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      01-08-2014, 07:37 AM   #1
mjposner
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Leasing BMW through your own small company

For tax reasons, my partners in my company are not direct employees, but have separate limited liability companies that get paid, and we, as owner/single employee, get a salary and distributions.

Some more aggressive CPAs have suggested I buy/lease my next car through the LLC so I can deduct the monthly payments in part. Has anyone done this through BMW? My LLC has a bank account but no credit.

Thanks for the info.
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      01-08-2014, 07:45 AM   #2
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Just get really specific with your CPA. There are different rules. You can depreciate the car (independently of payments), whether it is owned by you or by the LLC. However, in a sole proprietorship, which I am guessing you are, it is more important to not "mix" finances with personal finances. Sometimes permanent signage is needed, etc.

My answer to your question is "no", but I know it is possible and the rules can be complex.
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      01-08-2014, 07:50 AM   #3
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You will have to sign personal guarantee for the LLC obligation or BMW will not lease. The LLC has no assets or credit and I am guessing you are the sole member. It is just a pass through to you and the reality is that any lender/creditor will determine that and request personal guarantees until the LLC has established credit worthiness by borrowing and repaying money and has two years of tax returns showing income. You could probably just lease in your name and deduct the costs as long as you have a second car to drive for personal use, but registering the car in the name of the LLC is probably better (we do it this way).
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      01-08-2014, 07:51 AM   #4
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Quote:
Originally Posted by jtodd_fl View Post
Just get really specific with your CPA. There are different rules. You can depreciate the car (independently of payments), whether it is owned by you or by the LLC. However, in a sole proprietorship, which I am guessing you are, it is more important to not "mix" finances with personal finances. Sometimes permanent signage is needed, etc.

My answer to your question is "no", but I know it is possible and the rules can be complex.
Can you depreciate a leased car?
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      01-08-2014, 09:33 AM   #5
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Leasing through the LLC provides no real advantages since you get a K-1 anyway so everything is just a pass through. Your overall tax situation must be considered and we don't know the entire picture.

As you know, you can deduct your lease payment based on the percentage usage between business use and personal use. Leasing provides a slight advantage over purchasing in some instances because you deduct the entire payment (no breakout between depreciation, taxes and interest). Purchasing on the other hand only allows to deduct the depreciation component, and only to the extent of business usage. But if you purchase you could take advantage of section 179 accelerated depreciation.

Also you need to look at your entire tax picture because these deductions are limited to the extent you are in AMT for Federal purposes...although these limitations don't apply for State taxes or self-employment taxes.
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      01-08-2014, 10:22 AM   #6
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Quote:
Originally Posted by pbonsalb View Post
Can you depreciate a leased car?
http://www.irs.gov/taxtopics/tc510.html
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      01-08-2014, 11:06 AM   #7
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If you lease through your LLC... The insurance coverage will be higher which negates the tax benefit. You can claim that, all the maintenance (replacement bbk, supercharger, carwashes etc) all the marketing mods (rims, tint, etc)

Otoh if you lease as an independent contractor... And keep your refular insurance You can claim the lease, all the maintenance (replacement bbk, supercharger, carwashes etc) all the marketing mods (rims, tint, etc) for your work... But as an independent contractor that makes you a little bit more of a target when it comes to audits.
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      01-08-2014, 04:23 PM   #8
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I purchased my car under my business name for tax purpose, not only that all my vehicles are in my business name and also my house. why? i choose that way when it comes to the "security" and safety the LLC generates when having assets under your name in case of a law suit. Also, it does not make the prices on my insurances higher , at least not here in florida.
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      01-08-2014, 04:37 PM   #9
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Quote:
Originally Posted by Markao66 View Post
I purchased my car under my business name for tax purpose, not only that all my vehicles are in my business name and also my house. why? i choose that way when it comes to the "security" and safety the LLC generates when having assets under your name in case of a law suit. Also, it does not make the prices on my insurances higher , at least not here in florida.
Uh actually that seems rather backwards. I don't tie my personal assets to my business. Heck, none of my business credit is self guaranteed anymore. If the business goes belly up or is being sued, my personal assets are separated. And the likelihood of getting sued as a business is higher than personally.

