Can You Buy a Truck With an LLC for Your Business?

A Limited Liability Company (LLC) can purchase a truck for business operations. Acquiring a vehicle through the business entity allows for the separation of business assets from personal ones, which is a primary benefit for both liability protection and tax purposes. When the LLC is the legal owner, the truck is treated as company property, similar to any other piece of equipment. This requires following specific legal, financial, and record-keeping steps to ensure the vehicle’s costs are correctly attributed to the business.

Foundational Requirements for LLC Vehicle Ownership

Before an LLC can purchase a truck, the acquisition must have a legitimate business purpose. The vehicle’s use must be directly related to the company’s operations, such as transporting goods, traveling between job sites, or meeting with clients. The IRS scrutinizes vehicle expenses, so a clear connection between the truck and revenue-generating work is needed to claim tax benefits. Commuting from home to a primary place of business is not considered a valid business purpose.

Maintaining the “corporate veil” is a requirement. The corporate veil is the legal concept that separates the LLC as a distinct entity from its owners, thereby protecting the owners’ personal assets from business debts and lawsuits. To keep this protection, the LLC must be treated as a separate entity. This includes using a dedicated business bank account for all vehicle-related transactions, from the purchase to ongoing expenses like fuel and maintenance.

The LLC’s operating agreement, which outlines the rules for the company, should grant the authority to acquire assets like vehicles. This internal document formalizes the decision-making process and provides evidence that the purchase was a deliberate business action. Following these formalities helps ensure the purchase is recognized as a legitimate act of the LLC.

The Purchase and Titling Process

An LLC can secure financing in its own name or have the owner provide a personal guarantee for the loan. Lenders will examine the business’s credit history and financial health. For newer businesses without a substantial credit profile, a personal guarantee is common, meaning the owner agrees to be responsible for the debt if the LLC defaults.

All official paperwork, including the bill of sale, loan documents, and title application, must list the LLC’s exact legal name as the buyer. After the purchase, the truck must be titled and registered with the state’s department of motor vehicles under the LLC’s name. Dealerships or registration agencies will require specific documentation to process this, including the LLC’s articles of organization, its Employer Identification Number (EIN), and proof of insurance. The vehicle title is the legal proof of ownership and must be issued in the LLC’s name to be considered a business asset.

Tax Deductions for a Business Vehicle

Tax deductions for a business truck can be handled through two primary methods. The first is the standard mileage rate, where a business deducts a set amount for each business mile driven; for 2024, the rate is 67 cents per mile. The second option is the actual expense method, which involves tracking and deducting all operating costs.

This method includes depreciation, which allows the business to recover the vehicle’s cost over time. Actual expenses include:

• Fuel, oil, and tires
• Repairs and maintenance
• Registration fees
• Commercial insurance premiums

Depreciation deductions are beneficial for heavy vehicles, defined by the IRS as those with a Gross Vehicle Weight Rating (GVWR) over 6,000 pounds. For these trucks, businesses can use Section 179 expensing to deduct a large portion of the purchase price in the first year. For 2024, the Section 179 deduction limit for heavy vehicles is $30,500. Businesses may also claim bonus depreciation, which for 2024 allows an additional first-year deduction of 60% of the cost after the Section 179 deduction is applied. For some trucks with a cargo bed of at least six feet, the entire purchase price may be deductible in the first year.

Insurance and Record-Keeping Obligations

An LLC-owned truck must be insured with a commercial auto policy, not a personal one. Personal auto policies exclude coverage for accidents during business use. Commercial policies offer higher liability limits, such as $500,000 or $1 million, to protect the business from claims arising from accidents.

To substantiate tax deductions, the IRS requires contemporaneous records, meaning they must be created at or near the time of travel. A detailed mileage log is required for both the standard mileage and actual expense methods. Failure to maintain an accurate log can result in the disallowance of all vehicle-related deductions during an audit.

A compliant mileage log must document the following for each business trip:

• The date of the trip
• Starting and ending odometer readings
• Total mileage driven
• A clear statement of the business purpose, including client names or specific reasons for the visit