To buy a car under a business, you need a legally formed company in good standing, a federal Employer Identification Number, a commercial auto insurance policy in the business’s name, and documentation proving you have authority to sign on the company’s behalf. Every field on the purchase contract, insurance binder, and title must carry the business’s exact legal name, not yours. Done correctly, the vehicle becomes a company asset that can be depreciated or expensed on the business tax return, and the contract obligations sit with the business rather than with you personally.
Set Up the Entity and Get an EIN First
Before a dealership will title a car to your company, the company has to exist as a recognized legal entity. That means an LLC, an S-corporation, a C-corporation, or a sole proprietorship registered with your state. An LLC or corporation gives you clearer legal separation between yourself and the business than a sole proprietorship does, which matters when the vehicle is involved in an accident or a contract dispute.
The entity also has to be in active good standing with the state where it was formed, with annual reports and franchise taxes current. Lenders and many dealerships will ask for a Certificate of Good Standing to confirm this, and a lapsed entity can kill the deal at closing.
Your business needs its own nine-digit Employer Identification Number from the IRS. You apply on Form SS-4 online, by fax, or by mail.1IRS. Employer Identification Number The EIN is what the dealership uses to title the vehicle to the business and what a lender uses to process a commercial financing application. Without one, the transaction cannot be completed in the business’s name.
Documents Dealers and Lenders Will Ask For
Bring a full paperwork bundle. Most dealerships and commercial lenders want to see:
- Articles of Organization (for an LLC) or Articles of Incorporation (for a corporation), showing the entity legally exists.
- The operating agreement or corporate bylaws, which identify who can sign contracts and make financial decisions.
- A corporate resolution authorizing a specific named person to purchase and finance the vehicle. Lenders routinely require this for corporations, and many require it for multi-member LLCs.
- A Certificate of Good Standing confirming the entity is current with state filings.
- A commercial insurance binder listing the business as the insured.
The corporate resolution is the document most likely to trip up a purchase. It should name the authorized individual by full name and title, describe the transaction being authorized, and be signed by someone other than the person receiving the authority, typically the corporate secretary or another officer. If the name on the resolution does not match the name on the purchase contract exactly, the lender can refuse to fund.
Line Up Commercial Auto Insurance Before You Buy
A vehicle titled to a business cannot be covered by a personal auto policy. If the company owns the car and only a personal policy is in place, a claim can be denied and the business will have no defense in a lawsuit arising from the accident. You need a commercial auto policy naming the business entity as the principal insured, and the legal name on the policy has to match the formation documents exactly.
Commercial policies carry higher liability limits than personal ones. Many insurers recommend at least $1,000,000 in combined single-limit coverage for a business vehicle, with $500,000 treated as a floor even for a small company. To bind coverage, the insurer will need the vehicle identification number and the business’s EIN. Get the binder in hand before you go to the dealership; you will need it to complete the sale and register the vehicle.
Financing a Vehicle in the Business’s Name
A commercial auto loan is more document-intensive than a personal one. The lender evaluates the business’s finances, not just yours. Expect to provide:
- The EIN and the two most recent years of federal business tax returns.
- Current-year profit and loss statements.
- Several months of business bank statements demonstrating consistent cash flow.
- A personal guarantee if the business is newer or has limited credit history, which requires your Social Security Number and consent to a personal credit check.
Lenders look at debt-to-income ratios and payment history when deciding whether the business can carry the payment. A company with at least two years of operating history and stable revenue generally qualifies for better rates. If the business is new and has no established credit file, the personal guarantee becomes the primary basis for the loan decision, and the loan will show up on your personal credit report as well.
Sign the Contract and Register the Title Correctly
How you sign matters. The authorized representative should sign with their own name followed by their title in the company, such as “Jane Doe, Managing Member” or “John Smith, President.” Signing this way makes clear you are acting on behalf of the business. Leaving off the title can expose you personally to the contract.
The buyer information on the purchase agreement must show the business’s full legal name and registered address. A home address or a personal name anywhere on the buyer fields creates problems with tax assessments and title issuance later. If the vehicle is financed, the lien is recorded against the business entity, so accurate information matters for the DMV filing too.
After the sale, submit the registration package to your state motor vehicle agency. It usually includes the signed title from the dealer, a bill of sale, proof of commercial insurance, and the EIN. Some states also require an odometer disclosure statement. Registration and title transfer fees vary by state based on vehicle weight, value, and type; budget for several hundred dollars. If the car is financed, the title will list the business as the owner and the lender as the lienholder.
Processing the physical title can take from a few weeks to over a month depending on the state. You will normally get a temporary operating permit that lets the business use the vehicle in the meantime. Store the permanent title securely once it arrives; you will need it for any future sale, transfer, or refinance.
Deducting the Vehicle on the Business Tax Return
The tax treatment is often the main reason to title a car under the business. The IRS gives you two ways to deduct vehicle costs, and you have to pick one in the vehicle’s first year of business use. That choice constrains what you can do in later years.