To the OP: It really depends on your whole tax situation. It's a gray area as far as leasing a vehicle under the business name -unless- it's completely used for business purposes(for example a delivery truck). Lease payments can be deducted as an expense but you do not depreciate since the deducted lease payments already account for that. Buying will allow you to depreciate but only interest can be deducted, not the principal amount paid. Personally I just use mileage deduction and purchase vehicles under my own credit.
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      01-08-2014, 06:13 PM   #10
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Thanks for all the advice. To answer some questions, It is an LLc but taxed as an "s" corp. I know about business and personal use, I ill have to log miles. If my business goes belly up I go belly up either way. Also, in Florida i am married and only own my homestead residence, so I am judgment proof (very pro debtor state). I also own two other cars. One I am really interested in is will using the LLC (and my guarantee) affect interest and or lease rates. I use Pen Fed alot due to low rates, not sure they will let the LLC buy.
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      01-08-2014, 06:56 PM   #11
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Quote:
Originally Posted by mjposner View Post
Thanks for all the advice. To answer some questions, It is an LLc but taxed as an "s" corp. I know about business and personal use, I ill have to log miles. If my business goes belly up I go belly up either way. Also, in Florida i am married and only own my homestead residence, so I am judgment proof (very pro debtor state). I also own two other cars. One I am really interested in is will using the LLC (and my guarantee) affect interest and or lease rates. I use Pen Fed alot due to low rates, not sure they will let the LLC buy.
You get the same tax deduction whether the car is owned by you or owned by the LLC since it's a pass through entity. That being said, if you get a worse deal from Penn Fed by leasing/buying through the LLC then that wouldn't be very smart unless there is another reason you are wanting it on the LLC's books. Bottom line is there is no discernable tax advantage to putting this car in an LLC.
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      01-08-2014, 08:53 PM   #12
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It is just a pass through to you and the reality is that any lender
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      01-08-2014, 08:53 PM   #13
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Quote:
Originally Posted by mjposner View Post
For tax reasons, my partners in my company are not direct employees, but have separate limited liability companies that get paid, and we, as owner/single employee, get a salary and distributions.

Some more aggressive CPAs have suggested I buy/lease my next car through the LLC so I can deduct the monthly payments in part. Has anyone done this through BMW? My LLC has a bank account but no credit.

Thanks for the info.
I am sure tax rules are different everywhere. I am in Canada and own an incorporated company. We used to lease through the company but the tax rules changed.

My accountants now have me charge mileage back to the company. So I pay for the car directly and for gas - then charge back mileage at $.45 - $.50 cents per kilometer.

At approximately 20,000 km per year that is like a $7000 allowance after gas. You just need to make sure you record your mileage for business use.
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      01-09-2014, 09:18 AM   #14
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Quote:
Originally Posted by Longboarder View Post
You get the same tax deduction whether the car is owned by you or owned by the LLC since it's a pass through entity. That being said, if you get a worse deal from Penn Fed by leasing/buying through the LLC then that wouldn't be very smart unless there is another reason you are wanting it on the LLC's books. Bottom line is there is no discernable tax advantage to putting this car in an LLC.
What he said.
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      01-09-2014, 02:03 PM   #15
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I'm writing off 100% of my monthly lease payment, and the lease is under my name. You'll need a personal guarantee anyways, so leasing through your company is really not necessary.
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      01-09-2014, 06:05 PM   #16
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As it's been said, leasing a car for business purposes, through your company (LLC/S corp) or personally, is the same.

There are benefits of purchasing or expensing through your company but a car isn't one of them.

Also, if your business has no credit and no financial statements from the last two years, you're going to have to personally guarantee it and it only makes for more paperwork.
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      01-09-2014, 09:33 PM   #17
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As it's been said, leasing a car for business purposes, through your company (LLC/S corp) or personally, is the same.

I guess the issue is the IRS challenging the deduction, and if its owned by the LLC it might be less likely too challenge, especially since the car has some personal use as well.
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