Transferring a personal vehicle, just like a property, to an LLC can limit your personal liability if someone is injured on the property and files a lawsuit against the owner. For instance, if the parking brake fails and results in the vehicle rolling down a hill and striking another vehicle, as an individual owner, the accident could be financially devastating.
However, if the vehicle is under the ownership of an LLC, any lawsuit would have the same limitations as legal action against a corporation, meaning your personal assets are protected as long as the LLC is properly formed and structured.
Limited liability companies, known as LLCs, are legal entities established through state business agencies and, in most cases, registered with the Internal Revenue Service for tax purposes. Even though each state has specific rules for LLC organizations, all states recognize limited liability companies as separate and distinct legal entities with full property ownership rights.
Have it in mind that these entities may buy, sell and retain private property like vehicles as well as real and intellectual property. You can also sell or contribute property to your LLC. However, once you transfer a vehicle to your LLC, ensure that all necessary changes in ownership are submitted to the correct agencies and authorities such as your state’s department of motor vehicles.
In the United States, it is pertinent that you carefully record your original purchase price, the fair market value, and any depreciation. Bargain sales at lower than fair market value are common, but there can be long-term tax implications related to depreciation. Though state regulations may vary, the IRS has no regulation prohibiting a business owner from selling her own personal vehicle to a business that she owns.
According to IRS publication 583, vehicle-related tax deductions based on actual expenses or a standard mileage rate are allowed by vehicle owners. Therefore, a business owner may deduct only those expenses or miles related to business purposes regardless of ownership.
Also note that business owners who choose to sell their personal vehicles to their business to protect the vehicle during a personal bankruptcy must do so a year prior to filing. Business owners who transfer ownership of their vehicle to their LLC may notice an increase in insurance premiums, registration taxes, and other vehicle-related expenses.
How to Transfer a Private Personal Vehicle to an LLC in 5 Simple Steps
In a limited liability company, personal assets are no longer subject to business liabilities and business assets cannot be seized in the event of personal bankruptcy. Howbeit, a private personal vehicle used for business purposes can be transferred into the LLC with the following steps.
Table of Content
1. Establish the LLC
Start by establishing an LLC according to your state’s laws. In most states, the website for the state agency that regulates businesses, often the Secretary of State explains how to do this. You will have to file articles of organization with the state’s business filing agency and pay a fee.
Also note that some states require you to publish a newspaper notice stating that you intend to form an LLC. You can file this paperwork on your own or seek assistance from an online legal service provider. It’s also a good idea to prepare an operating agreement that describes how you will run your business.
2. Talk to Your Insurance Agent
At this point you will have to talk to your insurance agent and discuss the insurance ramifications of transferring the car to the LLC. Most times, the business costs will go up as insurance companies equate business usage with higher liabilities compared to personal usage. However, if the insurance premiums make transferring the car cost-prohibitive, you may choose to keep the car in your personal property but have the LLC place a “friendly lien” on the title.
Note that this friendly lien is a contract that instigates that 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.
3. Contact Your Lender
If you have an outstanding loan on the vehicle, now will be the time to contact your lender. They have to give permission for you to transfer the title, and they may want you to pay off your personal loan and negotiate a new one in the LLC’s name.
4. Prepare a Title Transfer Form
You will also have to prepare a bill of sale transferring the vehicle’s ownership to the LLC. A bill of sale is a document used to record a property sale that contains the transaction details. The seller usually prepares it. You will also have the LLC apply to the state department of motor vehicles (DMV) or county treasurer for a new certificate of title.
An LLC can only act through its owners, called members, or managers, so if you are a member or manager, you can handle the necessary paperwork on its behalf. Also, remember to check with the DMV about whether you must take additional steps to register the vehicle in the LLC’s name.
5. Submit the Title Transfer
Lastly, submit the title transfer to the DMV. Show proper proof of insurance and pay any transfer fee for the title change. As the vehicle’s purchaser, the LLC may have to pay a state sale and use tax on the purchase. Your state comptroller’s office or DMV can provide that information.
As a legal entity, an LLC can indeed purchase a vehicle from a dealership or other third party. In that case, the financing, registration, and insurance should all be done in the LLC’s name. If you use your vehicle for business, the major benefit of transferring its ownership to the LLC is protection from liability if the vehicle is ever involved in an accident that results in a lawsuit.
In addition, the LLC itself is entitled to a tax deduction for its use of the vehicle. The deduction can be based on a standard mileage rate set by the Internal Revenue Service or on the actual expenses incurred in using the vehicle, including gas, maintenance, registration fees, parking, and tolls.
Frequently Asked Questions
Can You Depreciate A Personal Vehicle Used For Business?
Yes! Taxpayers who use a vehicle more than 50% of the time for business can deduct Section 179 expense or (MACRS) accelerated and bonus depreciation, as well as other ordinary and necessary expenses.
How Do You Transfer Personal Assets To Your Business?
To be able to transfer personal assets to your business, you need to fill out transfer form 01T on the Land and property information website (NSW only). If you are transferring the property as a gift, you will fill out and sign a gift deed, which allows you to transfer ownership without any exchange of money.
How Do You Pay Yourself From Your Llc?
