How much can you write off on a car lease through a LLC?
An expense is an expense.  You can deduct your lease payment subject to some limitations, but you don't make out by having more expenses.  Higher expenses mean lower profit. Is leasing better than owning?  It depends on the car you'd buy.  If your business doesn't benefit from flashiness of your car, then buying a quality used car (a few years old at most) would probably be a wiser decision financially. I'd think hard about whether you really need an up-to-date car.
It's wrong in several situations:  One, the business owner counts this as a business expense, which it is not, and therefore reduces the company's profit and taxes. That would be tax avoidance and probably criminal.  Two, someone who is not the sole owner counts this as a business expense, which it is not, reduces the company's profit and when profits are shared, the company pays out less money to the other owners. That's probably fraud.  Third, if the owner or owners of a limited liability company draw out lots of money from the company with the intent that the company should go bankrupt with tons of debt that the owners are not going to pay, while keeping the money they siphoned off for themselves. That would probably bankruptcy fraud.  Apart from being wrong, there is the obvious risk that you lose control over your company's and your own expenses, and might be in for a nasty surprise if the company has to pay out money and there's nothing left. That would be ordinary stupidity. If you have to tell your employees that you can't pay their salaries but offer them to admire your brand new Ferrari, that's something I'd consider deeply unethical. "Assuming you are talking about an LLC in the United States, there are no tax repercussions on the LLC itself, because LLCs use pass-through taxation in the U.S., meaning that the LLC does not pay taxes. Whatever you take out of the LLC in the form of distributions goes onto your personal income tax as ordinary income, and you pay personal income tax on it.  See this link on the subject from the Nolo.com web site: Tax treatment of an LLC from the Nolo.com web site Repayment of your loan by the LLC would just be another business expense for the business itself.  I guess the question would then turn on what your personal tax repercussion would be for payments received from the LLC on the loan.  I would guess (and I emphasize ""guess"") that you would pay tax on any interest gain from the loan payments, which makes the assumption you made the loan to include interest.  If not (in other words, if you made this an interest-free loan) then it would be considered a wash for tax purposes and you would have no tax liability for yourself. To reiterate, the LLC (if it is a U.S.. entity) does not pay taxes.  Taxation of LLC income is based on whatever distributions the principals take out of it, which is then claimed as taxable personal income. My apologies to littleadv for not making my prior answer (I deleted it) more clear about my answer assuming you were speaking of a U.S.-chartered LLC. I hope this helps. Good luck!" LLC in NJ. You are awesome my friend. I have the LLC started. Im just getting the low voltage waiver and deciding on the payment system but this seems to work. I can just simply print them out the invoice. I gotta check with Amazon but this was extremely helpful. I'm not an expert, but here's my $0.02. Deductions for business expenses are subject to the 2% rule. In other words, you can only deduct that which exceeds 2% of your AGI (Adjusted Gross Income). For example, say you have an AGI of $50,000, and you buy a laptop that costs $800. You won't get a write-off from that, because 2% of $50,000 is $1,000, and you can only deduct business-related expenses in excess of that $1,000. If you have an AGI of $50,000 and buy a $2,000 laptop, you can deduct a maximum of $1,000 ($2,000 minus 2% of $50,000 is $2,000 - $1,000 = $1,000). Additionally, you can write off the laptop only to the extent that you use it for business. So in other words, if you have an AGI of $50,000 and buy that $2,000 laptop, but only use it 50% for business, you can only write off $500. Theoretically, they can ask for verification of the business use of your laptop. A log or a diary would be what I would provide, but I'm not an IRS agent. Assuming your country is the United States there is.  See schedule C line 9 and the corresponding instructions.   There are many rules associated with this, in some cases the entire purchase can be written off but typically if the truck is only used for business.  Most people write off partial usage in the form of credits for mileage. You are best to consult with a CPA once your business earns a profit.  Good luck. "Apologize - replied without actually looking at the financials. After reviewing -- Starbuck's financial statements use the line item ""Cost of sales including occupancy costs."" This is very different than ""hiding"" rent in COGS, as they plainly describe what it represents. Anyone who wants to derive true cost of goods sold without occupancy costs can look in the footnotes of the financials to find the lease expense for the year and subtract it. This line item is used by multiple public companies (Whole Foods is one that comes to mind), and regardless of their true motives, they have convinced the SEC that they think it gives the consumer the most accurate view of their business operations. As with all financial statements, the footnotes play a crucial role in understanding how a business works. If you want to find opportunities for future value or an Achilles heel, look in the notes." The LLC will file its own business taxes which may or may not have business level income and expenses.  