Buying a Car Under an LLC: What to Know Before You Buy

Can You Buy a Car Under an LLC?

Generally, yes. An LLC is a legal entity that can own property, so it can typically buy, finance, title, and register a vehicle in the business name, as long as the LLC is active and in good standing in its state.
 

Dealerships, lenders, and state motor vehicle offices each set their own requirements for an LLC vehicle purchase, and those requirements can differ by vehicle, by state, and by how the vehicle will be used.
 

There is more than one way to structure the purchase. The LLC can buy the vehicle outright, finance it with a business auto loan, or lease it. Some owners buy a vehicle personally and later transfer it to the LLC. Milepost is an insurance agency and does not provide legal or tax advice, so talk with a qualified attorney and a CPA before you decide which approach fits your business.
 

Milepost helps with the insurance needs of the vehicle once the LLC owns it. A vehicle titled to your business generally needs a commercial auto policy in the LLC's name.
 

Why Business Owners Buy Vehicles Under an LLC

Business owners often buy a vehicle under an LLC to keep business and personal assets separate, to build business credit, or to keep cleaner records for tax purposes. None of these benefits is automatic, and which ones apply to you generally depends on how your business is set up.
 

Keeping Business and Personal Assets Separate

An LLC, or limited liability company, is a legal entity that is separate from its owners. When the vehicle is titled to the LLC, paid for from the business bank account, and used for business purposes, it is generally treated as a business asset rather than a personal one.
 

Whether that separation protects your personal assets depends on how carefully you maintain your business and personal finances, as well as the laws in your state. This liability protection is not guaranteed. Separately, you choose the liability limits on your commercial auto policy, which dictate how much the insurance company can pay on a covered claim against the business.
 

Building Business Credit

Financing a vehicle in the business name can help an LLC build business credit, which may matter later when the company borrows for equipment, a second vehicle, or a line of credit. Lenders often ask the owner of a newer LLC to sign a personal guarantee, as explained in the financing section below.
 

Keeping Cleaner Records at Tax Time

Business owners often cite tax benefits as a reason to buy under an LLC, including depreciation, bonus depreciation, the Section 179 deduction, and the choice between the standard mileage rate and the actual expense method. Whether any of these tax deductions apply depends on your situation, so review them with your CPA.
 

Accurate records support both your tax filings and your insurance. If you keep mileage logs, separate business trips from personal trips, and carefully document how the vehicle is used, your CPA will have the information needed for your tax return, and your insurance agent can quote your coverage more accurately.
 

What You Usually Need to Buy a Vehicle Under an LLC

The documents that dealerships and lenders ask for vary, but most will request the following items:

• Your EIN, or employer identification number
• Articles of organization showing the LLC is registered and active
• Your operating agreement, especially for a single-member LLC
• A business bank account in the business name
• A business license
• Financial statements or business tax returns, if you're financing
• The exact legal business name, spelled the way it appears on your formation documents

The legal business name is a common source of delays. The name on the purchase order, the vehicle title, the loan, and the insurance policy should generally match. When the names do not match, the title, loan, or registration can be delayed until the documents are corrected.
 

Financing a Vehicle Under an LLC

Business auto loans often work differently from personal auto loans. When a lender reviews a business auto loan application, it generally looks at the business's credit history, revenue, and time in operation.
 

Business Auto Loans and Personal Guarantees

Because a newer LLC may have limited credit history, lenders commonly ask the owner to sign a personal guarantee. A personal guarantee makes you personally responsible for repaying the loan if the business cannot.
 

Buying a Car Under an LLC With No Money Down

Some owners look for ways to buy a car under an LLC with no money down. Some lenders offer business auto loans with little or no down payment, but approval often depends on the business's credit history and, for a newer LLC, on a personal guarantee from the owner.
 

Comparing Loans and Leases

Leasing is another way for an LLC to get a vehicle. Interest rates on business auto loans can be higher than rates on comparable personal auto loans, so some owners compare lease payments with loan payments before they decide. With a lease, the leasing company typically remains the vehicle's owner and commonly sets minimum coverage requirements.
 

Before you sign a loan or lease, ask the lender or leasing company two questions: whether a personal guarantee is required, and what insurance the agreement requires you to carry. Lenders commonly require physical damage coverage, with the lender named as loss payee on the policy. Share those requirements with your insurance agent before the purchase so the policy meets them from the start.
 

Titling and Registering the Vehicle to Your LLC

The vehicle title is the legal document that shows who owns the vehicle. When the title lists the LLC as the owner, the registration and the insurance policy generally need to be in the LLC's name as well.
 

Registration is a separate step from titling, although many states handle both at the same time. Registration authorizes the vehicle to be driven on public roads, and it is handled by your state's department of motor vehicles (DMV) or the equivalent state agency. Requirements vary by state and by vehicle type, but registering a car under an LLC commonly involves proof the LLC exists, the LLC's EIN, the title or bill of sale, proof of insurance in the business name, and payment of registration fees. Some states also assess property taxes on business-owned vehicles.
 

Insurance and License Plate Requirements

Many states require proof of insurance in the LLC's name at registration, not in your personal name. As a result, the commercial auto policy usually needs to be purchased before you register the vehicle.
 

