Who own your Car? You or your Corporation?

[creativeje]

I searched the forum to the best of my ability and did not find a similar thread to answer this minor question. I'm hunting for a new vehicle and am considering just purchasing it with my Company credit/account instead of my personal account.

I know that for tax purposes company vehicles - such as a vinyl-wrapped deliver truck - are obvious company assets. But when it comes to your personal vehicle which you also use to attend meetings, deliver products (etc, etc) for business purposes, would it be wise to purchase it and place it in your corporation's name? How does this affect the the car insurance?

The less money that has to be paid out to me personally to cover my business expenses, the better. I want to keep this clean, legal and efficient. Why pay myself when I then turnaround and pay taxes, title, insurance, etc for a car that I use for business purposes as well?

Any tips, advice and ideas on vehicle ownership that will maximize tax savings and asset protection will be appreciated. Thank you in advance!

 

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[GlobalWealth]

Why pay myself when I then turnaround and pay taxes, title, insurance, etc for a car that I use for business purposes as well?

You answered your own question right here.

Whether you are a freelance business owner or employ hundreds, herein lies a key benefit of self-employment.

Wage earners do not get the same tax breaks as the self-employed. One of those breaks is writing off expenses like your auto.

Absolutely title your car in your company name. You may also find that commercial auto insurance is cheaper than personal.

 

[Kfleming]

It really depends on how your company is structured, there is no simple answer unfortunately. This is why it's incredibly important to have a really bright tax guy, someone you can call directly with any issues like this that may come up. That is the best advice I can give and it will save you tens of thousands, hundreds of thousands or even (hopefully) millions in the long run.


Although you can get great advice on this forum, I wouldn't "trust" business tax advice from the internet regardless of the source, or at least before I discussed it with my tax guy.

 

[sharky]

I've always bought my cars thru my business, it's like getting a 35-40% discount right off the top depending on your tax bracket, since you're paying for it with pre-taxed dollars. Plus you can depreciate it over a number of years (disclaimer, i am not an accountant nor pretend to be, so you might want to double check that...) Keep track of either your business mileage or personal mileage just in case you need to prove anything to the IRS. Regarding insurance, my experience has been that it was more expensive for a business policy (however same rule applies with pre-taxed $$'s vs. after tax $$'s) but again you'd have to check on the coverage that you're getting compared to personal coverage.

 

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[JGbolagoke]

Whether you are a freelance business owner or employ hundreds, herein lies a key benefit of self-employment.

Wage earners do not get the same tax breaks as the self-employed. One of those breaks is writing off expenses like your auto.

I agree with you here. You see, if you are a wage earner, the tax law do not give you allowances based on each of your assets. Rather, it gives you a general allowance that applied to everybody. But because a corporation is what I call an non-existing individual, the law allows its assets to be treated on one-on-one basis. This is where capital allowances come to play.

So the effect is that, when you acquire your assets (cars, houses, furniture, machineries etc) in the name of your company, it is the company (which is the non-existing personality) that owns the assets even though you are the one controlling it. In other words, you are enjoying the benefits of the assets while your corporation is owing the assets. It makes sense to adopt this approach.

It really depends on how your company is structured, there is no simple answer unfortunately. This is why it's incredibly important to have a really bright tax guy, someone you can call directly with any issues like this that may come up. That is the best advice I can give and it will save you tens of thousands, hundreds of thousands or even (hopefully) millions in the long run.

I agree with this. But let me explain that in every country, there are laws - tax laws, incorporation laws, civil laws etc. These laws govern the whole lots of activities. This is where you need your professionals such as lawyers, accountants etc. These people are vast in studying the laws and interpreting it in applying it to day-to-day transactions. So you may have an idea of what you want, but you still need to seek the advice of professionals. But like the MJ assertion in the Millionaire Fastlane book, your ideas will help you to know if your advicer has given you the right or wrong advice.

James

 

[creativeje]

Absolutely title your car in your company name. You may also find that commercial auto insurance is cheaper than personal.

Thank you all for the great insights. Even here the issue of car insurance for commercial vs personal yields different answers.

For asset protection, I imagine that even those $100k+ sports cars could be titled in the name of foreign trust to keep any creditor's mitts off the vehicle.

Yes, having a knowledgeable tax expert on your team would be best... but until I get that chance, I was hoping to "crowd source" an answer from fellow entrepreneurs.

Again I appreciate everyone's feedback!