In this video, I will show you how to buy a car in your business name. I will go through a step-by-step process of how to buy a car for your business that you can easily follow.
In this video i’ll teach you everything that you need to know about how to buy a car in your business’s name as a business owner you probably already know that this is a possibility but there is a right way and wrong way to do this you need to figure out whether or not buying makes sense or leasing is more beneficial taxes and most of all how to get approved for
Financing what’s up winners my name is nam if you’re new here welcome here we talk all things personal finance and credit start now by subscribing so you don’t miss out on any future videos when you buy a car for your business you can do it in your business’s name or you can buy it directly for yourself both are perfectly feasible ways of doing things but i’m about
To show of you that there are some good reasons to do things in your business’s name we’re about to go through the process step by step so you can understand how everything works so before we even think about buying a car in your business’s name you’re gonna need to first incorporate your business meaning that your company has to be an llc llp or a corporation to
Start building business credit so as a sole proprietor there’s no way to differentiate you from your business you must file an article of organization directly over your state before you think about buying a car in your business so once you have done that now you need to obtain an employer identification number also known as the ein number from the irs unless your
Business is very new you probably already have one but on the off chance if you don’t have an ein there’s easy ways to get it you should never pay anyone to get an ein number this is a 100 free process there are two routes that you can take you can download the irs form ss4 from the irs website fill it out and send it in or you can just follow it online the link
Will be down in the video description once you’ve gotten your ein you have to create a credit profile to do this you would want to contact dunn and brass street this is a credit bureau that specifically tracks business credit and they’re a little bit more hands-on compared to the consumer ones you can actually create a profile on their website and even upload your
Financial statements this can help you quickly build business credit which is the first step of getting a loan done in brass street required to have at least three trade lines or credit lines in order to build a score there are plenty of business trade lines out there that offer net dirty terms meaning that you have to purchase supplies for your business and within
30 days you promise to pay them back some of the easiest net 30 accounts to get are from quill granger and also uline all of these companies offer office and industrial supplies so if you’re any sort of business most likely you will get some sort of value from any of these companies once you set up an account and start using them they will report this information to
Done brash street which will help you build your business credit another route that you can take is a low limit commercial card from retailers like staples home depot or walmart most major companies will report your payment information to dmb already but it doesn’t hurt just to make sure now you got some lines of credit it’s time to start building business credit so
To do this all you have to do is establish a record of making timely payments in fact it can take as long as two years to get to the point where you qualify for a car loan if you only want to use business credit if you don’t have two years to burn then don’t worry you can still buy a car under your business’s name but during this time it is important to make sure
That all of your payments are on time or you won’t be able to qualify for the highest score along the same lines you actually need to use your lines of credit in order to establish a track record this puts you in a sweet spot where you are using your credit but you’re not at risk of hitting your limit while you are building business credit it is not hurt to clip
Any outstanding debts on your business if you have any liens judgments against your business get them paid off as soon as those are paid you’ll quickly see a jump in your score when you think you’re ready then go ahead and check your business credit score the three major business credit bureaus are equifax experian and done in brashary unlike personal credit scores
Getting your business credit scores costs money equifax they charge about a hundred dollars experience charges around forty dollars and db charges around sixty two dollars business credit scores are also ranked on a different scale for instance done in brass street they use a paid x score which is on a scale of zero to a hundred anything over 80 is considered good
And you should be able to qualify for a loan if you don’t yet qualify then you don’t necessarily have to wait until your business credit is fixed to get your car and your business name you will most likely need to be a personal guarantor for your business on the other hand requirements for a lease is much more relaxed and it is easier to qualify whether you are
Buying or leasing the next step is to find a dealership with your commercial sales department this isn’t strictly necessary but the specialists in these departments are experienced with the ins and outs of commercial sales it is just easier to deal with an expert than to deal with someone who’s only ever sold to individuals once you have a list of dealerships
The next step is to find the right vehicle for your needs there are also tax benefits depending on the weight of the vehicle as well so i’ll go a little bit more in depth with this a little bit later in the video but i’m pretty sure that you probably have already something in mind just make sure that you’re buying something that’s appropriate for your business if
You’re a construction company and you buy a tesla then there’s going to be some unwanted attention from the irs remember you should only buy a vehicle in your business’s name if it’s actually for your business all right so once you’ve found a card that you need you’re going to need obtained financing in addition to your business credit score most lenders are going
To want to see more information about your business finances unless you are an established business like two years or more most likely they will check your own personal credit score so just make sure that you have cleaned that up before you apply even if you are a one-man team your business and yourself are separate from one another provided your dealership has
A commercial sales department you should be able to get financing through them alternatively you can look at other sources of financing whether it is a local bank or a credit union in fact it is a good idea to shop around a several different lenders to find the best rates dealership financing is convenient but it is not always the best value some lenders may ask
You to sign a guarantee for the loan this means that you’ll be held personally liable if your business fails to make its payments for that reason sometimes it just makes sense to pass up a loan with ultra low interest rate simply just avoid the risk of personal liability if you’re unable to get financing strictly through your business credit you can always co-sign
A loan with your own credit it is kind of similar of getting a car for another person whether it be a spouse or a child and you just co-sign for that loan this exactly is the same but just with your business so when this is the case if you ever get into an accident possibly your business and you can personally be liable in case you get sued so this is not the end
