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mrusk
11-07-2004, 08:37 PM
A while ago there were a few post on this board about leasing a personal vehicle to a business. I want to use my truck that is in my name (however nowhere near paid off) as my work truck. To play it safe i need to get commerical insurance for it. What is the process i need to go through to set up this agreement so i can lease the truck to my LLC? I spoke with my accounting and he never heard of this. If you guys could tell me what i needed to do i'd appreciate it? And did any of you who do this have trouble with an insurance company not wanting to insure you because of this.

Thanks ahead of time.

Matt

Mueller Landscape Inc
11-07-2004, 08:44 PM
Talk to you CPA. Have him/her set it up.

tonygreek
11-08-2004, 11:28 AM
as john said, absolutely talk to your (a) cpa.

tony

mrusk
11-08-2004, 06:29 PM
I already spoke with my cpa already and he couldn't give me any advice on the subject.

matt

Mueller Landscape Inc
11-08-2004, 07:05 PM
You need to find another CPA.

Henry
11-08-2004, 09:34 PM
Ask your insurance agent. My agent gave me advice on this same subject when we met to discuss my policy.

jc1
11-10-2004, 04:54 PM
I was in a similar situation last year. I took my truck off of my personal insurance and insured with allstate on a commercial policy and named myself and my LLC as insured on the policy and got commercial tags.

tonygreek
11-10-2004, 05:03 PM
to shield yourself from liability, you probably would want to form an inc or llc, and have that company lease to your lco. talk to an attorney specializing in small business.

tony

John Gamba
11-10-2004, 05:04 PM
to shield yourself from liability, you probably would want to form an inc or llc, and have that company lease to your lco. talk to an attorney specializing in small business.

tony

Bingo!!!

John

Green in Idaho
11-11-2004, 06:33 PM
Imagine yourself leasing your personal vehicle to ABC Company (owned by someone you do not know) in another town.

The same issues you would want to address before turning over the keys and getting a payment would be the same issues to address if leasing a vehicle to your own company. It's a matter of paperwork.

I would concur it makes a big diff whether you hold the vehicle and lease to your LLC or if you form an S-corp to hold it and lease to LLC. I would rec the 2nd alt.

Also consider sales tax. In most states leasing is subject to sales tax too. Something the attorney may not consider. Something else an attorney may not consider is the accounting differences between of an operating lease vs. a capital lease.

And then when you are ready to make it happen calculate the savings and benefit of doing it. Do you want to go through all the hoops to save $x.

John Gamba
11-11-2004, 06:45 PM
Imagine yourself leasing your personal vehicle to ABC Company (owned by someone you do not know) in another town.

The same issues you would want to address before turning over the keys and getting a payment would be the same issues to address if leasing a vehicle to your own company. It's a matter of paperwork.

I would concur it makes a big diff whether you hold the vehicle and lease to your LLC or if you form an S-corp to hold it and lease to LLC. I would rec the 2nd alt.

Also consider sales tax. In most states leasing is subject to sales tax too. Something the attorney may not consider. Something else an attorney may not consider is the accounting differences between of an operating lease vs. a capital lease.

And then when you are ready to make it happen calculate the savings and benefit of doing it. Do you want to go through all the hoops to save $x.

Do you leave your self open to liability to save on tax dollars??. And when i'm done with the attorney,i always go to the accountant to see what this will do to me in the end run.
John

Green in Idaho
11-11-2004, 07:25 PM
[QUOTE=John Gamba]Do you leave your self open to liability to save on tax dollars??.
Point well taken. But there are several ways to reduce the liability, right? And in the post above cost/benefits, liability protection is one of the benefits. Which one saves the most $?

And when i'm done with the attorney,i always go to the accountant to see what this will do to me in the end run.
< And then the acct says, "Well that's one way. If you would've done it this different way it would've saved more money." And then one is going back to the attorney for a redo.

Ergo- all involved have to work together at the same time.

mrusk
11-11-2004, 08:59 PM
Thanks for all the replys. I am already a LLC. The reason i want to lease the truck to my business is because my insurance company says that if i use the truck for any commericals use, if anything would happen i would not be covered. I know most people ignore this, however i belive in playing it safe and i do not want to take the risk. I need to talk to my lawyer. if i can't pull this off some how i'll have to bite the bullet and go buy a mason dump under the business name. I would just like to advoid buying another truck at this time.