Commercial plates are not always required for a passenger car, but they are often required for trucks, vans, and vehicles above certain weight ratings. Each state sets its own rules for which vehicles need commercial plates, so check with your state's DMV.
 

What Changes About Your Insurance When the LLC Owns the Car

Once the title lists the LLC as the vehicle's owner, a personal auto policy is usually no longer the right policy for that vehicle. Personal auto policies are generally written for vehicles owned by the individuals named on the policy, so in many cases the personal auto insurance company will not continue to cover a vehicle that the LLC now owns.
 

The Named Insured Should Match the Title

For a vehicle the LLC owns, the named insured on the policy should match the legal owner on the title, which means the LLC generally belongs on the policy as the named insured. For a leased vehicle, the LLC is generally the named insured, and the leasing company is typically added to the policy as well.
 

A mismatch between the title and the named insured often goes unnoticed until a claim is filed. At that point, it can lead the insurance company to question or delay the claim, or in some cases, can leave the vehicle without the coverage you expected.
 

Who Drives the Vehicle

A vehicle driven only by the owner is generally priced differently from one driven by several employees. For a commercial auto policy, the insurance company typically asks for information on everyone who will drive the vehicle, such as driving experience and driving records, so it can evaluate and price the policy. Unlike personal auto policies, commercial auto policies generally do not list individual drivers on the policy. If a specific driver is excluded from coverage, that driver is typically named on an exclusion form.
 

If employees use their own vehicles to run business errands, ask about hired and non-owned auto coverage. This coverage protects your business against liability claims involving vehicles it uses but does not own.
 

Personal Use of a Company Vehicle

Many businesses allow owners and employees to use a company vehicle for personal trips. However, you should disclose personal use to your insurance agent rather than assume it is covered. Personal use often changes how the insurance company evaluates and prices the policy, and it can also affect your tax records. If personal use is not disclosed, a claim that happens during a personal trip can become more difficult to resolve.
 

When You Likely Need Commercial Auto Insurance

If your business owns the vehicle, you will likely need commercial auto insurance. A personal auto policy is written for vehicles owned by the individuals named on it, and it generally cannot name the LLC as the insured, cover employees who drive for the business, or add the business coverages a company vehicle may need.
 

Coverages Most Business-Owned Vehicles Need

Most businesses that own vehicles need some combination of the following coverages. Depending on the vehicle and the work, your business may need others as well.

• Auto liability — bodily injury and property damage to others that you are legally responsible for
• Physical damage — comprehensive and collision coverage for the vehicle itself; this is often required by lenders
• Medical payments — medical costs for the driver and passengers after a covered accident; availability varies by state, and some states require personal injury protection (PIP) instead
• Uninsured and underinsured motorist — coverage when an at-fault driver has no insurance or not enough; availability and requirements vary by state
• Hired and non-owned auto — liability coverage for vehicles your business uses but does not own

Our coverages page lists the coverages available, and our non-commissioned agents will help you choose the ones that fit your operation.
 

What Affects the Cost of Insuring a Business-Owned Vehicle

Several factors generally influence what a business-owned vehicle costs to insure, including the vehicle type and value, where it's driven and how far, what it's used for, the driving records of everyone who will drive the vehicle(s), your liability limits and deductibles, and your claims history.
 

Setting a Simple Company Vehicle Policy

Once the LLC owns a vehicle, it helps to write down how the vehicle will be used, even if you are the only driver. A short company vehicle policy typically covers topics such as:

• Who is permitted to drive, and whether family members are included
• Whether personal use is allowed, and how it's tracked
• How mileage logs are kept
• What to do after an accident, and who to call'
• Where the insurance ID card and certificate of insurance are kept

Writing a company vehicle policy might take a couple of hours, but it can save you serious time later when you want to add a vehicle to your fleet or bring on another driver.
 

Why Businesses Buying Vehicles Choose Milepost

Milepost Insurance was founded in 2017 in Omaha, Nebraska, as an insurance agency for the businesses that run on vehicles. Here is what business owners buying a vehicle under an LLC can expect when they work with us:

• A custom commercial auto quote in about 15 minutes for most businesses, online or by phone during business hours
• A VIN is not required for an accurate quote; the year, make, and model are usually enough
• The option to quote and purchase coverage online in a single session
• Non-commissioned agents focused on the coverage your operation needs
• Certificates of insurance and ID cards you can generate online, 24/7, when a client or lender needs immediate proof of coverage
• Coverage for many types of business vehicles, including sedans, pickups, cargo vans, and box trucks
• 'A Berkshire Hathaway company. The insurance companies we represent are rated A++ (Superior) by A.M. Best, the highest financial-strength rating an insurance company can hold*

Whether you are buying your LLC's first vehicle or adding another, our agents can help you put the right coverage in place before you register the vehicle.

Related guides

• Commercial Auto Insurance for Business Vehicles
• Do You Need Commercial Insurance for a Passenger Van?
• Commercial Sedan Insurance
• Top 5 Commercial Auto Insurance Mistakes Small Businesses Make
• Simplify Your Commercial Vehicle Insurance Quote