All of getting a vehicle under your business but there’s just more responsibility that comes along with it if you’re tagged along on that vehicle once you’ve gotten approved for your chosen lender then you’re ready to buy your vehicle that’s all there is to it well not quite after you’ve made that purchase you would have to make regular payments just as you would
On a personal vehicle remember late payments will impact your credit score not only for your business credit but most likely your personal credit score will be affected as well if you are a co-signer if this is a vehicle strictly for business use just make sure that you always make payments from your business account and not your personal account as always it’s
Never wise to mix business and personal assets another thing that you need to do is to immediately obtain insurance for that car or truck provided as a primary work vehicle which it should be you can even get a commercial auto policy these plans provide higher levels of liability coverage than individual policies although you may pay a higher rate registration gets
A little bit hairy because the process does vary from state to state in most cases you need to show your articles of incorporation or your company’s equivalent to find out what paperwork that you need reach out to your state’s dmv or bmv when the vehicle is registered it will need to be done by you or by someone else who is a manager at your business as with your
Car payments and insurance make sure that you pay any registration fees out of your business account and that’s your personal account come tax time you’ll be able to claim the tax deduction for the cost of the vehicle with that said the rules are kind of complicated and they’re going to be different depending on the type of company that you run this is where having
A good account really comes in handy one thing to remember is to keep a mileage journal if you’re paying for gas out of your own pocket you can claim a tax deduction for any miles that you drive on company business so what are the advantages of buying a car in your business’s name to begin with you’re able to maintain a clear distinction between your business and
Personal assets if you buy a business car or truck in your own name you’re mingling these assets as mentioned previously you can be personally liable if you get into an accident while using it for business use as for the tax savings it does make it a lot simpler but it doesn’t really matter if you have a personal vehicle that you use for business or you just have
A vehicle that’s strictly for business use if you have a car that’s 50 business and 50 personal then you can write off that portion that’s used for business the one thing that gets passed around a lot between influencers and content creators is the section 179 equipment deduction this allows you to ride off 100 of your vehicle within the first year if the vehicle
Is heavier than 6 000 pounds and under 14 000 pounds normally with cars you would depreciate the asset over five years so depending on your business and your situation you may want to talk to your accountant or tax strategist to make sure that it makes sense for your business for vehicles that are under 6 000 pounds there is a tax code that allows you to have bonus
Appreciation you can deduct 18 100 within the first year with bonus depreciation 16 000 for the second year 9600 for the third year and every year after that you can do 5 760 this is only if you use your car 100 for business as a reminder the irs love the audit business owners who ride up 100 of their vehicles especially when it comes down to luxury vehicles so
Just be aware of that so any time that you depreciate a vehicle under your business if you decide to sell the car there’s something called a depreciation recapture which may cause you to pay capital gains tax but this is outside the scope of this video so just make sure you ask your cpa or tax specialist more about this on the other hand if you are leasing your
Vehicle you can deduct up to 100 of that car payment depending on how much you use it for business this means that you may not have to put any money down spend only for what you use and not take a loss when selling the car because you would just have to turn it in another important benefit is the higher insurance coverages available on commercial vehicles the
Last thing that you want to do is to get in the car accident and have someone sue you and watch your business go bankrupt with higher coverage you’re limiting your exposure to that risk additionally if you are a co-signer on a business vehicle your personal assets are liable rather than owning your business even if you have an llc or a corporation even though i
Highly recommend buying your business vehicle in your business’s name and not your personal name there are still a couple of downsides to begin with the purchase process is a little bit more complicated even if you are an established business with good credit it can take several days to complete the transaction this can be problematic if you need to buy a vehicle
Immediately another downside that’s with increased insurance coverage is that you also get higher premiums this is annoying but it’s usually worth it in order to get better coverage now we only been talking about buying in your business name but what if you don’t have enough business credit or you need to buy a vehicle right now in that case you might not have any
Other choice to buy a car in your own name to begin with this only works for passenger vehicles and light work vehicles if a truck weighs more than 10 000 pounds then you won’t have any choice but to register it into your business’s name buying a car normally is pretty straightforward you just buy register and insure the same way as you would your own personal
Vehicle with that said when you buy your insurance you would have to indicate that it’s being used for business purposes in most cases this means that you won’t be covered for accidents that happen during work hours there are a couple advantages to buying a business vehicle in your own name to begin with the purchasing process is simple and straightforward and you
Can get your vehicle on the road that same day you also pay less for insurance than you would pay for a commercial policy even so i really wouldn’t recommend doing this unless you have no other option first off you are exposing yourself to a huge insurance risk if you are involved in an on-the-job accident even if your policy covers the accident you will not be
Able to get the same coverage as you would with a commercial insurance policy if that’s not bad enough your personal umbrella policy will cover you for the damage to that vehicle another major problem with buying your business card in your own name is that you’re not separating business and personal assets the liability issue is a good example of why this is a
Bad idea with purely a personal vehicle you aren’t exposing yourself to the risk with a purely commercial vehicle you’re only risking your business with a mixed use vehicle that’s registered in your name both you and your business could be liable in event of an accident not only that but if you change your mind later on and you want to register your vehicle under
Your business’s name the business will have to cut you a check and pay the sales tax on the transaction and even if you set the price as low as a dollar you would have to pay tax on the fair market value so what did we learn today as long as your business has good credit buying a car in your business’s name should be quick and painless and if your credit isn’t
Great you can always consider a lease but regardless of the method that you choose if your personal credit is not that bad then you could always be a co-signer for your business vehicle if you want to know how to get the best deal on a lease come hang over me some more over here i’ll see you over there you
Transcribed from video
How to Buy a Car in Your Business Name (2022) By Naam Wynn
