Not really sure if this is a “dumb” question.
Can a company lease vehicles and provide them as perks for their employees? Like a perk for managers, is it considered a stretch, and is it similar to offering free lunches (perk) to the employees?
If yes, is this something that the company can expense? Employee who wants to partake in that perk still pays for registration, insurance and maintenance.
Probably it depends on how the company sets it up, but I think employees have to pay tax on that “perk”.
Interesting that MB askes for a personal guarantee. My lawyer told me not to co mingle personal and business expenses, especially as a guarantor of a loan. I suppose, that MB or any other car company will not approve a corporate lease under the corporate name. It should bc to be truly a corp lease it has to be under the corporate name.
It’s no different from a business credit card - it’s under your company name but you provide your info when applying.
I don’t think being a guarantor to a loan is co-mingling. A guarantor is needed for almost ANY business loan (like a credit card) or a lease for an office or even a loan for buying a commercial building (SBA or not). All banks almost always require a personal guarantee unless your business has enough credit on its own. If anybody knows how to develop business credit (please do not tell me about D&B Credit Corp, those guys are scammers … maybe not anymore after 2015). We have been in business multiple years, been on Inc 500’s list twice but everything else still needs a personal guarantee.
Co-mingling is more for operational (day-to-day) stuff and if you are using your business checking account to pay your home mortgage.
Likewise, pretty much any loan to a small business is going to require a personal guarantee by the principal(s). This is not mingling business and personal expenses.
To me the key is keeping very good records of your business versus personal miles. This becomes the real determinant as to how much of the car-related expenses can be claimed as a business expense. For example, if at the end of the year you business-related mileage is 60% of the total mileage then 60% of all related expenses (e.g., lease, gas, maintenance, insurance) is business expense. The remaining 40% becomes personal income. As far as I know, the only place this gets sticky is if you are claiming depreciation on the car. In this case, your business use must be greater than 50% or things get complicated. This would not be the case with a lease as the car is not treated as a business asset that is being depreciated.
Keep in mind that if your office is outside your home then the commuting miles between your home and office are not business miles. Also keep in mind that you cannot have the company pay your car expense and then you claim a mileage expense. You get one or the other.
The fact is, that as a loan guarantor you loose protection from your corporate veil, you become financially liable to all debts. Yea it’s true that in order to obtain a loan you may have to do this, if your corp doesn’t have enough established credit. There are ways to limit your personal responsibility with proper preparation from your lawyer.
It may be more prudent to just lease your vehicle as a personal car and deduct the miles for business. This way, you have the be less corporate loan with a personal gyuarantee. This is the advise my lawyer gave me in case you ever have a lawsuit and a judge is looking at your corporation and personal ties to it. He may rule to keep you out of corporate liability or may decide that there is a certain amount of personal ties to it. I.E.: if it’s just a property lease and a credit card, he may be ok. If more loans, cars are added he may not rule to protect you. It’s up to the judge.
I’ll have to address some areas of concern on my side. However I do have a company by the name of TecqLife. It’s mostly digital goods and services revenue. Without any real operating costs. However that’ll begin to change very soon. Therefore, I’m glad to have received some clarity and base understanding to further build upon. Sorry to hijack the thread OP, you may now carry on with your normally scheduled programming.
Yes. You can. Its quite common. Typically the arrangement is that the company pays the lease, the employee pays the maintenance and insurance.
In an small business, its next to impossible not to co-mingle expenses. For LLCs and S-corps, the owners are ultimately responsible anyway.
Its not so much about co-mingling, rather than just having a system to account for personal and business expenses.
You will only pierce this if you use company funds to pay for your house or your kids college which are blatant personal expenses. Sadly, I have seen this stupidity happen but the examples here are not those. At the worst case, your accountant can treat any “accidental” co-mingling and classify it as an “owner draw” or “owner disbursement” and not deduct that specific transaction (it is still bad practice).
Just get a PO Box near to home that you check everyday
Lol good one. For the po box trick.
no trouble…
This was an incredibly useful thread! Any new additions in terms of recent tax code changes?