Benefits of Registering a Vehicle in a Business Name
Commercial cars usually cost more to insure, but you could save money on your taxes if the vehicle counts as a business asset. Learn more here.
Written by Bonnie Stinson
Reviewed by Georgina Grant
Table of Contents
- Benefits of registering a vehicle in a business name
- Disadvantages of registering a vehicle in a business name
- Benefits of registering a vehicle in your personal name
- Disadvantages of registering a vehicle in your personal name
- How to register a vehicle in a business name
- Does insurance cost more for a vehicle in a business name?
- FAQs
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There are some valuable benefits to registering a vehicle in a business name, like tax deductions and protecting your personal assets. But it’s not appropriate for every situation. The higher cost and complicated tracking methods for commercial vehicles aren’t for everyone.
Whether you’re self-employed with a home-based business or you’re a business owner with multiple employees, it’s important to think long-term about the advantages and disadvantages of registering a vehicle as a company car.
In general, if the vehicle will primarily be used for business purposes, then it makes sense to register the vehicle as a company car. With this strategy, you could save money on your taxes—although you’ll pay more for
commercial auto insurance
. Here’s what you need to know about registering a vehicle as a professional (or personal) car before you make this big decision.
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Tax reduction is the major benefit of registering a new vehicle in a company’s name. If you are a business owner and you have registered the vehicle as an asset under your business name, it can count as a tax deduction when it’s time for your business to file taxes. You could write off mileage, fuel costs, registration fees, and depreciation as business expenses.
Separating your personal assets and professional assets helps protect you in case you get sued after an accident.
Getting a
car loan
using business credit is another advantage. You can only use a business bank account to buy a commercial vehicle for business use. A car insurance policy may be better with a business vehicle as well. A commercial auto insurance policy typically has higher coverage limits.
Disadvantages of registering a vehicle in a business name
It can take a lot more time to buy and register a vehicle under your limited liability company or sole proprietorship. There are hoops to jump through at the dealership and the process can take several days to move through the Department of Motor Vehicles.
You have to closely track the usage and expenses associated with the company vehicle in order to successfully get the tax advantages of registering a vehicle as a business asset. While the need to track usage is not strictly a disadvantage, it does require a lot more effort.
Insurance companies usually charge higher premiums for commercial auto insurance than
personal auto insurance
. Consult with an insurance agent to figure out which strategy is best for you and your business.Benefits of registering a vehicle in your personal name
It is faster and simpler to register a vehicle for personal use. Personal auto policies usually have lower premiums than commercial auto policies, too.
MORE: How to estimate car insurance before buying a car
Disadvantages of registering a vehicle in your personal name
Buying a business car in your personal name makes you vulnerable to losing this asset if you get sued in a lawsuit. You could also face a gap in
liability insurance
if you get into a severe accident while using a personal vehicle for business purposes.If you change your mind later, you’ll have to re-pay the vehicle taxes. At the moment, buying a car in your personal name may seem like the best decision. But if you decide to transfer your vehicle to your business later on, you will have to pay taxes on the value of the vehicle for a second time.
How to register a vehicle in a business name
Before you go to the DMV to register your vehicle, make sure you have the right paperwork. If this is the first time you are buying a vehicle for your business, you will need your employer identification number.
Bring the IRS form that shows your tax ID number and which type of business entity you own (LLC, sole proprietorship, nonprofit, etc). You will also need a registration and title form.
You can use a car for both personal and professional use. However, the process of correctly tracking deductions for the IRS becomes more complicated.
Ultimately, you could benefit from registering a vehicle under your small business for tax benefits. An accountant can help you determine the best decision for you.
Does insurance cost more for a vehicle in a business name?
Yes, commercial cars usually cost more to insure. That’s because business vehicles transporting people or goods for business purposes come with a higher risk for liability and property damage claims.
Insurance premiums are calculated using complex formulas. The purpose of using the vehicle will affect the price, but so will its value, the average distance covered, the coverage limits, and any other requirements for your professional needs.
While commercial auto insurance is generally more expensive, you may find that tax write-offs and other benefits help balance out the higher insurance cost at the end of the day.
Regardless, make sure to shop around for the lowest possible rate before you commit to a policy. Don’t accept the first rate you’re offered—a few minutes of research could make a difference of hundreds of dollars every year. Whether you’re registering a personal or professional vehicle, who wouldn’t appreciate a bit more cash in the bank?
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FAQs
Can I use my business car for personal use?
There are some risks to using a professional car for personal use. For instance, if you get into an accident using a company car while on a personal errand, you (not the company’s insurance policy) could be liable. The IRS also considers this use a taxable noncash fringe benefit, which leads to less take-home pay. It may be against company policy, too, since the driver’s behavior during off-hours could affect the reputation of the organization.
Can I get a loan on a car if it’s in my business name?
Yes. You will need a business bank account and business credit to get a car loan in your business’s name.
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