In the United States, any business -- including an LLC -- can purchase tools necessary for doing business. Since many LLCs may find it necessary to provide transportation for owners, clients and employees, an LLC can buy a car as a way of providing this necessary transportation. This constitutes a normal business expense, which functions as a decrease of taxation on the owners.
For tax purposes, an LLC, like an S Corp, is a pass-through entity. This means that it does not pay taxes on the company level. Rather, company profits go straight through the company to the owners, and the owners pay taxes on their personal income. When it comes to buying a car, an LLC may legally purchase a car expressly for the owner's use. The advantage of having the LLC buy the car rather than the owner is that, by counting it as a business expense, the money to buy the car is never counted as part of the owner's income. For this reason, the money used to buy it is not subject to income tax. However, the owner must be able to verify that the car does constitute a necessary expense for the business and that he uses the car for business purposes.
Just as an LLC can purchase a car to facilitate transportation for a company owner, it also can do so to furnish necessary transportation for employees. Whether the car is for a specific employee or for general use is entirely up to the company. This does not only apply to passenger cars, either: LLCs can purchase cars, vans, pickup trucks and cargo trucks to use for company purposes. However, if an LLC does this, it will need to make sure that the automobile has the necessary insurance coverage. In cases in which the company furnishes a vehicle for a specific employee, it may be advantageous to require the employee to pay for the vehicle's insurance, as this will encourage safe driving habits.
Although an LLC probably has no need to purchase a vehicle for a specific client's use, it may need to purchase a car that it can lend out to various clients. Such may be the case for a company that frequently brings clients to a training center where they must stay for several days. Another situation in which a loaner vehicle for clients is often a necessary business expense is when auto repair or auto detailing businesses require clients to leave their vehicles in the shop. An LLC can buy a car for the specific purpose of helping clients with their transportation needs in the mean time, and this constitutes a normal business expense.
Alternatives to Buying
Whether an LLC wants to provide transportation for owners, employees or clients, it does have alternatives to buying a vehicle. First, it can rent a car. Rental may be a better option for cases in which the LLC will not need to provide such transportation much in the future. Another alternative is to reimburse clients or entrepreneurs for miles driven in their own vehicles. Similarly, LLC owners may claim miles driven on company business in their own vehicles as tax deductions.