• Post last modified:August 29, 2023

Some of you may know that there are companies out there selling trade lines to help you establish and build business credit. For example, they may charge you $1500 and then report to the business credit bureaus that “their” company sold your company products or services on credit and you paid on time or early for those products or services. They may report that the total amount of those products or services was $25K and you had that trade line since 2016. The challenge with this is that all of this transaction can be deemed as fraudulent if investigated. The first issue is that many of these companies use “shell” companies to sell the trade lines. A shell company is any company that has been registered but has not had any activity in the past 2 years. People buy these companies and the use them to do many financial transactions including selling trade lines. Shell companies are notorious for participating in illegal activities so the IRS is much more likely to scrutinize these companies over ones that have consistent activity. The second issue is that the company is reporting transactions that never occurred! In our previous example, the company reports that your company got $25K worth of products or services in 2016. Well…you never actually got those things so if the IRS does an audit of the shell company and finds that they are falsely representing trades that never happened that shell company can get fined or worse. In addition, the IRS can also come after your company because you participated in the fraudulent reporting.Buying trade lines is completely legal but please be careful when deciding to do so. Assess the risk and exposure and consult a business credit professional before making a decision to move forward!!

If you want to learn more about building business credit, go to the following