How to Buy a Car Under an LLC: A Complete Guide

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Learn the benefits & drawbacks of buying a car under an LLC
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If you own a company, you can buy a car under your business name as long as you’ve established a business entity like an LLC. This can potentially help you save on your taxes, although it’s important to talk to a certified professional accountant (CPA) to find out whether it’s the right move for you. We talked to professional auto broker Bryan Hamby to find out everything you need to know about buying and registering a car under an LLC—plus the pros and cons .

Can you buy a car under an LLC?

According to auto dealer Bryan Hamby, you can buy a car under an LLC, but you should talk to your CPA to see if it’s a good option. If your CPA recommends it, apply for financing under the LLC’s name. Once you choose your vehicle, purchase a commercial auto insurance policy and register the vehicle under your business name.

Section 1 of 5:

How to Buy a Car Under an LLC

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  1. 1
    Form your LLC and obtain a tax ID number if you haven’t already. The exact steps for forming a limited liability company (LLC) will vary depending on where you live. Start by choosing a company name that follows your state’s guidelines. Set up your business structure, including who will be involved and what role they’ll play. Then: [1]
    • File your articles of organization (the paperwork that makes your LLC official) with the Secretary of State where you live.
    • Apply for an Employer Identification Number (EIN) from the IRS. You’ll need an EIN to establish business credit. To get your EIN, fill out an online application on the IRS website or fill out IRS Form SS-4 and mail it in.
    • Follow your state’s laws for maintaining your LLC. You’ll likely need to pay an annual fee and file a tax return each year to keep your LLC registration current. Some states may have additional requirements, as well. [2]
    • Create a credit profile with Dun & Bradstreet. Dun & Bradstreet is the major credit bureau for businesses. Create a profile and upload your company information, including your financial statements. You’ll receive a DUNS number, which banks and vendors can use to check your business credit score. [3]

    Meet the wikiHow Expert

    Bryan Hamby is a professional auto broker and the owner of Auto Broker Club in Los Angeles.

  2. 2
    Open a business bank account for your LLC. In order to register a vehicle to your business, you’ll need to conduct the transaction through a separate business account—not your personal account. When you go to the bank to open your account, be sure to bring: [4]
    • The name, address, and phone number of your LLC
    • The date the business was established
    • Articles of organization
    • Operating agreement
    • Business license
    • EIN
    • Financial information like your estimated annual revenue
    • Your identification, date of birth, and Social Security number (and the information of anyone else who owns 25% or more of the business)
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  3. If you’re planning to finance your vehicle purchase, you can apply for a vehicle loan right through the dealership. However, you may be able to secure more favorable loan terms if you finance through a local bank or credit union, so shop around. Be sure to specify that you’re financing in your company’s name. [5]
    • When you apply for financing, lenders will check your DUNS (business credit) score. You may also need to provide financial statements for your business.If your business is brand-new, you may not have credit established yet, which may make it difficult to secure financing unless someone personally guarantees the loan.
    • Some lenders will only finance auto loans for businesses that have been in operation for at least 2 years. [6]
    • If you’re paying cash for the vehicle, you don’t have to worry about financing.
    • Can you buy a car under an LLC with no money? In some cases, you may not need to pay a down payment when you’re buying a car under an LLC—but you’ll typically need a solid business credit history and/or a guarantor with excellent credit.
  4. If your company doesn’t have enough business credit, Hamby says that you may have to personally guarantee the loan. “Some lenders will not finance an LLC without a guarantor. If the guarantor has bad credit, the auto loan may not be approved or the interest rate may be higher.” [7]
    • If you act as guarantor, it means you’re agreeing to be personally responsible for the loan if the business stops making payments. This means the lender can come after you (and your personal assets) to satisfy the loan.
  5. When you’re ready to buy the vehicle, head to a dealership and shop around. Some dealerships have commercial sales departments specifically for helping businesses buy and register their vehicles. It’s worth calling around and asking which dealerships near you have these departments—it could make buying the car easier, especially if you’re planning to buy multiple vehicles. [8]
    • Decide on the type of vehicle that will best suit your business needs. For instance, you may need a van if you’ll be making deliveries or a truck if you need to load and unload a lot of gear. [9]
    • Also, make sure the vehicle fits the tax deduction guidelines set out in IRS Section 179 . This section specifies that the vehicle must be used at least 50% of the time for business purposes. It also specifies different deduction limits based on the weight of the vehicle.
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Section 2 of 5:

