One business vehicle, multiple businesses

[chris.hodgdon]

I am getting ready to purchase a vehicle that will be exclusively used for business.  The issue is, this vehicle will be shared between 4 business.  Yes, 3 independent LLC's that I, my wife and/or kids and 1 independent LLC owned by me and my brother.  The vehicle will be purchased in the name of one of the businesses but shared between all 4. 

I use milage and expense tracking software for and can add different activities, so I can make each business its own activity in the program.  Not sure if all the businesses will be sharing in the vehicle payment or insurance.  That is something I will be looking into as we get closer to this.

My question is, should I go ahead and separate each business out and track the individual mileage for each business or just let the buying company track all the milage in bulk and just split it up 4 ways when its time to do the taxes. 

[Carl]

I get the impression that you have a mix of 1 or more single member LLCs, and I already know that you have "at least" one multi-member LLC. The single member LLCs get reported on SCH C as a part of the personal 1040 tax return of the legal owner of the business. Whereas the multi-member LLC (you and brother) gets reported on the physically separate 1065 Multi-member LLC/Partnership tax return.

Claiming a vhicle in multiple businesses of the same structure is complicated enough. Using it among different business types can be an absolute ever lasting nightmare from which you will never awaken. One teeny tiny mistake with just one business, can have a ripple effect (depending on the mistake) across all businesses making taxes pure hell.

Since the vehicle will be purchased with one of the businesses as the titled owner of the vehicle, and will be 100% business use (i.e.; not driven one single inch for personal use by anyone) then I would suggest the business that owns the vehicle, rent it out to the other businesses at something like a fixed rate per day, or fixed rate per mile. Then claim the vehicle as a business asset.

If feasible and reasonable, if the business that owns is the business that will drive it the least (or not at all) then it can be listed as a business asset that gets depreciated over 5 years. The rent paid to the business would be business income. The taxability of that income would be offset by the costs associated with maintaining the vehicle, which could include the cost of gas if you include that in the rental price.

For the business that owns the vehicle, it's expenses for use would be the actual costs to that owning business. I'm not sure,but I'm pretty confident that with absolutely no personal use, mileage logs would not be required. (But I would still do so anyway)

For the businesses leasing the vehicle, they won't need to keep mileage logs, since they would be paying a bonafide business rental expense for the vehicle.

[Anonymous]

I agree with Carl except for the need for mileage logs. here's what I found in IRS PUB 463 page 25

Cost of each separate expense. For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year

from this webpage

https://www.driversnote.com/irs-mileage-guide/mileage-log-requirements

The IRS defines adequate records
Regardless of the circumstances of your employment, you will likely be asked to record the following:

"the mileage for each business use"
"the total mileage for the year"
the time (date will do), place (your destination), and purpose.

[Carl]

While I can see such documentation for the business that owns the car, I can't find anything that clarifies that for a rental vehicle. I mean, a car rental service does annotate starting/ending miles for each client that rents from them. But they don't ask for the purpose of use, list of destinations and all that stuff. The car is more of a business asset to the rental company that is used to generate income for that rental business.

But while keeping more detailed records of my personal use for my business (which is the owner of the vehicle) I'd only see the need to document mileage only for the entity renting the vehicle from me. Just the mileage when it left the lot, and the mileage when it returned. Don't know what good that would do unless I was charging rent at a per-mile rate. But I'd do that anyway.

[chris.hodgdon]

@Carl and @Anonymous 

Thank you for that information.  That is what I was thinking and will most likely follow that direction if we do purchase the vehicle.  

@Carl to let you know.  All of them are technically multi-member LLC's, but all except the one owned by me and my brother, are owned by me and my wife, like I stated, but being in a community property state (Texas) we are both able to file a schedule C for each of us on those businesses.  I am actually lucky enough at this time that they don't bring in a lot of income and so the taxes are easy.  But hoping to change things this coming year.

Thank you both for your input.

[AdamSJ]

A lot of people think that need their odometer readings on a monthly basis, however, it's enough to provide it at the very beginning and the very end of the year:

https://www.mileagewise.com/irs-compliant-mileage-log/

[Carl]

Just FYI, but the one owned by  you and your wife is a multi-member LLC if that's how you registered it in your state.  The fact that the two owners are in a community property state and elect to report on two SCH C's doesn't really change that from a legal perspective. At least, not at the state level.