osonda

I don’t have a business but want to get business credit cards for the points. I am considering creating an EIN for a sole proprietorship business and applying for business credit cards with it.

A few questions:

1 - Bloggers always say I can do that even if I don’t really have a "real" business, and that a side hustle will do. They say: “a business can be anything: selling on eBay, walking a dog, etc”. But why does that even matter if you are actually doing those things or not? Is the CC company going to check, and how could they? How does the CC company know you are performing these business activities, and what happens if you don’t?

2 - If I am just charging personal expenses to the business CC, does that matter? Does it have any implication for taxes (my scenario is EIN with sole proprietorship)?

3 - Is it legal/ok with the IRS if my revenue is near 0?

4 - Is it legal/ok with the IRS if I am charging personal expenses to the card? (I do not intend to deduct any of those personal expenses as business expenses when filing taxes.)

5 - Is it legal/ok with the IRS if I am paying the card from a personal account?

6 - I know I don’t need to file taxes separately for a sole proprietorship business, and that I do it in my own tax return. But do I have to include this business information in my tax return even if I am just using it for personal expenses and not deducting anything?

7 - Is there a limit for the number of business cards you can get (something like the Chase 5/24 rule)? What if I use multiple EINs?

Thanks in advance for your help.

mia

There is no compelling reason to use an EIN to open a "business" credit card as a sole proprietor. The card is issued to an individual, not to a company. You must still provide your Social Security Number on each application, you are still personally responsible for the debt. Creating additional EIN's does not make you more creditworthy or allow you to open more cards.

The IRS has no special interest in "business" credit cards. If you have a real business, and if you commingle personal and business expenses, this can create tax problems, but this is due to your bookkeeping procedures, not to the type of credit card. "Business credit card" is a marketing term. It's how a card is used that matters for tax purposes.

Simply opening a "business" credit card does not create a business for tax purposes.

osonda

Thank you, mia .
Good to know the IRS doesn't care.
What about the credit card company? Do they care if there are no business activities going on? Why do bloggers always stress the "side hustle" aspect of it? I heard some people saying the credit card company gave them a "hard time" for not having a real business, but they didn't give any details and I am curious why or how that would happen.
Finally, any information on the 5/24 rule? Do they apply to the combination of personal and business cards, even if using EINs? I've seen people talking about the 5/24 rule only applies to the first business card, and then no more. Any confirmation on that?

mia

Card issuers like to open business accounts, but they cannot knowingly issue "business" cards for personal use due to regulatory differences between personal and business accounts. However, once the card is open they are not particularly interested in how the card is used. This is a generalization, there will be apparent exceptions. Card issuers are mass market companies. They are not interested in any individual customer, but if they decide to close your account they might cite a provision in the business card terms to justify it, but that does not mean it is the real motive for closing.

Using an EIN changes nothing because you also provide your SSN.

Chase's unpublished 5/24 policy does apply to business cards, but opening a business card generally does not increase your 5/24 count because business cards are generally not reported to personal credit bureaus. Please see this thread: Applying for Chase BUSINESS Cards (April 2020 - 2022)

Dr Jabadski

I’ve noticed the same thing. I’m far from an expert about all this but (mainly for Chase 5/24 reasons) I’ve had many business credit cards (sole prop, SSN not EIN, 0 employees, business income same as personal income, number of years in business same as years since graduating medical school) with marginal business credentials, more a business concept than a “real” business 😉 and of course I did once stay at a Holiday Inn Express* 😊.

Many of the bloggers receive substantial advertising income and/or referral payments (for completed successful applications via their links) from credit card issuers. Perhaps those agreements include not promoting business cards for those without a business.

(* “Some years ago, a large lodging chain ran a TV commercial depicting an operating room with surgeons and nurses gathered around the patient. One member of the team begins issuing orders on what to do to save the patient. A second asks, “Are you a surgeon?” He replies, “No, but I did stay at a Holiday Inn Express last night.””)

EmailKid

Apparently don't recall the details of the commercial except the punchline

And this is FlyerTalk, so I'll go a little Off Topic ......

A pilot in United Airlines forum used the phrase in "Ask a Pilot" thread ...... maybe the same one that I sat next to on one of my flight years ago.

He said "I did stay at a Holiday Inn Express last night and today I am flying in Captain's seat." (obviously not on that positioning flight).