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Can I Lease My Personal Vehicle to My LLC Business? (Details)

Max Smith

Reading Time: 6 minutes

To continue various business activities, your LLC may require a vehicle. At that moment, your LLC may not be able to afford to buy a vehicle. But you own a vehicle and want to use that for your LLC. So, a question may cross your mind: “Can I lease my personal vehicle to my LLC business?”

It’s legal to lease your vehicle to your LLC. But you must sign the lease contract papers. As a result, the LLC will pay you the lease amounts, affecting taxation.

Leasing vehicles is not complex but a formal process. If you have the documents required by your state laws, you can lease your vehicle to your LLC.

Without further ado, let’s go into depth to learn more about leasing your personal vehicle to your LLC.

You cannot give your vehicle to your LLC informally. There are some requirements and official documents to submit. In order to do this, follow the steps given below.

1. Form your LLC

Your vehicle is transferable only to businesses that are incorporated. Fortunately, an LLC is an incorporated business. So, if your business is not registered as an LLC, it’s time to make it an LLC.

First, apply for registration with the associated fees to the Secretary of State. Every state has different rules and fees, but the basic rules are almost the same. Get the help of an expert service provider and form your LLC.

2. Get a Dealership License

In some states, you may need to obtain a dealership license. It will help you to give your vehicle on lease to an entity. Pay the necessary fees and collect your license. 

Lastly, find out whether your state requires additional licenses and fees.

3. Make a Vehicle Lease Agreement Between Individual and Company

There will be an official lease agreement between you and your LLC. You will be the lessor, and the LLC will be the lessee. As your LLC is a legal entity, it can sign the lease agreement as a lessee. 

In addition, you cannot mix both personal and business entities. There should be a separation. That’s why it’s essential to make a lease agreement.

The official agreement papers will include all the details about the lease contract. For instance, 

  • The lease term, 
  • The lease price, 
  • The responsibility for any kind of damage, and 
  • The insurance premiums. 

Moreover, the insurance premium will be the lowest. If your LLC is a company, you must also explain the vehicle’s value to the LLC. Otherwise, the lease contract will be considered as your personal beneficial decision.

Also, don’t forget to get the required documents to make the lease contract happen. But what exactly are these requirements? Find out in the next section!

Business Car Lease Requirements You Need to Know

Only showing up with your vehicle is not enough to transfer your financed car to your LLC. There is a need for documents to fulfill the requirements and make a leasing contract between you and the LLC. Check out the essential documents below:

Identification Proof

Attach your ID card, social security number, or birth certificate. There is a need for a solid identity verification document to lease your vehicle to your LLC.

Residence Papers

Provide your physical address to ensure that you are a resident of the specified state.

Financial Stability

Does your LLC have the ability to pay the entire amount? If yes, then show its tax returns, income statements, or bank statements.

Showing Business Address

You may use a utility bill to provide the LLC’s physical addresses. If your LLC is new, you can also use the tax document or bank statement to prove its physical location. 

Lastly, choose the bill from the last 3 months to show the latest address.

Insurance Surety

The LLC may show the insurance documents while signing the leasing contract. It proves the insurance will cover the LLC’s vehicles, including the leasing one.

Presenting Business Documents

There are various types of business papers. Some of them include:

  • Articles of Incorporation,
  • Business license, 
  • Employer Identification Number (EIN), etc.

It proves that your LLC is using the vehicle for business purposes, and it’s essential for reaping the tax benefits.

Effects on Taxation

Leasing a car to your LLC brings tax benefits for you. For instance, you used the vehicle strictly only for business purposes; the whole cost is deductible from your tax returns. However, if you use it for personal and business gain, you must track it carefully.

There are 2 methods to follow:

  1. The standard mileage rate method and
  2. The actual expense method

You can then deduct car expenses such as fuel, oil, repairs, tires, insurance, registration fees, licenses, and depreciation. 

Plus, the lease payments are based on the percentage of total miles driven for business purposes. You may need to calculate and use the business usage while writing off a car lease with an LLC.

