Last updated: September 16, 2022

Transferring a private vehicle to an LLC is one of the most common reasons a business owner may choose to form a legal entity such as an LLC. But first, there are a few steps that you must go through to complete the transfer.

Start an LLC to Legally Transfer a Car

Driving a car

Most states do not allow for the transfer of an individual's vehicle ownership to another person.

This would be considered transferring ownership which requires a title transfer in most states.

When you decide to start up your own LLC, it is best practice to choose an appropriate name that does not include any words like "Incorporated," "Incorp," "Inc." or any other type of term that includes the word 'incorporated.'

This will allow you to legally transfer your personal vehicle into your new business name and then out of the company as a legal maneuver.

If you already have a business name and want to use that name for your LLC, it might be best to form a holding company with the name of the LLC and then transfer the vehicle into the holding company. This is because most states do allow an individual to transfer their own property into a holding company but not directly into another LLC.

Once you have formed your LLC, you will need to place a lien on the vehicle in order to make it an asset of the company. Again, most states do not allow an individual to transfer their own property directly into a new business.

You must first file a Declaration of Security Interest which is also referred to as a Financing Statement, and make sure to file this with the state in which you live and any other states where you plan to operate your LLC.

Once the vehicle is officially an asset of the LLC, it is time to transfer the title into the legal entity.

Contact Your Insurance Company

You need to contact your insurance agent and let them know that you plan to transfer the vehicle into an LLC and ask what they need from you.

Most companies will only want a copy of your articles of organization and then a letter that is written by the president or owner stating that they consent to transfer ownership.

It's as simple as this, make sure to check with your insurance company before moving forward to make sure that you are compliant. In many cases, business usage will be associated with greater liabilities to the insurance companies than personal usage.

If the insurance premiums make transferring the vehicle impossible, you might choose to keep the car in your personal property while having the LLC file a "friendly lien" on the title.

Inform Your Lender

Writing signature on contract

Your lender or bank will also need to be notified of the change in ownership as well as updated with your new title and lien-free document.

If you have a mortgage on your vehicle, you will receive a release from the lienholder after they receive their check for the payoff amount, which should be stated on your current title.

However, you must take care that this does not apply to cars that are financed by the dealership.

Once you have reached this point, then you can change your address with the DMV and insurance company, transfer insurance into your new name, and continue on with owning your car in an LLC without ever worrying about any liabilities coming back to hurt you.

There are two main reasons why you would choose to transfer a vehicle into an LLC, and both of these reasons can hold serious consequences if you are not careful.

These two reasons include:

  1. Asset Protection: By transferring your car or other properties into an LLC, you can protect them from creditors in the event that something were to happen.
  2. Legality: Transferring property into an LLC can protect you from being personally liable if someone were to get injured and decide that they want to sue the business.

Most states will not allow for a direct transfer of personal assets from one individual's name to another. However, transferring your vehicle into an LLC is much different than just placing it under private ownership.

By doing this, you are protecting yourself from any liability that comes along with owning a car as well as keeping your personal assets safe from those who might want to hurt them or take them.

Once you have taken all of the proper steps and notified each party involved in order to transfer a vehicle into an LLC, it should be much easier for you to get on with owning your new LLC and driving without worrying about anything else.

Get The Title Transfer Form

The state in which your LLC is located will have a title transfer form that is usually already filled out with the necessary information from when you initially purchased or registered the vehicle.

In order to make this process as easy as possible, it is best to simply write in your new name and address on this form before submitting it.

You should be able to receive the new title of your LLC in a couple of weeks, and it should be completely lien-free.

If you plan on financing or leasing your car again within the next six months, then you will need to keep your personal name on the title for this time period.

Apply For The Transfer of Title

Giving the car keys while writing signature

The first two steps in this process are extremely simple, and all you need to do as a business owner is:

  1. Complete the title transfer request form and submit it to your Department of Motor Vehicles with a photocopy or scanned image of your LLC documentation.
  2. Fill out an application for a new title, registration, and license plate if you have not done so already.

If you plan on financing or leasing your car again within the next six months, then you will need to keep your personal name on the title for this time period.

When filling out any forms, it is best to check with your local Department of Motor Vehicles and/or finance company before moving forward in order to make sure that there are no mistakes.

When you are ready to obtain new registration and license plates for your car after moving the title over to your LLC, you will need to visit your local Department of Motor Vehicles.

You should be able to simply hand in the forms that you have already filled out and then receive all of the new registration materials that you will need for your car, including a license plate or permission slip.

Paying The Sales Tax

The last step in the process of transferring a vehicle into a Limited Liability Company is to pay your sales tax. This will be different for each state. However, you should never have to pay sales tax when transferring property to an LLC.

The IRS publication 583 states that vehicle-related tax deductions based on actual expenses or a standard mileage rate are permitted by car owners. These actual expenses include gas, maintenance, registration fees, parking, and tolls.

FAQs

Can You Use Your Ein To Buy A Car?

Buyers may still use their EIN or SSN as a Tax ID for car purchases.

Can You Depreciate A Personal Vehicle Used For Business?

If you use your personal vehicle for business, you can usually take a tax deduction for the mileage used.

To determine the correct rate to use for this deduction, it is best to complete form 2106 and include it with your annual tax filing.

How To Transfer A Private Vehicle To An LLC...

In conclusion, transferring your vehicle into a Limited Liability Company is a fairly simple process that can be done through either the DMV or by filling out forms with the necessary information.

If you want to avoid potential issues down the line, it is best to let your new company take responsibility for owning and driving your car.

This is not only beneficial for protecting yourself but also makes the process of transferring a personal vehicle to an LLC much easier.

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