Standard Mileage Rate
For 2026, the IRS standard mileage rate for business driving is 72.5 cents per mile.2IRS. 2026 Standard Mileage Rates Multiply the rate by business miles driven during the year. The rate is meant to cover depreciation, fuel, insurance, repairs, and maintenance in a single number, so you cannot also deduct those expenses separately.
Actual Expense Method
Under the actual expense method, you deduct the real operating costs of the vehicle, including gas, insurance, repairs, tires, registration fees, and depreciation, prorated by the percentage of miles driven for business.3IRS. Publication 463 – Travel, Gift, and Car Expenses If 75 percent of total miles are business miles, you deduct 75 percent of those costs. This method tends to produce a larger deduction when the vehicle is expensive to operate or driven heavily for business.
Section 179 and First-Year Depreciation Caps
Section 179 lets you deduct a large portion of the vehicle’s cost in the first year rather than spreading it over several years. For 2026, the overall Section 179 limit is $2,560,000, which covers all qualifying business assets combined.4IRS. Revenue Procedure 2025-32 The deduction begins phasing out once total qualifying property placed in service during the year exceeds $4,090,000.
Passenger cars and light trucks are subject to annual depreciation caps (the “luxury auto limits”) that limit how much you can write off each year no matter what you paid. For vehicles placed in service in 2025, the first-year cap was $12,200 without bonus depreciation and $20,200 with it.5IRS. Instructions for Form 4562 The 2026 caps had not been published at the time of writing, and general bonus depreciation drops to 20 percent for property placed in service in 2026.
Heavy SUVs and trucks with a gross vehicle weight rating above 6,000 pounds are exempt from the passenger car caps. These vehicles qualify for a Section 179 deduction of up to $32,000 for 2026.4IRS. Revenue Procedure 2025-32 Cargo vans and pickup trucks with full-size beds above the 6,000-pound threshold can qualify for even larger first-year deductions because the SUV cap does not apply to vehicles not designed primarily to carry passengers.
Track Business Use and Report Personal Use
To claim any of these deductions, the IRS requires you to substantiate the business-use percentage. Keep a logbook recording the date, mileage, and business purpose of every trip, plus odometer readings at the start and end of the year.6IRS. Travel and Entertainment Expenses – Frequently Asked Questions GPS-based mileage apps can automate the process as long as they capture those data points.
If an employee (including an owner-employee) uses the company car for personal driving, including commuting, that personal use is a taxable fringe benefit that must be reported on the employee’s W-2. The IRS allows three methods to value it:7IRS. 2026 Publication 15-B Employer’s Tax Guide to Fringe Benefits
- Cents-per-mile rule: multiply the standard mileage rate by personal miles driven. Available only if the vehicle’s value when first provided to the employee falls below a threshold the IRS sets each year.
- Commuting rule: each one-way commute is valued at $1.50. Limited to situations where the employer requires the commute in the vehicle for legitimate business reasons and personal use is restricted to commuting.
- Lease value rule: the vehicle’s annual lease value from an IRS table, multiplied by the percentage of personal miles. For vehicles worth more than $59,999, the annual lease value equals 25 percent of fair market value plus $500.
The personal-use value must be added to the employee’s wages no later than January 31 of the following year. Failing to report it can trigger income tax and payroll tax penalties for the business.
Should You Lease Instead
Not every business needs to buy outright. Leasing preserves cash and shifts some risk to the leasing company. A closed-end lease leaves the depreciation risk with the lessor: you make fixed payments, return the vehicle at the end of the term, and owe nothing extra unless you exceed the mileage cap or return the car with damage beyond normal wear. An open-end (TRAC) lease puts the depreciation risk on your business: if the vehicle is worth less than its projected residual value at the end of the term, you owe the difference; if it is worth more, you get a credit. Open-end leases suit high-mileage use or vehicles modified with equipment.
Lease payments are generally deductible as a business expense in the year paid, rather than depreciated over time. For high-value leased vehicles, the IRS requires a “lease inclusion amount” adjustment that slightly reduces the deduction. Whether leasing or buying comes out ahead depends on how many miles the vehicle will run, how long you plan to keep it, and whether you want equity in the asset.
Liability When Employees Drive the Company Car
Titling the vehicle to the business helps shield your personal assets from accident claims, but it also creates liability exposure for the company itself. Under the doctrine of respondeat superior, a business is responsible for the wrongful acts of its employees committed within the scope of employment. If an employee causes a crash while driving the company car for work purposes, the injured party can sue both the employee and the business, regardless of how closely the employer was supervising the driver at the time.
This is one reason commercial policies carry higher liability limits. Coverage should be enough to protect the company’s assets in a serious accident. It is also worth setting written vehicle-use policies that define who is authorized to drive, whether personal use is permitted, and what happens if an employee uses the vehicle outside the scope of their job. Respondeat superior does not extend to independent contractors, so if the car is used by a non-employee, the liability analysis is different.