Insurance, Registration, & Documentation

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  1. If your vehicle is owned by a company, it will not be covered by your personal auto insurance policy. You’ll need to purchase a separate commercial policy, even if you sometimes drive the vehicle for personal use. [10]
    • Talk to an insurance agent to find out exactly what type of coverage is right for you. Many large insurers like Geico, Progressive, Nationwide, and Allstate offer commercial auto coverage.
    • Be prepared to provide the name and driver’s license numbers of every employee who will drive the vehicle.
  2. Car registration differs depending on the state. You’ll probably need to show that your business has been properly organized by providing copies of your Articles of Organization. You’ll likely need proof of insurance, as well. Contact the DMV for information about registration in your state. [11]
    • Send a manager or owner of the business to register the car, like a manager or owner. Legal matters like vehicle registration have to be handled by an authorized representative.
    • Remember to pay all registration fees using your business bank account—don’t use a personal check. You need to keep your business and personal finances separate to maintain limited liability.
    • In some cases, the dealership where you buy the car will handle the registration paperwork.
  3. Because you can only deduct business-related expenses on your taxes, it’s especially important to keep meticulous mileage records if you use the car for both personal and business purposes. Log the starting and ending mileage of every business trip and note what it was for. You can write this down by hand or use a mileage tracking app like Mile IQ , Everlance , or TripLog . [12]
    • Also, keep all of your receipts for gas, vehicle repairs, maintenance, and any other vehicle-related expenses.
    • Keep track of every loan payment you make (and always use your business bank account to make payments on the loan). You won’t be able to deduct the principal payments, but you can deduct the interest.
  4. Tax deduction rules are complicated. To make sure you’re maximizing your deductions (and not taking any deductions you don’t qualify for), talk to your CPA or another tax professional before you file your taxes. [13]
    • In general, you can typically deduct any vehicle costs you incurred as part of business use, like gas, oil changes, tire rotations, insurance premiums, registration fees, detailing, and signage. [14]
    • You may also be able to deduct the depreciation of the vehicle for a set amount of time. [15]
    • Your CPA can help you decide whether it’s more advantageous to take a standard mileage deduction or claim your actual expenses.
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Section 3 of 5:

Advantages of Buying a Car Under an LLC

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  1. 1
    It separates personal and business liability. Hamby says, “The biggest advantage of buying a car under a business name is that you’re personally protected against anything that happens with the car.” [16] For instance, if you get into an accident while driving your business vehicle, the company (not you) will be held responsible for any damages that aren’t covered by your insurance policy.
    • Similarly, if a creditor takes action or a judgment is filed against you personally, they won’t be able to take your business vehicle, since it’s owned by your LLC.
    • Having your vehicle registered in your company name also gives you a bit of privacy, since anyone checking the registration will see your LLC’s name instead of yours.
  2. 2
    You can claim vehicle-related tax deductions. “Buying a vehicle under your LLC can provide tax write-off benefits, depending on how you have your LLC set up,” says Hamby. “Meet with your CPA to determine what the write-off benefits might be.” [17]
    • As discussed above, you may be able to deduct things like oil, gas, tire changes, vehicle repairs, and more.
  3. 3
    The vehicle can boost your brand visibility. If you have a separate vehicle for your business, you can customize it with signs, wraps, and other graphics. That’s a great way to get the word out about your company. [18]
    • Additionally, having a company vehicle can make your business seem more legitimate.
    • Be sure to include your business name, phone number, and email address or socials to make it easy for potential customers to get in touch with you.
  4. 4
    It can lead to an increase in your business credit. Hamby says that another pro of financing a vehicle under your LLC is that “you’ll build your business credit.” [19] A better business credit score can make your company seem more secure, which could attract more clients and partnerships in the future.
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Section 4 of 5:

Potential Drawbacks of Buying a Car Under an LLC

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  1. 1
    You have to maintain thorough records. Hamby says, “If you’re using your vehicle for personal use, you need to keep a ledger that breaks down the business and personal miles.” [20] You can’t claim personal use of the vehicle on your business taxes, so your records need to be really clear about when the vehicle was used and what it was being used for.
    • Even if your vehicle is used entirely for business purposes, it’s still a good idea to track your mileage—just in case the IRS ever has questions.
    • You’ll also need to keep any relevant receipts, bills, and maintenance records.
  2. 2
    It could put your company’s finances at risk. Hamby points out that having your business assume liability for the vehicle is both a pro and a con. While you’re protected from being held personally responsible, “if something happens with the car, the LLC will be liable.” [21]
    • For instance, if the vehicle is involved in an accident with damages that cost more than your insurance limits, the business will be responsible for paying the remaining damages—and creditors could seize the company’s assets if the debt isn’t paid.
  3. 3
    You may have higher interest rates or other fees. According to Hamby, when you’re financing a vehicle under an LLC, you may have to pay a higher APR on the auto loan, especially if the loan was signed by a guarantor with poor credit. [22]
    • Business auto loans may also have stricter requirements than personal auto loans.
    • You may also have to pay property taxes, additional permits, or higher registration or licensing fees.
    • Commercial auto insurance often costs more than personal auto policies, as well.
  4. 4
    There’s a limit on how much you can drive for personal use. To register a vehicle under an LLC, that vehicle has to be used for at least 50% business purposes. [23] If you use the car for personal reasons more than half the time, you may be in violation of the IRS’s deduction rules under Section 179.
    • It’s important to note that commuting is typically considered personal use— not business use.
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Section 5 of 5:

Bottom Line: Should I buy a car under my LLC?