Matt

kootoomootoo
11-11-2004, 11:50 PM
Why not sell the truck to your company for $1.

Darr57
11-12-2004, 02:41 AM
Because you can write off the cost the the lease on your taxes, and pay yourself more than the vehicle is actually worth. Extra income that you don't have to pay S.S. or mediscam on! It's a easy way to avoid 15% of your money going straight to Uncle Sam.

John Gamba
11-12-2004, 07:32 AM
Thanks for all the replys. I am already a LLC. The reason i want to lease the truck to my business is because my insurance company says that if i use the truck for any commericals use, if anything would happen i would not be covered. I know most people ignore this, however i belive in playing it safe and i do not want to take the risk. I need to talk to my lawyer. if i can't pull this off some how i'll have to bite the bullet and go buy a mason dump under the business name. I would just like to advoid buying another truck at this time.

Matt

Let us know what you do.

John
Good Luck :)

kootoomootoo
11-12-2004, 09:28 AM
Because you can write off the cost the the lease on your taxes, and pay yourself more than the vehicle is actually worth. Extra income that you don't have to pay S.S. or mediscam on! It's a easy way to avoid 15% of your money going straight to Uncle Sam.

The lease payment you receive will be deemed income? How will you get around this?

Green in Idaho
11-12-2004, 12:58 PM
The lease payment you receive will be deemed income? How will you get around this?

Exactly. So the statement earlier of escaping SE tax is not completely correct. IRS says rental of personal tangible property (equipment & vehicles) is reported on Schedule C as trade /business. Sched C income is subject to SE tax. Such an arrangement would cause TWO Sched Cs: one for your single-member LLC lawn business and one for the rental activity.

Personally, I would make an arguement that rental of equip is NOT my trade or business but rather an investment of capital. Using an S-corp to hold that equip would make my arguement more viable. And more importantly that ownership would make it less likely to become an issue. BUT if IRS identified it as rental of equip it would likely be an audit issue (Tax Court Memo 1997-7- for just one ref.) and I would be swimming in deep waters above a big shark.
Of couse I would still be paying a little bit of employment taxes to me as an office of the S-Corp. AND this is all balanced with my point earlier that it's a lot of effort to save some money or reduce the liability.

Buying a commercial insurance policy within the LLC (with trucks in LLC) can accomplish the same goal of liability protection.

Another alternative is to have a ltd partnership (or LLC) of two, where I am a 1% general partner and spouse or other investor (son/father) is the 99% owner. Then 1% of the net would be subject to SE tax and 99% slides through w/o SE. LTD holds the equip/trucks but STILL with a commercial insuracce policy.

There are several ways to skin this cat. But is it worth getting all complicated when the correct insurance policy gets the job done?

mrusk
11-12-2004, 05:00 PM
I can't just sell the truck to my business for 1 dollor because it is not payed off yet.

I could borrow from my father to pay if off then sell it to my company for 1 dollor. But then i can't write it off.

Matt

MacLawnCo
11-12-2004, 11:46 PM
I can't just sell the truck to my business for 1 dollor because it is not payed off yet.

I could borrow from my father to pay if off then sell it to my company for 1 dollor. But then i can't write it off.

Matt
Matt,
we have already spoken on this issue. Ive told you that it can be done. My mom is the principle on a loan from GMAC, similar to your dad and you. My insurance agent without a question wrote ME a business policy for the truck. No questions asked. If your agent wont do it, then find someone else who will.

The main reason ive seen people set up leasing companys is to shield the assets from loss should the primary company fail or get sued. That is not your intent, so do not waste so much effort when you can directly accomplish your goals with a much simple method.

lawnman_scott
11-13-2004, 03:44 AM
I can't just sell the truck to my business for 1 dollor because it is not payed off yet.

I could borrow from my father to pay if off then sell it to my company for 1 dollor. But then i can't write it off.

Matt
Then borrow the money and sell it to the company for $25,000.