Company Car Questions

[Stealthengineer]

Hello,

I am looking for some information regarding how to move a personal car to a company car. I had my fiance quit her job to work for the company and consequently we are having her vehicle detailed with advertising, it is driven to all events we attend/sponsor and it will be used for any local deliveries (once we get there). I would like to have the company take it over as she works out of our home and we rarely drive it besides for business reasons or trying to advertise. Has anyone had any experience with these type of issues? She is my sole employee right now and her paychecks are just enough to cover her car payment, so I would really like the company to take it over. LIke I said, especially because it has been plastered with the company name now. Any and all help would be greatly appreciated!

Thank you

[vangogh]

Good question, but one I probably don't have a good answer to. I searched a little, but most articles I'm coming across are dealing with buying or leasing a new car. They all seem to indicate your business needs to be a legal entity like an LLC. I'm guessing here, but I wouldn't think a sole proprietor would qualify. In that case you would probably use the car as a deduction on your taxes. You do need an EIN. The few articles I looked through all mentioned it.

I just did a little more searching and I think I spoke in error above. It looks like a sole proprietor can buy a car for business. Here's an article on vehicle write offs (http://yourbusiness.azcentral.com/vehicle-writeoffs-sole-proprietorship-2458.html). Assuming you are a sole proprietor, it sounds like you buy the vehicle with business money and then make sure to document it's business and personal use. At tax time it becomes a deduction like I thought above.

There's definitely information online. Search for something like buy a car and add in your type of business whether sole proprietor, LLC, or other.

Hope that helps.

[jamesray50]

I'm not real sure about this either, but I would think the company would have to purchase the car from the individual, the title will need to show the company owns it in order to take the deduction for the car. The employee using the car would have to keep track of personal use because it will be a taxable benefit.

[TAAccounting]

Stealth,

Transferring a personal car to being a company car is a relatively simple process -- but it depends on your company filing status (are you an LLC, S-Corp, or C-Corp) and how complex you want to get with it.

Assuming you are an LLC and you want a simplistic approach; all you need to do is simply have the company start paying for all the car expenses (gas, maintenance, insurance, etc) and keep a very detailed mile book. I use Google Map to chart the mileage then, I put it in a mileage binder that I keep in the car. This will suffice for both year-end taxes and audits.

If you want a bit more benefits, it is a bit more complex. You will need to look up the Fair Market Value (FMV) of the car and put it on your book as a Fixed Asset. This asset is then depreciated on a yearly basis and will lower your net income or even allow you to claim a loss (tax planning). You will still need to pay for all the car expenses and keep a mile log.

Let me know if you have any other questions.


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[Stealthengineer]

Thank you all for the replies! (And sorry I have been so delayed in response) This was exactly what I needed to know and I appreciated all the help!