Well, the family business just got bigger. My wife has said goodbye to the corporate world and has come along to swing a hammer.
We’re getting her a truck, new, (first new rig we’ve ever bough actually). Its under 6000# GVW, a toyota, so we can’t get the automatic full write-off for the business. My question for everone is; What are the advantages of naming the title in the business’s or in her name respectivley?
Factors: I’ve got two rigs that are solely business use, a pickup and a boom truck, and we seem to pay much higher insurance on the commercial policy. This toyota of hers will be at least 90% business use.
Thanks ahead of time for the input.
-duke
Replies
my company has 175 trucks, we are employee owned, all of the trucks are in the main owner name, not the company. I dont know why, Its always been that way.
What's the structure of your ownership? LLC LLP or S-Corp?DCG Your Neighbor's Contractor LLC
"A wrongdoer is often a man who has left something undone, not always one who has done something."--Marcus Aurelius
My setup is sort of what Bill described. I personally own the truck I drive for business, and I also drive it for personal use. The vehicle is insured on my personal policy with an endorsement for some business use (an important part). My business is named as an additional insured on that portion of the personal policy. My business insurance has a 'non-owned vehicle' endorsement, which recognizes and covers risk caused by employees (me and others) driving their personal vehicles while working for the business. I personally pay for gas, repairs, etc. The business reimburses me for use of the vehicle at IRS rates every quarter (and yes I keep a detailed mileage log). Both my lawyer and my insurance guy thinks that this covers it from all angles.
If the business owned the vehicle then it would pay all of the expenses and theoretically I would have to rent the vehicle from the business for personal use. If the business is sued I still have the truck.
This wont be comprehensive, but its what I know so far.
You hit on the first to come to mind. Commercial insurance is higher. I also know that aftermarket warranties on vehicles often specifically state that the contract is void if the vehicle is put into commercial use.
I think the legal angle is if it's hers and she uses it for business, that's up to her. If the business gets sued, they cant take her truck. If she gets in a wreck, she can get sued, not the business (which can be good or bad). I rather hope SHG comes and hypotheticals a little more on the pros and cons there.
If it's the business truck, then fuel, oil changes, maintenance, tires, all that is a legitimate expense. If it's hers, then that all comes out of her pocket. I'm sure there's a way that the business can also pay her an allowance specifically intended towards offsetting the costs of using a personal vehicle as part of your day to day duties.
BT is great on this stuff for shotgun pattern opinions and small glimpses of knowlege, but for you, in your state, your business, your situation . . . it's worth talking to an accountant to get the straight scoop on the financial implications.
Real trucks dont have sparkplugs
"You hit on the first to come to mind. Commercial insurance is higher. I also know that aftermarket warranties on vehicles often specifically state that the contract is void if the vehicle is put into commercial use."Commercial has to do with how the truck is used. Not the ownership."If she gets in a wreck, she can get sued, not the business (which can be good or bad). "If the wreck was happened when the truck was being used for business purposes the business can certainly be sued.In any case insurance is what is needed. And even if personally owned I would look at having the business as a named insured."If it's the business truck, then fuel, oil changes, maintenance, tires, all that is a legitimate expense. If it's hers, then that all comes out of her pocket.If it's the business truck, then fuel, oil changes, maintenance, tires, all that is a legitimate expense. If it's hers, then that all comes out of her pocket."That can all be reimbursed. If standard milage is used then it is a non-taxable event.However, if actual expenses are used might have to declare the reimbursement as income and take deduct the expenses. If she is an employee then that is not a good thing. However, if she a member of the LLC then I think that it will flow to sch C and have the same benifit.But even if it is in the companies name and pays all of the expenses she will have to declare income from the amount of time for personal usage.In some cases, specially for realestate, sometimes it is worth it to setup a separate entity to own the assest. Probably not in this case.Another things is if loan is being taken out the rates are probably much better if it is in an individuals name rather than the LLC.There are other tricks that are sometimes used. Personally owned, but leased to the business.Probably a couple of dozen other tax items that I have not mentioned.Really need to pass this by his accountant.Also if this is the first "employee" and specially if he does not expect to have other employees, at least for a while, then he needs to look at the advanatage and disadvantage of having her as an employee vs a co-owner of the business.Potentially big advantages in fringe benifits depending on the structure.
