As a business owner, you may find yourself in the market for a new vehicle to use for your company.
However, with so many options, it can be challenging to determine what type of vehicle will best serve your business’s needs while maximizing your investment.
Enter in the LLC-owned car! As a business finance expert, one of my top recommendations to my clients is to purchase their vehicle through an LLC instead of buying it outright.
Doing so offers several advantages that could result in significant savings for you and your business.
This blog post will discuss maximizing your investment in a company vehicle.
Whether you’re deciding between leasing or buying, read on for the benefits of purchasing a car under an LLC.
How Does Leasing a Car Work?
When you lease a car, you pay a monthly fee to use the vehicle for a set period, typically between two and four years.
This fee is often lower than the monthly payments you would make if you financed a vehicle outright.
You can return the car and lease a new one at the end of the lease term, ensuring you always have access to the latest models and technology.
Benefits of Buying a Car Under an LLC
The primary benefit of buying a car under an LLC is that it allows you to separate your personal and business finances.
This separation makes tracking expenses easier, staying organized, and avoiding mixing the two.
Let’s look at how this separation can benefit your business.
Tax Deductions
Tax deductions are one of the most significant benefits of leasing a company vehicle.
By deducting the cost of your lease payments and any expenses related to the car, you can significantly reduce your business’s taxable income.
However, it’s not just the cost of the lease that can impact your bottom line. Fuel expenses can also add up quickly, so choosing a fuel-efficient vehicle is key to keeping more of your hard-earned money.
Liability Protection
One of the major benefits of an LLC is liability protection. As the name suggests, an LLC limits your personal liability if something goes wrong with the car.
Suppose you get into an accident, and someone sues you for damages.
Your personal assets, like your home or savings account, will be protected if the car is under an LLC.
This can provide some peace of mind knowing that you won’t be financially ruined in the event of an accident or lawsuit.
Buying Privacy
Privacy is a vital aspect of our lives. When it comes to purchasing a vehicle, this becomes even more crucial.
This is where the Limited Liability Company or LLC comes into play.
By buying a car under an LLC, you are not only protecting your personal information but also limiting your legal liability.
When you purchase as an individual, all the details related to that transaction, such as the vehicle’s make, model, and VIN number, become a matter of public record.
However, the vehicle is registered under the company’s name by purchasing under an LLC. Any future transactions will be registered under the company name, ensuring your privacy and safety.
This is why buying a car under an LLC is a smart move for anyone who values their privacy and wants to protect themselves from any potential legal issues down the line.
Things to Consider Before Buying a Car Through Your LLC
Buying a car through your limited liability company (LLC) can have many benefits, ranging from tax deductions to liability protection. However, before you purchase, there are specific things to consider.
Let’s consider a few of the most crucial considerations before buying a car under an LLC.
You Might have to Pay Property Tax
One of the most crucial factors is that your LLC might have to pay property tax on the vehicle.
This expense can add up quickly and affect your overall financial plan, so it’s essential to factor in this expense when considering purchasing a car through your LLC.
Consider the other advantages of buying through your LLC, such as deductible expenses, and consult a tax professional before making any decisions.
Your Total Cost after the Transaction
Purchasing a car through your LLC can be a smart financial move. Still, it’s essential to carefully evaluate your total cost after the transaction.
There are several factors to consider which can significantly impact your overall cost, such as:
- Taxes
- Registration fees
- And insurance premiums
Additionally, you’ll want to research the vehicle’s resale value and the potential tax implications of selling it in the future.
Analyzing all these costs will ensure that you make an informed decision and maximize your investment.
Remember, the total cost of a car goes far beyond the purchase price, so be sure to calculate all associated expenses before making any final decisions.
Tax Benefits
Buying a car through your LLC can offer numerous tax benefits. Still, there are a few things to consider before purchasing.
- The car’s primary use must be for business: You cannot use it for personal use, such as commuting to work.
- The LLC must keep proper records of all expenses related to the car, including gas, repairs, and insurance. This will ensure that any tax deductions are accurately reported.
- Consult a tax professional: This will help you determine the best way to depreciate the car’s value over time.
With proper planning and consideration, purchasing a car through your LLC can provide significant tax advantages for your business.
Can an LLC Write off a Car Purchase?
If you own a business, you may wonder whether you can write off a car purchase for your company.
The answer is yes if your business is structured as a limited liability company (LLC).
However, some certain rules and restrictions apply:
- You can’t write off the entire cost of the car in one year. Instead, you must spread the deduction over the vehicle’s useful life.
- To qualify for the write-off, the car must be used primarily for business purposes.
- If you use the car for personal use, you can only write off a portion of the expenses based on the percentage of time you use the car for business.
As with any tax question, it’s always a good idea to consult a qualified tax professional to ensure you follow the rules and maximize your deductions.
How to Write off a Car for an LLC
Writing off a car purchase for an LLC can be a great way to save on taxes.
Here are the steps you need to take:
- Make sure that your business is structured as an LLC and that the car will primarily be used for business purposes
- Make sure you keep track of all expenses related to the car, including gas, repairs, and insurance
- Determine the car’s useful life and spread the deduction over that period
- Consult a qualified tax professional to ensure you follow IRS rules and maximize your deductions.
By following these steps, you can maximize your car purchase by taking advantage of all the tax savings available.
How to Buy a Car Under an LLC
As a business owner, knowing how to handle vehicle purchases for your LLC is important. Let’s break it down step-by-step.
Figure Out Your Credit
You can finance the car solely under the business’s name if you have a solid business credit history. This can be incredibly advantageous, as it protects your personal credit and limits liability.
However, if you cannot finance the car under the LLC, you’ll likely have to personally sign for the loan.
Find a Lender
Purchasing your car under your LLC can be complicated, but finding the right lender can make all the difference.
A lender knowledgeable in small business loans will understand the importance of a reliable mode of transportation for your business.
Additionally, a lender can provide guidance on how to properly document these expenses for tax purposes.
Don’t let writing off a car for your LLC overwhelm you – let a trusted lender guide you through the process.
Check With Your Insurance Company
If you want to write off a car for your LLC, it is essential to check with your insurance company.
While you may only plan on using the car for business purposes, your insurance provider may require you to obtain auto insurance.
This coverage is crucial in protecting your vehicle in an accident or theft. Even if you think you do not need it, it is always better to be safe than sorry.
So, talk to your insurance company and get the proper coverage for your LLC’s vehicle needs.
Purchase and Register Your Car
Before you take your next step, you need to purchase a car!
One option to consider is the Dacia Duster. This affordable SUV is a great choice for businesses looking for a reliable vehicle with plenty of space for cargo and passengers.
With a starting price of just under £12,000, the Duster is an affordable option that won’t break the bank.
Once you’ve found the perfect car and have the funds in your business bank account, the next step is to register the car in your LLC’s name.
While requirements vary by state, you’ll likely need to bring a copy of your LLC’s articles of organization to your state’s DMV and pay your registration fees with your business account.
Keep Records
Keeping track of your mileage and other auto expenses can make a big difference when filing your taxes.
By doing so, you may be able to deduct some of these expenses from your taxes which can help save you money.
Conclusion
In conclusion, buying a car under an LLC can benefit individuals and businesses alike.
From liability protection to tax advantages, there are plenty of reasons why a business should consider purchasing a car using an LLC.
Have you ever purchased a car through an LLC before? If so, we would love to hear about your experience in the comments below.