How to Use an LLC for Vehicle Ownership

By Laura Payet

How to Use an LLC for Vehicle Ownership

By Laura Payet

A limited liability company (LLC) is a business structure that shields its owners from personal liability for the business's debts and obligations. In that respect, it is similar to a corporation, but an LLC is easier to establish and avoids some of a corporation's negative tax consequences, making it a good option for small business owners. Because LLCs, like corporations, are independent legal entities, they can own property just as individuals can. If you use a vehicle for your business, you can benefit from transferring its ownership to an LLC. Here are the two main steps.

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1. Establishing an LLC

Create an LLC according to your state's laws. In most states, the website for the state agency that regulates businesses, often the Secretary of State, explains how to do this. Generally, you have to file articles of organization with the state's business filing agency and pay a fee. Some states also require you to publish a newspaper notice stating that you intend to form an LLC. You can file this paperwork on your own or seek assistance from an online legal service provider. It's also a good idea to prepare an operating agreement that describes how you will run your business.

2. Transferring Vehicle Title to Your LLC

If you intend to transfer title of a vehicle you already own to your new LLC, these are the steps you need to follow.

  1. Contact your insurance company and let them know that you plan to transfer your vehicle's title to the LLC. The LLC may have to purchase a business policy, which may have higher premiums than your personal policy. Be sure that the LLC is named as the insured on the policy.
  2. If you have an outstanding loan on the vehicle, contact your lender. They have to give permission for you to transfer the title, and they may want you to pay off your personal loan and negotiate a new one in the LLC's name.
  3. Prepare a bill of sale transferring the vehicle's ownership to the LLC. A bill of sale is a document used to record a property sale that contains the transaction details. The seller usually prepares it.
  4. Have the LLC apply to the state department of motor vehicles (DMV) or county treasurer for a new certificate of title. An LLC can only act through its owners, called members, or managers, so if you are a member or manager, you can handle the necessary paperwork on its behalf. You should also check with the DMV about whether you must take additional steps to register the vehicle in the LLC's name.
  5. As the vehicle's purchaser, the LLC may have to pay a state sales and use tax on the purchase. Your state comptroller's office or DMV can provide that information.

As a legal entity, an LLC can also purchase a vehicle from a dealership or other third party. In that case, the financing, registration, and insurance should all be done in the LLC's name.

Advantages to LLC Vehicle Ownership

If you use your vehicle for business, the primary advantage of transferring its ownership to the LLC is protection from liability if the vehicle is ever involved in an accident that results in a lawsuit. In addition, the LLC itself is entitled to a tax deduction for its use of the vehicle. The deduction can be based on a standard mileage rate set by the Internal Revenue Service or on the actual expenses incurred in using the vehicle, including gas, maintenance, registration fees, parking, and tolls.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.