When using a vehicle for business purposes, there are a variety of issues to consider: Should you use a personal or business vehicle? Should you have the company reimburse you for business-related expenses? How should you deduct your mileage?

As with any aspect of your business and personal lives, it's important to keep vehicles and the related expenses separate. The type of vehicle arrangement that will be most financially favorable depends on your particular situation. Here are five things to consider:

1. The driver--Who will be driving the vehicle for business? Will it be the owners, the employees or both? You obviously have more control over your driving behavior than that of your employees. If your employees have a poor record, this could affect your insurance rates and overall liability exposure and costs.

Insurance rates automatically increase when you add coverage for your employees. It will also fluctuate depending on whether employees drive their own cars for business purposes or drive company vehicles. Your agent needs to understand the details of your situation so he or she can make the best recommendation and ensure you're covered appropriately.

You assume additional liability when allowing employees to drive for your business. Not only do you need to consider adequate insurance coverage, but also the liability you are taking on should anything happen to your employee or a third party using a vehicle. Accidents are an unfortunate fact of life, and you need to prepare for the "what-ifs" to protect your business.

2. Taxable business expenses--What is considered a legitimate business expense? If you have a business vehicle, you shouldn't drive it for personal use. Otherwise, you may need to claim some of the vehicle's value as 1099 income.

If you drive a personal vehicle for business use, you need to track the mileage that is business related. The government allows a monetary value per mile that is considered "a reasonable business expense" for tax purposes. There are two options for deducting automobile expenses: the per diem rate or the actual expenses you incur. For most, the per diem is the most favorable option. Talk with your personal accountant to find out what is appropriate for you. Visit www.irs.gov for the current per mile allowable rate.

3. Financial statements--Financial statements will show only the assets owned by the business. That means personal vehicles are not listed as assets. If the vehicles are business assets, their cost, accumulated depreciation and any related liability will appear on the balance sheet.

4. Property taxes--Property taxes for the vehicles are often different for personal and business considerations. The titling of the vehicle will determine how it is taxed through your local government entity. Insurance also is usually based on titling to determine if the vehicle is for business or personal use.

5. Leasing vs. buying--There are some favorable aspects to leasing a business vehicle vs. buying. For instance, the lease payment is normally fully deductible as an expense on your profit and loss statement immediately. This can be a tax-savings advantage over buying.

Explore these five aspects before making decisions about purchasing a business vehicle and who you let drive it. The IRS website can be very helpful in detailing specific aspects of using automobiles for business that will help you decide what's best for your situation.