How To Put A Car In Your Business Name
It’s important for your business to have its own car, unfortunately many business owners don’t know how to start this process. So if you’re wondering How To Put A Car In Your Business Name, we’ve laid out some steps here for you.
Different Ways To Get A Car In Your Business Name
Having a car under a business name is not very different from having a car as an individual. If you keep your credit in good shape and follow the rules in your state, you’ll be on your way to growing your business and meeting its needs in no time.
Buying A New Car In Your Business Name
Buying a vehicle through your business isn’t entirely different from buying one personally. But before you buy a vehicle under your business’s name, there are several factors you must consider.
Set Up Credit For Your Business
Before you can get a loan to buy a car under your business name, you’ll need to build and keep up enough business credit.
- Get an ID number for taxes. To start building credit for your business, you’ll need an Employer Identification Number (EIN) from the IRS. You can also go to the IRS website and fill out an SS-4 form.
- Create a credit profile. Sign up with one of the best credit bureaus. After you make your profile, you can upload financial statements and other information about your company.
You’ll need at least three trade lines with big companies to get a credit score from a credit bureau. Make sure your supplier sends the payment information for your company to the credit bureau.
Build And Keep Good Credit For Your Business
It can take up to two years to build up enough credit for your business, so you should start as soon as possible. To get a high credit score, you’ll need to do the following:
- Pay your bills on time. It’s always a good idea to pay your bills on time, but sending them in early will help your credit score.
- Don’t use a lot of credit. Limit your business to 20–30% of the credit it can get.
- Check your public files. To get good credit, you’ll need a clean record. Your score will go down if you go bankrupt or get fined by the court.
Finalize Your Choice
Now it’s time to choose your car, but before you go to the dealership, there are a few things you need to do.
Check the credit score of your business. Check with several credit bureaus to see what your business’s credit score is. To check your credit score, you’ll have to pay, but it’s worth it to know where you stand. Most of the time, seeing your score costs between $37 and $100. Your score will be between 0 and 100. If your score is 80 or higher, you should be able to get a loan. If it’s below 80, it’s better to get a car loan in the name of your business than to buy a car right now.
Look for car lots that sell mostly commercial vehicles, such as Enterprise or any local Ford dealer. These divisions help businesses buy vehicles and will make it easier for you to buy a vehicle. Choose the car you want. Make sure the vehicle fits the needs of your business. For instance, if you run a delivery service, a minivan or truck would be a good choice. If your car will be used to get around, choose one that gets good gas mileage.
Show your financial documents. Before giving out a loan, banks will want to see a variety of financial records and other documents. Lenders will probably also check your credit score, so you should check your credit report first.
Getting A Business Car Loan
Now that you’re ready to buy a car, you can do one of two things. You can either get a loan from the dealership or look into car loans at banks and credit unions in your area.
You can always sign a guarantee if your business’s credit score isn’t high enough to get a loan. This means that if your business can’t make the payments, you will have to pay the amount yourself.
Make your loan payments on time. Don’t forget to use the bank accounts of your business to pay back your loan. If your business payments are made with a personal account, the IRS might look into it.
Register Your Vehicle
- Put the car in the name of your business: Every state has its own rules about how to register your car. You might have to show copies of your Articles of Organization to show that your business is being run correctly.
- Get car insurance: If you’re going to use the car mostly for business, you should get commercial auto insurance. If you only plan to use the car for business part-time, it might be better to get personal auto insurance. Apps like Way can help you compare quotes and helps you get the best affordable car insurance for you.
- Ask for a tax deduction: You already know that the rules for tax deductions are hard to understand. Depending on whether your business is an LLC, a corporation, or a partnership, you may be able to claim a bigger deduction.
Transferring A Car To Your Business Name
A personal vehicle used for business purposes can be transferred into the LLC with certain considerations. Here are the steps you need to take in order to successfully transfer the car to your business name.
The two things you need to get started is your car title and your LLC articles of organization.
Open a Registered LLC
Open and maintain a registered LLC in the state you do primary business operations in. This doesn’t need to be in the state you reside in, though you may need a registered agent in an outside state to represent you within the state. LLCs are filed with the secretary of state and have a filing fee that ranges between $100 and $800.
Contact Your Insurance Agent
Call your insurance agent and discuss the insurance ramifications of transferring the car to the LLC. In many cases, the business costs will go up as insurance companies equate business usage with higher liabilities compared to personal usage. If the insurance premiums make transferring the car cost-prohibitive, you may prefer to keep the car in your personal property but have the LLC place a “friendly lien” on the title.
A friendly lien is a contract that where the asset is given loan terms by the LLC to the owner with no payments required until demanded by the LLC. Friendly lien samples can be found through the Small Business Association, local Chamber of Commerce website or through online legal forms providers.
Contact Your Lender
Contact the lender and get approval to move the car into the LLC if a loan balance exists. Obtain the proper paperwork from the lender and submit it for approval.
Prepare And Submit A Title Transfer Form
Go to the department of motor vehicles where the car is registered and request a title transfer form. List the LLC’s full legal name as the new owner. Sign the title request, having it notarized that you are the authorized signer for the private vehicle and the LLC.
Submit the title transfer to the DMV. Show proper proof of insurance and pay any transfer fee for the title change.
You can also speak with local experts who can help you handle the title and registration process.
Think About Refinancing
If you’re deciding to transfer a personal vehicle into your business name, it might be a good option to refinance it to get a lower rate if it’s not paid off. You can use tools such as an Auto Refinance Calculator to see if it can save you some money in the long run.
Should I Put My Car In My Business Name?
If you decide to purchase the car under your company’s name, you can benefit from tax advantages. Whether you’re the business owner or an employee, you must contemplate the pros and cons before purchasing.
Taxes
One of the top benefits of putting your car under your business name is that you can enjoy claiming the cost of a brand new vehicle as an asset. In turn, you can lower a tax deduction for your business during tax season.
However, keep in mind that when putting a vehicle under your company name, it is detrimental for you to track mileage and how often you use it. It may become challenging if you’re someone who uses the car for personal use as well.
Before deciding that a tax deduction is an excellent benefit, make sure you’re adequately prepared to complete extensive paperwork that ensures the car remains a company car.
The IRS is known to scrutinize these types of expenses and you must keep good records. If you don’t and you are audited, you may own taxes and penalties. Always consult with a tax professional about your individual situation. IRS Publication 463 details tax deductions expenses associated with a vehicle used for business.
AUTO POLICIES
Another great pro of putting a car under your company’s name is that you can put the vehicle under your company’s auto policy as well. In this way, business owners and employees alike can save actual costs due to not paying more for personal auto coverage.
Usually, if you put the car under your business’ name, you won’t have to worry about hitting a limit. The fact is that most personal umbrella policies lack coverage for accidents occurring during business endeavors. Therefore, using your business’ auto insurance provides you coverage in case of accidents occurring during business expeditions.
However, before making a critical decision, make sure you have a proper and in-depth understanding of your brand’s auto insurance policy.
