Where can I research more about the pros and cons of getting a company car for my small business?

Question

I have a small graphic arts business and am thinking about getting a company car. It's not for status but for functionality (right now my personal car is a 97 and isnt roomy or dependable enough for moving around equipment). I was thinking something along an scion xb as it could easily be car wrapped and I would have a mobile advertisment (instead shelling out MUCH more in adds in newspapers and magazines).

I want to make sure I make an educated decision on this, but I need help as to where I should focus my research. Would I finance it in the company name? What about car insurance? Should I talk to my accountant and get ideas about taxes and depreciation?

Answer 1

If you are established I would simply recommend that you consult your accountant.

If your are not established I would recommend the following:

1) By the car in your name: Works out better if the company fails. You will not need business insurance, $$$$$$$!

2) Use standard insurance unless you are hauling people. Do what ever you have to do NOT to carry business clients. Have them meet you somewhere. If you are going to carry clients then you need business insurance. Other then that if you had an accident then that's all you have is an accident. But if you have clients then you better have business insurance. I do not carry clients and I do not carry business insurance. Which maybe a good reason not to rap your vehicle.

3) Basically the IRS either allows your to claim all your receipts...gas, maintenance, insurance, etc...or you can just take the mileage write off. I would recommend the mileage write off. All you do is keep track of your mileage and then at the end of the year you just give that to your tax preparer and your done. Remember that the IRS does not allow you to write off personal miles or miles to the office...everyone has to get to work.

4) You need to consider whether to buy or lease. If you lease you can write off the amount of the lease...opposed to a % of the purchase price and I think that is only for 3 years (worth of depreciation.) Be careful if you lease. Leasing fits my business needs great but that can be a monkey on your back if leasing is not good for you. In reference to miles, get at lest 15,000 per year and if you think you are going to need more then buy them up front. If you buy them at the beginning of the lease they are a fraction of the price as opposed to buying them at turn in.

Hope I was helpful. I recommend that you talk with a tax professional in your state.

The site below -- I thought it might interest you, a graphic arts person.

I have learned to keep business simple...word of mouth is still the best...it just takes time!

Remember this one word...integrity.

Best of Luck & God Bless!

Answer 2

A company car is always a good thing for doing business. If you can wrap it for advertising in your community - that is a good thing too, if the majority of your work comes from your community. As to whether it is a good business expense, only you and your accountant know what your complete tax picture looks like.

The vast majority of small business fail in the first 5 years, and generally it is from spending & expensing more than they are making. A car is a capital expense for a business and as such it isn't expensed, it is depreciated over several years, meaning that you can only write off ta portion of the cost each year along with the actual expenses to operate it.

When you speak with your accountant you will want to discuss whether it is better for you to buy the car, or lease one. There can be advantages either way.

Where to focus your research?

1. from the tax viewpoint visit the IRS site for self-employed people and small businesses: http://www.irs.gov/businesses/small/index.html

2. From the advertising standpoint, you will want to price what it costs to "wrap" the car, and compare it to running quality advertising.

You don't say where you are located so I can't give you any ideas about advertising for clients but two of the best sources I have found are Craigslist.org, and the local print edition of bizjournals.com. Also, attending mixers, meeting people face to face and passing out business cards is always an affordable way to drum up some new business.

Answer 3

www.irs.gov just start reading. It's best to read and understand for yourself but if you have a good accountant they should be able to tell you what the pros and cons are. There are irs requirements to take your car off your business instead of just expenses or gas mileage. If you decide to deduct it, it must be in the company's name. some realtors I know do it and they have to keep those magnetic signs on their cars. It is good advertisement and good deductions. Get good advice before leap.
Second thought-a few years ago their was a deal for companies that bought those big, big cars and they got a really good deal from the irs. I don't remember particulars or if it is still in effect but it did involve a LARGE deduction on taxes.

Answer 4

You can go to your local courthouse, and they'll answer any and all questions you have regarding business. You can also log on (or call) your local chamber of commerce. They'll give all sorts of advise from tax write-offs to the least expensive gas stations to go to in your area. Great luck to you!