Do I need to put vehicles used for business purposes in the business name?
There are several strategies you should consider with an attorney if you use a vehicle for both business and personal use.
Many small business owners require a vehicle for business purposes. You might need a car to meet with a client, make a delivery, pick up supplies, and many other reasons. Most people living in Michigan also need a vehicle for ordinary purposes. If you use a vehicle for both business and personal use, you should consider at least the following during a consultation with an attorney:
- Suppose you get into an accident due to your negligence (for example, hitting a pedestrian or backing into a building). In that case, the other party can sue you in your individual capacity, even if you are on the job for your LLC. Thus, your personal assets may be used to satisfy a judgment in that lawsuit, which would include the vehicle if it were titled in your individual name.
- Generally, a business has a greater chance of being sued than an individual, and every customer or employee a company acquires typically results in a slightly higher chance of that company being sued. If the vehicle is titled in an LLC’s name and someone sues that LLC, the vehicle may be used to satisfy a judgment. However, assuming you are not personally involved in the lawsuit and properly maintain the LLC, a vehicle titled in your individual name would not be used to satisfy a judgment against the LLC.
- It may be wise to form another LLC that does not engage in business with the general public and title the vehicle and other valuable assets (for example, real estate, expensive equipment, and intellectual property) in the new LLC’s name. For this strategy to be effective, the new LLC should leverage privacy by organizing without the owner’s individual information on public record. If this new LLC is properly organized and maintained, the vehicle and other property should be protected in a lawsuit against you individually or against the customer-facing LLC. By keeping this LLC private, not engaging in business with the general public, and not hiring employees, this entity is at a minimal chance of facing a lawsuit.
Regardless of which option you choose, always be sure to document all mileage, repairs, and other expenses related to the vehicle, especially regarding what was for personal or business use. Considerable tax deductions are potentially available for the business use of a car. Additionally, double-check the named insured and permissible uses under the auto insurance policy to ensure both you and the business or businesses are adequately protected.
This content is for general informational purposes only as of the date of this post, is not intended to convey legal or ethics advice, and does not establish an attorney-client relationship. Future legal developments may impact the validity or effectiveness of this content. Always consult with an attorney licensed in your state about your specific situation before relying on information found online, including this website.