card options, like the Spark Classic, which is geared toward fair credit profiles and offers unlimited 1% cash back with no annual fee.

If you’re a sole proprietor, you can get a business credit card in many cases. As long as you produce income independently, there are certain business credit cards you might be able to qualify for. Note that some business credit cards might have certain thresholds that must be met before you can get approved—such as a minimum annual business income.

If your business earns money independently, you might be able to qualify for a business credit card—even if you don’t have a registered limited liability company or corporation. Instead of using a business Tax Identification Number on a business credit card application, you may be able to use your Social Security number (SSN). And even if you haven’t produced any business income, you may still be able to qualify for a business credit card, depending on the issuer.

One way to promote more organization within your business is finding a way to separate your business and personal finances. Using a credit card specifically for company expenses can give you a record of all of your business-specific transactions, which can be particularly helpful at tax time.

Your business credit card may be able to help you establish a business credit score—if payment activity is reported to commercial credit bureaus. And as you use your business credit card responsibly and keep your account in good standing, you can work toward improving your business credit score to potentially open up future financial opportunities.

Certain business credit cards offer rewards that can be earned on every company purchase you make. You can then redeem these rewards in the form of cash back, miles or points to get more out of your credit card.

Some business credit cards offer additional features that are geared toward the unique needs of business owners. While it can vary depending on the card, here are some examples of added business credit card benefits:

• Purchase records
• Digital tools
• Elevated travel benefits
• Extended warranty protection
• Roadside assistance

If you’re a sole proprietor interested in applying for a business credit card, here are some tips as you move through the application process.

There are a variety of business card options that can suit your company’s needs, including:

• Business charge cards: This type of business card has no preset spending limit—offering a more flexible spending capacity—but you have to pay the balance off in full each month.
• Cash back business credit cards: With this type of card, you typically earn cash back at a set percentage on eligible purchases in the form of a statement credit, check or transfer directly to your bank account.
• Travel rewards business credit cards: Certain business credit cards offer travel rewards that can be earned in the form of points or miles, which can then be redeemed for travel expenses. 

When you apply for a business credit card as a sole proprietor, your personal credit score may be considered. Reviewing your credit score can give you a clearer understanding of your financial standing and help you determine which cards you may qualify for. Learn more about how business credit cards can affect personal credit.

If you’re applying for a business credit card as a sole proprietor, you may be required to provide the following information:

• SSN—if you’re not using an Employee Identification Number (EIN)
• Legal name of the business
• Annual business income
• Industry type
• Business contact information and address

One way to better understand the business card options available to your sole proprietorship is getting pre-approved. The business credit card pre-approval process lets you find out which cards you may be eligible for—without impacting your credit score.

There are a variety of business credit card options for sole proprietors, and the best option for you depends on your specific business needs and goals. Before you apply for a business credit card, here are some questions to ask yourself:

• What type of business card do I need? From cash back business credit cards to business cards with no preset spending limits, there are a variety of card options available to suit different company needs.
• Should I pay an annual fee? Some business credit cards have an annual fee—especially if they have elevated features. Before applying for a business credit card with an annual fee, analyze your company spending habits and determine if the card benefits outweigh the cost of the fee.
• What’s the prospective business card’s rewards structure like? Depending on the business card, there are certain rewards programs—like cash back, points or miles. Determine what your company typically spends money on to find a card that best rewards you for your business spending. 
• What’s the interest rate? As you’re reviewing business credit card options you might be interested in, compare the cards’ interest rates so you can fully understand the cost of borrowing.
• Are there any additional benefits? Different business credit cards offer different benefits and features that you might find valuable for your business. For instance, elevated travel features, enhanced security protections and employee cards are examples of card benefits that could help you move your business forward.

One Capital One business credit card option for sole proprietors is the Spark Classic. With responsible use of Spark Classic, you can build credit while earning unlimited 1% cash back on all business purchases—without any category restrictions or limits. And with no annual fee, you can take advantage of top-tier benefits, digital tools and security features to help you better manage your business.

Spark Classic is geared toward those with fair credit profiles so you can build a strong foundation as you move your business forward.

If you’re deciding whether you should get a business credit card for your sole proprietorship, you might consider other funding options, such as:

• Self-funding: Sometimes referred to as bootstrapping, you can use your own financial resources or consider asking friends or family for capital to fund your business. This option typically lets you maintain full company ownership.
• Crowdfunding: This strategy involves raising funds from a group of people—known as crowdfunders. In most cases, crowdfunders don’t have any company ownership stake, but you might compensate them in other ways, like providing them with a company gift or giving them public recognition.
• Venture capital from investors: You can fund your business by turning to venture capital investments, but note that investors typically receive an ownership share in your company and may have decision-making power.
• Small Business Administration loans: These types of government-backed loans are options for business owners who are having difficulty getting a traditional business loan. They tend to have longer terms and lower interest rates, but eligibility requirements could be more stringent and you may need to guarantee collateral or put money down.

If you’re a sole proprietor, you might consider using a credit card to separate your business and personal expenses, earn rewards on business spending and potentially build your credit scores. Take the next step and compare Capital One business cards today and get pre-approved to see which option best suits your needs—without impacting your credit.