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If you’ve been in business for a while, and you’re tired of always renting vehicles, then you know it’s time to buy a fleet of your own. But, you’re also frustrated because you don’t really know your rights and responsibilities and what you need to do to stay compliant with the law. Here’s how to get your company car fleet up and running and how to manage it all while staying on the right side of the law.
Your Tax Deductions
When you own a fleet of vehicles, you’re responsible for all costs. But, you can also deduct a lot of those expenses, or deduct mileage on your taxes. As a small business owner, you can claim any expenses related to your trucks, vans, cars, whatever. Alternatively, you can claim a certain number of cents per mile for your vehicles if you happen to drive a lot.
If you use a vehicle for personal use, however, you can’t deduct any of those miles. This includes commuting to and from work and if your employees commute to and from work. It’s important that you keep detailed records, and your employees need to keep detailed records too, or you could be in trouble come tax time or if you get audited by the IRS.
If you own 5 or more vehicles, generally, you’re not allowed to take the standard deduction.
When Purchasing a Vehicle Under Your Own Company Name
Ideally, you will buy the fleet under your company’s name. This removes a lot of the complication for tracking the expenses because everything will be under your company’s bookkeeping instead of spread out amongst independent contractors or employees (which then complicates how you are able to claim deductions in the first place).
You should have an Employer Identification Number from the IRS, which you can apply for free of charge, online.
Once you have your EIN, your business can establish credit through Dun & Bradstreet. It might take up to two years, or more, to get the credit you need. In the meanwhile, you will have to personally guarantee all loans yourself.
The type of vehicle you choose should depend entirely on the type of business you run.
When You Buy Direct
When you buy directly from the manufacturer, you have some advantages on your side.
Sometimes, this is possible where you buy your vehicles direct from Ford, or General Motors, or other automakers. Ford, for example, requires that you either own 15 cars or have purchased at least 5 of their vehicles in the past year.
If you’re not operating at that volume, and many aren’t, try to find a local dealership that can help you.
How To Get Insurance
Getting the insurance right is important. Personal injury lawyer in Clinton, injuryclaimnyclaw.com, deals with accident claims all the time where insurance was an issue. When you run a business, your insurance needs are different than if you’re using it for personal use.
And, if you’re underinsured, it creates a huge liability issue.
How To Register Your Vehicle
State registration requirements differ based on the gross tonnage of the specific vehicle in question. It’s also based on the vehicle’s intended use and whether or not you will drive it out of state.
You’ll have to show proof of your insurance and complete IRS form 2290 if the weight is more than 55,000 pounds.
When you buy it, make sure all the paperwork has your business name on it. Sounds obvious, but some businesses miss this one because they often have to personally guarantee the loan for the vehicle so it gets titled in their own name. Don’t let this happen.
Ethan Doyle has worked in various roles within the business world all of his working life, gradually working his way up the ladder in 3 companies. His business knowledge is vast and he enjoys sharing this knowledge with others through his writing.