Moreover, do you know the factors to consider when writing off a car lease? If not, read on to find out!

How to Write Off a Car Lease with an LLC

Writing off a car lease with an LLC is crucial. You must provide the correct figures to get the proper tax benefits. Below are some of the critical factors to watch out for:

Mileage Logs

Check out your last-year tax papers. You may mention the year-end mileage. It will help you calculate the running-year mileage logs. If your LLC is new, you can start keeping the mileage records from this year-end.

Determining Miles

If you used the vehicle 100% for business purposes, just see the total miles you traveled. But if you also use the leased vehicle for personal use, you must keep separate records for the tax year.

Calculate Business Usage

Did you use the car for both business and personal use? Then, divide the miles used for business by the total miles you have driven in a year. As a result, you will get the business use percentage.

Car Expenses

Remember your business usage percentage. Then multiply it with the car expenses. It will give you an equation to help you deduct expenses for your LLC’s tax return.

Taxation

Choosing the correct tax form according to your LLC is essential. The taxation will include the car lease expenses. Check out the tax forms below.

  • Form 1040 for the sole proprietorship,
  • Form 1165 for a partnership LLC
  • Form 1120S for S Corporation LLC and
  • Form 1120 for C Corporation LLC.

Lastly, the IRS requires you to deduct vehicle lease expenses. But you must calculate the business usage. Otherwise, you may also pay taxes for personal use, as you do not have the calculations.

Conclusion

Get the help of an expert service provider to smoothly lease the vehicle to your LLC. Though you own your LLC, you just cannot provide the vehicle for business use.

Contact your state officials and fill out the requirements promptly. Besides, you may also calculate the vehicle usage and enjoy taxation benefits.

In the end, the answer is yes to your question, “Can I lease my personal vehicle to my LLC?” So, go ahead to lease your personal vehicle to your LLC without any hesitation.

Key Points

  • Leasing your personal vehicle to your LLC is possible.
  • Make a lease agreement with your LLC to lease your personal vehicle. It will make you a lessor and the LLC a lessee. 
  • The contract will include various details, including the lease term, lease price (market fair), responsibility for any damage, and insurance premiums. 
  • Explain your vehicle’s importance to your LLC to provide clarity that the lease contract is not only for your personal benefit. 
  • Get a license and pay fees if your state requires it. 
  • You may need to show multiple documents to make the lease contract. For instance, identification papers, residence papers, bank statements, LLC’s physical address, insurance documents, etc. Plus, present business documents like Articles of Incorporation, business license, Employer Identification Number (EIN) and more.
  • There are 2 methods to follow for tax calculations. For example, the standard mileage rate method and the actual expense method.
  • The tax payment is based on the percentage of total miles driven for business purposes.
  • If you use your vehicle for 100% business usage, its expenses are completely tax deductible. 
  • There are particular factors to watch out for while writing off a car lease. For example, the mileage logs, determining mileage, car expenses and more. 
  • Make the calculation to keep the vehicle usage separate between business and personal usage. 
  • Divide the miles used for business by the total miles you have driven in a year to find out business usage.
  • Choose the correct tax forms: Form 1040 for the sole proprietorship, Form 1165 for a partnership LLC, Form 1120S for S Corporation LLC and Form 1120 for C Corporation LLC.

Frequently Asked Questions

Can I lease my personal car to someone?

Yes! As your vehicle’s owner, you have the right to do anything with it. You can sell it or give it on a lease. The lessee can be an individual or a business entity, like an LLC.

Can I lease my personal vehicle to my LLC in Texas?

Surely! In Texas, it’s 100% legal to leave your personal vehicle with your LLC. It builds up a self-rental relationship between your LLC and you. Plus, it offers a chance to deduct some or the whole vehicle cost as a business expense.

Max Smith - LLC Formation

He is a seasoned entrepreneur and legal expert at LLC Formation Hub. With a stellar track record in both business and law, Max simplifies the complexities of LLCs. His practical insights, featured on LLC Formation Hub, empower entrepreneurs across the USA. Max merges business finesse with legal acuity to guide businesses toward success.


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