For many small business owners across the U.P. and Midwest, it’s common to use a personal vehicle for day‑to‑day business operations. Maybe your LLC relies on your pickup for hauling equipment, meeting clients around Escanaba, or transporting supplies throughout Delta County. But if that vehicle is still titled in your personal name, you could be exposing yourself — and your business — to serious insurance gaps.

That’s where a company leaseback agreement comes in. It’s a simple, practical way to let your business use your personally owned vehicle while making sure the insurance is structured correctly.

What Is a Leaseback Agreement?

A leaseback occurs when an individual personally owns a vehicle but leases it to their company (such as an LLC). The business then pays a set amount, often monthly, to use that vehicle for business purposes.

This arrangement helps clarify the business’s insurable interest in the vehicle, which is required for proper commercial insurance coverage.

A Common Example

Imagine a small-business owner in Escanaba who uses their personally titled truck for nearly all business operations. The vehicle is essential for client meetings, transporting tools, and general travel across the U.P. Since it’s titled to the individual, their personal auto policy is technically on the hook for any claims.

The problem? Personal auto insurance does not cover most business-related exposures. If the truck is involved in an accident while being used for the business, there could be denied claims, uncovered liabilities, or costly disputes between personal and commercial carriers.

Why a Commercial Auto Policy Is Essential

Once a vehicle is used primarily for business, it needs to be protected under a commercial auto policy. Here’s why:

• Business use creates different risks than everyday personal driving.
• Employees or partners may drive the vehicle.
• Higher liability limits are usually needed to protect the business.
• Personal policies often exclude business activities, especially regular or heavy commercial use.

However, to insure the vehicle commercially, the LLC must have an insurable interest — meaning a financial stake in the vehicle. A personal name on the title alone doesn’t meet that requirement.

How the Leaseback Agreement Solves the Problem

A formal leaseback agreement creates a documented relationship between the business and the personal owner. The LLC becomes responsible for paying to use the vehicle, giving it a direct financial interest in the asset.

With the agreement in place, the commercial auto insurance carrier can clearly see that the business has an insurable interest, allowing the vehicle to be properly added to the commercial policy.

This ensures:

• Proper coverage for business-related claims
• Protection for both the owner and the business entity
• Clear documentation justifying commercial use and insurability
• No gaps between personal and business insurance

Talk With Your Accountant: Leaseback vs. Transferring the Title

While a leaseback agreement is one practical way to establish an LLC’s insurable interest, it isn’t the only option. Some business owners choose to transfer the vehicle title directly into the business’s name. When the business owns the vehicle outright, a leaseback agreement is no longer needed.

However, there are tax implications, depreciation rules, liability considerations, and business‑expense deductions that differ between a leaseback arrangement and a full title transfer. These factors can vary based on your business structure, how the vehicle is used, and your long‑term financial planning.

That’s why it’s important to speak with your accountant before deciding which option makes the most sense. They can explain:

• Potential tax benefits or drawbacks of each approach
• How depreciation would work under each structure
• Whether the business should own the vehicle as an asset
• How reimbursements or lease payments should be recorded
• Impacts on liability and personal vs. business protection

With the right advice, you can choose the structure that’s best for both your business and your personal finances — while still ensuring the insurance is set up correctly.

Why This Matters

In the event of a serious accident, the lack of proper insurance can put both your business and personal assets at risk. A leaseback agreement paired with a commercial auto policy ensures that your coverage matches how the vehicle is truly being used — something especially important for small businesses and local contractors.

Need Help Structuring the Insurance Correctly?

At TLH Insurance, we help local business owners set up the proper coverages and make sure their vehicles are insured the right way. Whether you operate a growing LLC, run a family business, or just need guidance on commercial auto coverage, our team is here to help.

Have questions about leasebacks or commercial auto insurance?
Contact our local agents today — we’re here to protect your business, your vehicle, and your peace of mind.