Personal or commercial auto insurance
Insurance for a private-passenger car operated by the principal of a limited liability company or a corporation can be accomplished with either a personal- or commercial-auto insurance policy. Generally, personal insurance is less expensive, but it may not be the right fit for your circumstances. Besides cost, you need to consider taxes, legal liability, insurance coverage, Department of Motor Vehicles regulations and how the car is to be titled.
If the car is titled and registered with the business, then a commercial policy is the preferred choice. However, since the title and registration do not have to match in New York state, the principal could register the car and insure it on a personal policy. Although, some insurers may not accommodate this arrangement.
If the car is titled with the principal, then a personal policy is the preferred choice. The car could be insured on a commercial policy if the principal was permitted to be a named insured on the policy along with the business or if the principal leased the car to the business.
In most cases, titling a car in the name of the business will yield the most reduction in taxes. Legal liability of the principal and the business can be impacted by how the car is titled and the vicarious liability laws of each state. Further, the choice of a personal or commercial policy can leave potential gaps in coverage for the principal and the business.
What seems like a simple decision turns out to be quite complex. You may need to discuss this with your attorney and accountant to get the guidance you need. But, don’t forget your insurance agent. We can help you determine the impact on insurance protection for the approach you are contemplating.