You can pay yourself from your single-member LLC by making an owner’s draw. Your single-member LLC is a disregarded entity which means, your company’s profits and your own income are one and the same. At the end of the year, you report them with Schedule C of your personal tax return (IRS Form 1040).
Can You Sell Your Personal Vehicle To Your Business?
Yes! You can sell or contribute property to your LLC. Though state regulations may vary, but the (IRS) has no regulation prohibiting business owners from selling their personal vehicle to a business they own.
Can You Rent Your Personal Vehicle To Your Business?
Yes! Technically, your personal vehicle can be leased to a small business if that small business is an entity and can act as a lessor in your state.
Can You Sell Your Personal Assets To Your Business?
Yes! It is legally possible to sell your personal assets to an LLC or business, but it may or may not be the right decision.
Can A Business Write Off A Vehicle Purchase?
Yes! If you purchase the vehicle and choose to do the actual expense instead of mileage, you can write off the actual expenses.
Can A Sole Proprietor Write Off A Vehicle?
Yes! A sole proprietor who uses a car only for business purposes may deduct the entire cost of the car’s operation on his income tax return. The cost of fuel, oil, maintenance, and repairs are all tax-deductible.
Who Is a Registered Keeper Of Company?
A registered keeper is a person who is using the vehicle and keeping it, which can sometimes be different from the owner of the vehicle or the person who is responsible for paying for it.
How Do You Transfer Your Personal Car To A Company?
To transfer your personal car to a company, consider the following guidelines;
- Establish the LLC
- Contact your lender
- Submit the title transfer
- Talk to your insurance agent
- Prepare a title transfer form
11. Do You Need An Llc For Your Car Rental Business?
Yes! An LLC is required because it will give you personal liability protection against potential business risks.
12. Is It Legal To Transfer Money From Business Account To Personal Account?
Yes! It is legal, provided all the necessary records are made in the business’s accounting books. But there must be valid business reasons for the transfer.
What Is The Difference Between a Registered Owner And a Legal Owner?
When you finance a car, the bank that you got the loan from is the legal owner (until it’s paid off). You are the registered owner when you get the tabs and plates in your name with the state Department of Licensing.
Can The Registered Keeper Sell A Car?
No! A registered keeper is never an owner. You can’t sell something that isn’t yours. Only the owner can legally sell the car or give approval for another to sell it.
How Do You Dissolve An Llc Corporation?
The following are how you can possibly dissolve an LLC corporation;
- Distribute the assets
- Vote to dissolve the LLC
- File your final tax return
- Clear-up an outstanding debts
- File an article of dissolution
- Conduct other wind-down processes
Can A Sole Proprietorship Take The Title To Real Estate?
No! Sole proprietorship is the simplest business form to create and operate under because it is an extension of the owner. And because sole proprietorship doesn’t exist separately and apart from the real owner, he is incapable of owning real estate on his own.
Can You Lease Your Personal Car To Someone?
The short answer is yes! If you own the car, you can do whatever you want to do with it. Including leasing it to someone else.
Can You Put A Car Through Your Business?
Yes, you can!
Is Leasing A Vehicle A Tax Write Off?
Yes! If you lease a car that you use in your business, you can deduct your car expenses using the standard mileage rate or the actual expense method.
Which Business Structure Is Right For Your Car Rental Business?
The right business structure for a car rental business is a Limited Liability Corporation (LLC), to avoid exposure of the owner’s personal assets to legal action.
Can you Lease Your Car Through Your Business?
If you’re a partnership or a sole trader, you may also qualify for leasing of car.
22. Can You Claim The Purchase Of A Car On Your Taxes?
This is optional. There is a general sales tax deduction available if you itemize your deductions. You will have to choose between taking a deduction for sales tax or for your state and local income tax.
23. Can You Sell Your Car To Your Corporation?
Yes, you can. Even though state regulations may vary, the (IRS) has no regulation prohibiting a business owner from selling his own personal vehicle to a business that he owns.
Can You Put Your Car In Your Business Name?
Yes! A benefit of putting a car under your business name is that you can claim the cost of a new car as an asset which will bring a tax deduction.
How Do You Put A Car In Your Business Name?
The following ways are how you can put a car in your business name;
- Get a tax ID number
- Create a credit profile
- Build and maintain your business credit
26. What Documents Do You Need To Get An Ab 60 License?
Though several documents may be required to help you apply for an AB 60 license, these are what you will need;
- Valid foreign document approved by DMV
- An expired driver’s license or California Identification Card
Can You Use Your Ein To Buy A Car?
Yes of course! It is very possible to buy a car with an EIN number, all you need is to clarify with the sales team that this is your intention.
What Are The Tax Benefits Of Buying A Car Through Your Business?
The following are some of the benefits of purchasing a car through business;
- Finance repayments
- Running costs
- GST credits
Who Owns The Car If Two Names Are On The Title?
Both named title holders are legal owners. The only difference is how the names may be separated.
Can You Buy A Car With Business Credit?
Of course yes! You can use business credit to buy a car. Commercial credit allows a business owner to borrow against his business rather than his or her personal credit file. Also, business credit eliminates personal liability from the contract, which protects the borrower’s personal assets.
Is It Better To Buy A Car Through Your Business?
The answer is yes! Purchasing a car through your business can save you plenty in taxes and deductions for too many expenses.