At the end, the LLC will issue Schedule K-1 tax forms to the members, that based on their percentage ownership, will reflect the percentage share of the income/losses.    From an individual standpoint, the members need only worry about the K-1 form they receive.  This has quite a few pass-through categories from the LLC, but the Income/Loss may be the only used one.  The individual will likely include the K-1 by filing a Schedule-E along with their 1040 form.  The 1040 Schedule-E has some ability to deduct expenses as an individual. Generally it's best not to commingle expenses.  Additional schedule-E expense reporting is generally for non-reimbursed, but related business expenses.  If a member paid certain fees for the LLC, it is better for the LLC to reimburse him and then deduct the expense properly.  Schedule-E is on a non-LLC, personal level. "A lease is a rental plain and simple.  You borrow money to finance the expected depreciation over the course of the lease term.  This arrangement will almost always cost more over time of your ""ownership.""  That does not mean that a lease is always a worse ""deal.""   Cars are almost always a losing proposition; save for the oddball Porsche or Ferrari that is too scarce relative to demand.  You accept ownership of a car and it starts to lose value.  New cars lose value faster than used cars.  Typically, if you were to purchase the car, then sell it after 3 years, the total cost over those three years will work out to less total money than the equivalent 36 month lease.  But, you will have to come up with a lot more money down, or a higher monthly payment, and/or sell the car after 36 months (assuming the pretty standard 36 month lease).  With this in mind, some cars lease better than others because the projected depreciation is more favorable than other brands or models.   Personally, I bought a slightly used car certified pre-owned with a agreeable factory warranty extension.  My next car I may lease.  Late model cars are getting so unbelievably expensive to maintain that more and more I feel like a long term rental has merit. Just understand that for the convenience, for the freeing up of your cash flow, for the unlikelihood of maintenance, to not bother with resale or trading the car in, a lease will cost a premium over a purchase over the same time frame." Yes, you can do this.  I do this for my own single-member LLC, but I usually do it online instead of writing a check. Your only legal obligation is to pay quarterly estimated tax payments to the IRS. I'm assuming you are not otherwise doing anything shady. For example, that you have funds in your business account to pay any expenses that will be due soon or that you are trying to somehow pull a fast one on someone else... I have a colleague who always leases cars first.  He's very well off, has piles of money in savings, owns a home, and the cherry on top, he could just write a check for the car....   He sees the lease as an insurance policy on the first couple of years of the car's life.  If it gets in an accident or he finds something about it he doesn't like, he can give it back to the dealer at the end of the term with no hassle and move on to the next car.  Some people value the fact that a lease is a rental.   If you're leasing a luxury car or something you couldn't otherwise afford, no amount of mental gymnastics will turn this in to a good idea.   Separately, you should never make a down payment on a lease.  If the car is totaled early on, you will not recoupe the money you put down.  The issue here is that while the numbers all work out the same between a lease and a purchase your situation is different.  If the leased car is totaled, the bank gets its money back from an insurer.  If that payment doesn't cover the value of the car, the GAP insurance will cover it.  In either situation, if there's an excess remaining it will be returned to you.  The issue is the excess may not fully replace your down payment.  If you then went to lease another car you would need to come up with that down payment again because you couldn't just simply choose to lease a used car; like you could in the case of a purchase.  Additionally, GAP is generally included in a lease whether you want it or not.  As far as I'm concerned it doesn't make financial sense to mitigate the value of the GAP coverage once you've decided to live in a lease situation. My assumption here is that you paid nearly 32K, but also financed about 2500 in taxes/fees.  At 13.5% the numbers come out pretty close.  Close enough for discussion. On the positive side, you see the foolishness of your decision however you probably signed a paper that stated the true cost of the car loan.  The truth in lending documents clearly state, in bold numbers, that you would pay nearly 15K in interest.  If you pay the loan back early, or make larger principle payments that number can be greatly reduced. On top of the interest charge you will also suffer depreciation of the car.  If someone offered you 31K for the car, you be pretty lucky to get it.  If you keep it for 4 years you will probably lose about 40% of the value, about 13K. This is why it is foolish for most people to purchase a new vehicle.  Not many have enough wealth to absorb a loss of this size.  In the book A Millionaire Next Door the author debunks the assumption that most millionaires drive new cars.  