How to Buy a Car Under an LLC - How to Start my LLC

How to Buy a Car Under an LLC

Written by:

Carolyn Young has over 25 years of experience in business in various roles, including bank management, marketing management, and business education.

Reviewed by: Sarah Ruddle

For over 15 years, Sarah Ruddle has been a noteworthy leader in the business and nonprofit world.

How to Buy a Car Under an LLC

How to Buy a Car Under an LLC

If you have a limited liability company (LLC) and want to purchase a company vehicle, you may be able to buy the car in the name of your LLC. There are some advantages to doing so, but several factors should be considered.

Luckily, this guide spells out everything you need to know about buying a car under an LLC. 

Benefits of Buying a Car Under an LLC

There are several benefits to buying a car under an LLC, the most important of which is personal liability protection. For example, if the vehicle is in an accident, the personal liability protection offered by your LLC should keep you from being personally liable for repair and medical bills. 

You’ll also be able to deduct the vehicle cost and related expenses from your taxes. Finally, it offers privacy, as no one can connect your name to the vehicle’s license plate.

Disadvantages of Buying a Car Under an LLC

If you need financing for the car, get it in the LLCs name, preferably in the form of a commercial auto loan. Interest rates on commercial auto loans tend to be higher, and insurance rates on commercial vehicles also tend to be higher. 

How to Buy a Car Under an LLC

Buying a car under your LLC will require good business credit. You can build up a credit history for your LLC by getting a business credit card and paying it off monthly.

If you don’t have business credit, you’ll likely have to guarantee the loan personally. This will make you liable for the loan if the LLC cannot make its payments. 

Here are the steps to buy a car under an LLC: 

  1. Find a lender that does commercial auto financing. Many dealerships have a commercial financing department, so you shouldn’t have to find your lender.
  2. Talk to your insurance agent about options to insure the car, and the various rates, so that you’re prepared for this expense.  
  3. Make the purchase. Pay the out-of-pocket costs, including the down payment, with LLC funds so that you don’t appear to be commingling personal and business finances. This could threaten your liability protection.
  4. Register your car with the department of motor vehicles. You may need to take copies of your LLC articles of organization. Call the DMV before you go.
  5. Keep careful records of your mileage and vehicle expenses to deduct them at tax time.

If You Want to Transfer a Car to Your LLC

If you already have a car that you want to start using for business, transferring ownership requires a few steps. First, if you still owe money on the vehicle, you’ll need to check with your lender about refinancing the loan in the LLC’s name. 

The bank may require a bill of sale of some kind transferring ownership from you to the LLC, which will need to be signed by you and an LLC member. The signing LLC member can be another member, or you can sign yourself. 

Then you’ll register your car at the DMV to obtain a new title and transfer the registration. After that, you’ll need the bill of sale again and a copy of your articles of organization. You’ll also need to contact your insurance agent. 

In Closing

Buying a car under your LLC is relatively simple and offers several advantages. But before going ahead with it, it’s a good idea to check with your tax advisor to ensure that it’s the right move for you and your business.