One of the perks of owning a business that is successful is that you can purchase some luxury items in the name of business. For instance, you can purchase a company suite at a local sports arena or a company car to use for both business and private use. Many of these items can be used as a tax deduction, making it even more attractive for business owners to make luxury purchases.
But is it really smart?
Intertwining Business And Pleasure Purchases Can Be Dangerous
Often, when a business owner begins to use more and more of the company property, such as the company car, for personal use, they are placing their business at risk. Accidents happen, and usually at the most inopportune time. Many questions arise and there are issues about who is liable, the owner or the company itself. Additionally, replacement costs can be damaging to business profit.
For example, a business owner is mixing a business trip with a vacation in Miami and takes the company car and then has a car accident in Miami, FL. Can you still write this off as a loss for the business? Is the owner covered personally or under the corporate policy? If they are the cause of the accident, who is liable? If the owner is injured, who pays the bills?
All of these questions must be addressed under this situation, and the answers must fall within the laws of the state in which the accident occurred. So, for the above stated scenario, Florida laws will apply to the accident even if the business owner or company car are from another state.
What To Do If You Are In An Accident In This Situation
If you find yourself facing this type of situation, the very first thing you will need to do is hire a local car accident attorney to evaluate the case. The attorney will be able to go over the information relating to the accident and establish who is at fault, and what liability the company and/or the owner has in the accident.
If you re injured, an attorney will be able to use state laws to determine who will be responsible for the payment of the medical bills and any other forms of compensation. They will also be able to help you determine what you can write off for your business, what must be claimed as a loss for your business and what you and your business can claim separately for your losses.
Owning a business definitely has its perks. However, business owners must consider their luxury purchases carefully because of the risk it places on them personally and their business. Sometimes the tax rite-offs you receive for personally using your car or other goods to conduct business is far more valuable than the tax write-offs that you receive for depreciation on company owned property.