They tend to drive cars that are pretty standard and a couple of years old.  They pay cash for their cars. The bottom line is you singed documents indicating that you knew exactly what you were getting into.  Failing any other circumstances the car is yours.  Talking to a lawyer would probably confirm this. You can attempt to sell it and minimize your losses, or you can pay off the loan early so you are not suffering from finance charges. 20% is almost certainly too high. I agree with 2%, as a very rough rule. It will vary significantly depending on the industry. I generally calculate an average of the previous 2-3 years working capital, and deduct that from cash. Working capital is Current Assets less Current Liabilities. Current Assets is comprised of cash, prepaid expenses, and significantly, accounts receivable. This means that CA is likely to be much higher than just cash, which leaves more excess cash after liabilities are deducted. Which reduces EV, which makes the EV/EBITDA ratio look even more pricey, as Dimitri noted. But a balance sheet is just a snapshot of the final day of the quarter. As such, and because of seasonal effects, it's critical to smooth this by averaging several periods. After calculating this for a few companies, compare to revenue. Is it close to 2%? "Your corporation would file a corporate income tax return on an annual basis. One single month of no revenue doesn't mean much in that annual scheme of things. Total annual revenue and total annual expenses are what impact the results. In other words, yes, your corporation can book revenues in (say) 11 of 12 months of the year but still incur expenses in all months. Many seasonal businesses operate this way and it is perfectly normal. You could even just have, say, one super-awesome month and spend money the rest of the year. Heck, you could even have zero revenue but still incur expenses—startups often work like that at first. (You'd need investment funding, personal credit, a loan, or retained earnings from earlier profitable periods to do that, of course.) As long as your corporation has a reasonable expectation of a profit and the expenses your corporation incurs are valid business expenses, then yes, you ought to be able to deduct those expenses from your revenue when figuring taxes owed, regardless of whether the expenses were incurred at the same approximate time as revenue was booked—as long as the expense wasn't the acquisition of a depreciable asset. Some things your company would buy—such as the computer in your example—would not be fully deductible in the year the expense is incurred. Depreciable property expenses are deducted over time according to a schedule for the kind of property. The amount of depreciation expense you can claim for such property each year is known as Capital Cost Allowance. A qualified professional accountant can help you understand this. One last thing: You wrote ""write off"". That is not the same as ""deduct"". However, you are forgiven, because many people say ""write off"" when they actually mean ""deduct"" (for tax purposes). ""Write off"", rather, is a different accounting term, meaning where you mark down the value of an asset (e.g. a bad loan that will never be repaid) to zero; in effect, you are recognizing it is now a worthless asset. There can be a tax benefit to a write-off, but what you are asking about are clearly expense deductions and not write-offs. They are not the same thing, and the next time you hear somebody using ""write off"" when they mean ""deduction"", please correct them." It's my understand that leasing is never the better overall deal, with the possible exception of a person who would otherwise buy a brand new car every 2 or 3 years, and does not drive a lot of miles. Note: in the case of a company car, Canadian taxes let you deduct the entire lease payment (which clearly has some principal in it) if you lease, while if you buy you can only deduct the interest, and must depreciate the car according to their schedule. This can make leasing more attractive to those buying a car through a corporation. I don't know if this applies in the US. The numbers you ran through in class presumably involved calculating the interest paid over the term of the loan. Can you not just redo the calculation using actual interest and lease numbers from a randomly chosen current car ad? I suspect if you do, you will discover leasing is still not the right choice. There are a few things you should keep in mind when getting another vehicle: DON'T use dealership financing. Get an idea of the price range you're looking for, and go to your local bank or find a local credit union and get a pre-approval for a loan amount (that will also let you know what kind of interest rates you'll get). Your credit score is high enough that you shouldn't have any problems securing a decent APR. Check your financing institution's rules on financing beyond the vehicle's value. The CU that refinanced my car noted that between 100% and 120% of the vehicle's value means an additional 2% APR for the life of the loan. Value between 120% and 130% incurred an additional 3% APR. Your goal here is to have the total amount of the loan less than or equal to the value of the car through the sale / trade-in of your current vehicle, and paying off whatever's left out of pocket (either as a down-payment, or simply paying off the existing loan).  If you can't manage that, then you're looking at immediately being upside-down on the new vehicle, with a potential APR penalty.