I'm an S-Corp, my accountant advised me to keep my truck personal, and have the business compensate me for the use of it. I'm just a one-man company so I don't know if that's got anything to do with it.
As usual, there are advantages and disadvantages of titling the truck either way.
Titling it to the corp means that you'll need to get business insurance for it which is most likely going to cost a bit more than a similar private auto policy (PAP). And if there's a claim on the company, the truck will be available to creditors. The good part is that the truck can be depreciated as a business expense (assuming you own it only for the business) as well a annual maintenance costs or standard milage rate.
The advantage to a PAP is the coverage is likely cheaper and it will be protected from creditors who may go after your business. However, the insurance may be the show stopper here. Standared exclusions to PAP's are any business use of the vehicle beyond incidental use. This means that if the truck causes damage to another and a claim is filed with your insurer...and the insurer finds out it is being used in your business, he may very well deny the claim, leaving you with the liability. Any any business logo on the truck will most likely mark the truck as for business use only. But to be sure, check with your Agent who should be able to speak to this.
BruceM
I better call my insurance agent. No sign on my truck, but that doesn't mean it's not being used for business. That could spell trouble!
Thanks for that bit of information.
3 corporate lawyers in the family. This is how they 'splained it to me as a standard unincorporated human.
Major assets of family should be held in common. House, property and assets.
STANDARD PERSONAL SETUP. High liability assets (car truck etc.) something where you could hit a school bus and cause a lawsuit that could outstrip your insurance coverage. Have those assets in an individual person's name. It isn't often, but in court sometimes it does happen that a judgement is levied on future earnings. It depends on who earns and will continue to earn the most money who you attach the high liability asset to.
Simply put: Bob & Mary Incorporated are one Litigant. Bob is a litigant, Mary is a litigant.
INCORPORATED SETUP. In your case I'd attach the trucks to the business. Pay yourself wages and list your home and personal assets as Mr & Mrs Bob. If you hit the school bus the liability follows the truck to the business. Theoretically if you outstrip the insurance, the business goes bankrupt. That is the fundamental reason to incorporate.
I would not put the truck in her or your name. If it is, then have the business pay you for the truck then it is listed as an asset of the business not yours.
The thread above has a lot of truth in it regarding the types of incorporation. Those are issues for a corporate lawyer to direct you. Taxes, retained earnings taxed in the business, methods of deductions against personal earnings, and how all of this affects your "net in your pocket money after personal taxes", needs to be figured out. It isn't a simple answer. How you want to pay yourself and how you want the business to evolve are things you want to contemplate before seeing a lawyer. Tell them what you plan and the hourly charge will be well spent.
Of course I don't play one on TV nor have ever been a lawyer. So talk to your company lawyer (and not the ambulance chaser) for direction as local state laws will have bearing. (That is why lawyers pass the bar exam in specific states) Final note: There is a book that shows a Lawyers' educational background, gradepoint, and specialty. This is important because you do truely get what you pay for. It isn't like buying toilet paper. A bargain lawyer, isn't.
Edited 11/5/2006 8:45 pm by booch
There is a book that shows a Lawyers' educational background, gradepoint, and specialty.
Would the name Martindale-Hubbel have anything to do with the "book" Booch?
blueOur Skytrak is sold. Frank sold it for 47k cash. I'm now officially retired as a carpenter. I've offered to fill in for Frank in emergencies, but when he calls, I'll probably say no LOL!
Good find if that is the document. I never saw it. I'd start with 'what-you-said'
All I know of the book is that my bro gave me a recomendation based on that book. He said it provides direction as to who to see in my state. Jack of all trades and master of none - you got a problem with that?
Martindal hubbel is a rating system for lawyers. I don't know enough about it to talk about it though. Maybe Shg will elaborate.
blue
ask BOB, oh sorry.
What did old bob do?
He must be posting secretly as someone new right now. He could never leave this site alone for a week.
blue