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  1. Talk to your CPA about whether you should buy a car under your LLC. Hamby says, “Contact your CPA to see what fits your business best.” [24] There are a lot of factors that determine whether registering your car under an LLC is the right move, including how you use the car and how much you’ll be able to deduct at the end of the year.
    • Your CPA can also advise you whether it may be more advantageous to lease a business car rather than buy one outright.

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  • Question
    Can I buy a car under my LLC?
    wikiHow Staff Editor
    Staff Answer
    This answer was written by one of our trained team of researchers who validated it for accuracy and comprehensiveness.
    wikiHow Staff Editor
    Staff Answer
    Yes, in the United States you can buy a car under a limited liability company (LLC). The company must be properly registered as an LLC and you will also need an Employer Identification Number (this can be obtained for free from the IRS). The steps above explain what you’ll need to do in more detail. Of course, the car must be one suitable for business work; unless your business actually requires a luxury sports car for its brand or sales, stick with standard models.
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  • Question
    Can a sole proprietor buy a car?
    wikiHow Staff Editor
    Staff Answer
    This answer was written by one of our trained team of researchers who validated it for accuracy and comprehensiveness.
    wikiHow Staff Editor
    Staff Answer
    A sole proprietor cannot buy a car for "the business" in the same way a registered company can. However, if you do buy a car principally for the use of your business, you may be able to claim all the expenses related directed to business use of your car. This can be tricky because unless you leave the car at work and only ever use it for work purposes, most sole proprietors end up mixing business and personal use. As such, it’s absolutely vital to fully document every business use of such a car to claim tax write-offs. Talk to your accountant or taxation agent for more details.
    Thanks! We're glad this was helpful.
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    Can you buy a car with an EIN number?
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    This answer was written by one of our trained team of researchers who validated it for accuracy and comprehensiveness.
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    Staff Answer
    Yes, it is possible to buy a car with an EIN number, you just need to be sure to clarify with the sales team that this is your intention. When buying the car, make it clear that it's a business purchase of the vehicle, not a personal one as this impacts which credit application you’ll have to fill out. When filling out the form, check the EIN box or write out the EIN on the appropriate line. Ask the sales team for help if you’re not sure.
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      References

      1. ↑ https://www.nolo.com/legal-encyclopedia/form-llc-how-to-organize-llc-30287.html
      2. ↑ https://www.sba.gov/business-guide/launch-your-business/register-your-business#id-stay-up-to-date-with-registration-requirements
      3. ↑ https://www.nerdwallet.com/article/small-business/how-to-build-business-credit-small-business-loans
      4. ↑ https://www.bankofamerica.com/smallbusiness/deposits/resources/documents/limited-liability-company/
      5. ↑ https://www.chase.com/personal/auto/education/buying/buying-a-car-for-business
      6. ↑ https://www.bankofamerica.com/smallbusiness/business-financing/auto-loans/
      7. ↑ Bryan Hamby. Professional Auto Broker. Expert Interview
      8. ↑ https://www.cbtnews.com/why-car-dealerships-must-prioritize-commercial-sales-and-service/
      9. ↑ https://www.chase.com/personal/auto/education/buying/buying-a-car-for-business
      1. ↑ https://www.iii.org/publications/insuring-your-business-small-business-owners-guide-to-insurance/specific-coverages/business-vehicle-insurance
      2. ↑ https://www.chase.com/personal/auto/education/buying/buying-a-car-for-business
      3. ↑ https://turbotax.intuit.com/tax-tips/small-business-taxes/business-use-of-vehicles/L6hi0zzzh
      4. ↑ https://turbotax.intuit.com/tax-tips/small-business-taxes/business-use-of-vehicles/L6hi0zzzh
      5. ↑ https://www.irs.gov/taxtopics/tc510
      6. ↑ https://nguyencpas.com/blog/buying-a-car-business-or-personal/
      7. ↑ Bryan Hamby. Professional Auto Broker. Expert Interview
      8. ↑ Bryan Hamby. Professional Auto Broker. Expert Interview
      9. ↑ https://www.chase.com/personal/auto/education/buying/buying-a-car-for-business
      10. ↑ Bryan Hamby. Professional Auto Broker. Expert Interview
      11. ↑ Bryan Hamby. Professional Auto Broker. Expert Interview
      12. ↑ Bryan Hamby. Professional Auto Broker. Expert Interview
      13. ↑ Bryan Hamby. Professional Auto Broker. Expert Interview
      14. ↑ https://www.irs.gov/publications/p946#idm140530190808640
      15. ↑ Bryan Hamby. Professional Auto Broker. Expert Interview

      About This Article

      Article Summary X

      To buy a car under a business name, get an EIN from the IRS to establish your business credit. You’ll also want to create a credit profile, which you can do with Dun and Bradstreet, the major credit bureau for businesses. When you go to buy your business car, find a dealership with a commercial sales department since they are prepared to help businesses buy and register vehicles. For information on how to obtain insurance, keep reading!

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