Should I Register My Vehicle To An Llc

Pros and Cons of Starting an LLC for Luxury Vehicle Ownership

The lauded tax benefits may be harder to come up by than they initially appeared.

By Harvey Bezozi

If your client purchases a yacht or jet that will exist used to bear business ventures, the acquisition should be structured then that the ownership of the vehicle clearly falls to the company, not your client personally. Most ofttimes, the advisable business structure is a limited liability company, chosen an LLC, which offers both the liability limits of a corporation and the "laissez passer-through" taxation for the revenue enhancement filing of a sole proprietorship, partnership or S corporation.

Even if your client is acquiring a new vehicle with no immediate use for it within the context of his existing businesses, he may want to consider starting a new LLC under which to make the purchase. Ownership of any vehicle that could potentially event in liability claims—from a sleek jet to a sturdy fishing boat or a third luxury car to a simple golf game cart—can put all of your clients' personal assets at risk if a tragedy occurs.

The Big Do good: Liability Limitation

The most of import do good of LLC formation for vehicle ownership is embedded in the abbreviation itself: express liability in the event that injury or holding harm results from your employ of the vehicle. A single, fluke incident in which the parking restriction on your golf cart fails and the vehicle rolls down a loma, striking another golfer, could be financially devastating if the cart is under your personal ownership. Even so, if the cart is under the ownership of your LLC, a lawsuit related to such an unfortunate result is subject to the aforementioned limitations equally whatever other legal activity against a corporation. Your personal assets volition be protected if the LLC is formed and structured properly.

Carry in mind that this protection is not absolute. If the court deems that there is no meaningful distinction betwixt you lot and the LLC—that is, that the LLC is in fact an empty trounce that exists solely to disguise the private nature of the vehicle ownership—the usual protections may be waived, granting the litigant the correct to sue you directly. Therefore, in lodge to realize the benefits of LLC germination, it is necessary to have all the steps normally required to operate a business concern—hiring a competent business attorney, staff or contractors, revenue and expense tracking and so on.

Tax Benefits Are Elusive

When considering the benefits of owning a vehicle as a business asset, many people are quick to state on potential tax advantages. However, those advantages are not as easily realized as many would like to recall.

Deducting Ongoing Expenses Related to Vehicle Ownership

In guild to deduct expenses related to a vehicle, such as repairs and upkeep, it is necessary to maintain thorough, detailed records and to file appropriate business organisation income/loss forms with your clients' taxes. Information technology is likewise important to recollect that a business is, by IRS definition, an system or activity that exists for the purpose of attaining profit. If your customer plans to go along the vehicle for the long haul, it will be necessary for the LLC to somehow generate revenue in society to continue deducting expenses.

Furthermore, your client will need to demonstrate that the expenses are in fact related to business concern utilize of the vehicle. For a jet employed for business travel, such a claim is easy to defend. Setting upward an office on a yacht where your client regularly conducts business might also fly (or rather float) with the Internal Revenue Service.

If you prepare up the LLC for ownership of a golf game cart or 4th luxury SUV, deducting operating expenses may well exist difficult to justify and unwise to endeavour. There is, nonetheless, a different taxation benefit that tin can exist readily attained for any vehicle endemic nether an LLC.

Sales Tax Savings

The most easily attained tax advantage of starting an LLC for a golf cart, boat or other vehicle is actually the benefit for the buyer when your customer sells the craft. Rather than simply selling the vehicle to some other party, your client sells them the LLC itself, with the vehicle included as a visitor nugget—thus exempting the transaction from sales taxation. Although this exemption ostensibly benefits only the purchaser, it pays dividends for the seller equally well, in the form of a higher ceiling for the selling toll of the vehicle.

To execute the tax-exempt sale of a vehicle, it is disquisitional that the transaction be structured and understood as the sale of the business organisation from the beginning. If an understanding for the purchase of the vehicle is reached separately, whatever subsequent attempt to "throw in" the LLC every bit function of the deal amounts to the purchaser ownership a company with no assets. Equally noted in my article on valuing artwork for tax purposes, both federal and state tax agencies are quick to flag transactions that appear to have been completed solely to attain a tax do good.

Properly Insuring the Asset

Finally, if your client does choose to constitute an LLC, make certain to insure the vehicle in the proper noun of the LLC, non under a personal insurance policy. Otherwise, you will notice yourself either uninsured or unprotected from liability or both.

This article: a) provides information, not advice or opinion; b) ‎is accurate to the best of the author's cognition every bit of the commodity date; c) is not intended to serve equally legal, other professional person advice, or to found any standards of care‎ for anyone; and d) is not a substitute for the communication of a retained professional person in applying this material in whatsoever particular factual situations.

Harvey Bezozi is a CPA and CFP. You lot tin read more of his writing at YourFinancialWizard.com.

Should I Register My Vehicle To An Llc,

Source: https://www.wealthmanagement.com/high-net-worth/pros-and-cons-starting-llc-luxury-vehicle-ownership

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