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Old 04-24-2016, 10:02 PM   #61
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Quote:
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Thanks Art. Hey...wow...what a liability bolthole they are. I'm amazed they are legal over there. No liability, no responsibility...I bet they are popular with small businesses, etc.
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Old 04-24-2016, 11:11 PM   #62
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That could be a small price to pay considering the speed of sale when it comes time for Walt's next boat
Thanks, Craig! It's that obvious huh?
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Old 04-25-2016, 12:41 AM   #63
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Thanks Art. Hey...wow...what a liability bolthole they are. I'm amazed they are legal over there. No liability, no responsibility...I bet they are popular with small businesses, etc.
They are a hybrid between traditional partnerships and corporations. They limit liability much as is done by a corporation. However, they don't have some of the burdens placed on corporations.

One complicating factor is that LLC's are different in each state, so one can't assume because they work for a friend in another state, they'll work well for you.

The basic nature of Corporations is that personal liability is limited to your contribution. That carries over to LLC's, so not like there's some entity that suddenly provides protection not available before.

No different than a Company in Australia just less burdensome from a compliance standpoint.

In Australia, Limited Partnerships limit the liability of the limited (passive) partners but does not of the managing (active) partners.
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Old 04-25-2016, 12:47 AM   #64
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They are a hybrid between traditional partnerships and corporations. They limit liability much as is done by a corporation. However, they don't have some of the burdens placed on corporations.

One complicating factor is that LLC's are different in each state, so one can't assume because they work for a friend in another state, they'll work well for you.

The basic nature of Corporations is that personal liability is limited to your contribution. That carries over to LLC's, so not like there's some entity that suddenly provides protection not available before.

No different than a Company in Australia.
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Old 04-25-2016, 01:11 AM   #65
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Art-it would not make any difference. Sales tax is assessed based on the physical location of the boat. Only the jurisdiction in which the boat is located or in which a sale takes place can assess sales tax. It does not matter where the owner of the boat, whether an individual, LLC or other business entity, is.

LLCs are pretty cheap in every state, generally no more than a few hundred bucks a year at most. There are no tax issues to deal with as the LLC does not conduct any business, it simply owns the boat. A different story of you are using the boat to produce some income, i.e chartering.
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Old 04-25-2016, 07:39 AM   #66
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Don't forget use tax in some states.....sales tax or use tax...they want their money and when talking boats...you are under a microscope I many cases.

I use to fly the taxation guys around to keep tabs on boats in NJ.
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Old 04-25-2016, 07:52 AM   #67
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Art-it would not make any difference. Sales tax is assessed based on the physical location of the boat. Only the jurisdiction in which the boat is located or in which a sale takes place can assess sales tax. It does not matter where the owner of the boat, whether an individual, LLC or other business entity, is.

LLCs are pretty cheap in every state, generally no more than a few hundred bucks a year at most. There are no tax issues to deal with as the LLC does not conduct any business, it simply owns the boat. A different story of you are using the boat to produce some income, i.e chartering.
In DE you can make $0.00 or $3M or more and there is no state tax... incase you do make $$$.
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Old 04-25-2016, 08:14 AM   #68
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But bring that boat into NJ at least for even a minute and they will charge you use tax even hiding in an LLC if you live there.

I found the original case law on this issue 2 years ago while looking it up for a friend.

It's all about intent, LLCs and corps and other states be damned. If they can connect residency and use.....they connect those dots.

Obviously I don't understand well into the legaleze, but it astounded many thinking they could hide boats in other states and using corporate laws. My friend squeezed out of it by the boat being in a Delaware LLC, boat in NJ, and his residency in PA. Even then his tax guy couldn't say without a doubt the absolute reasons why a state can do that.
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Old 04-25-2016, 08:21 AM   #69
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Don't forget use tax in some states.....sales tax or use tax...they want their money and when talking boats...you are under a microscope I many cases.

I use to fly the taxation guys around to keep tabs on boats in NJ.
And as this points out every state is different. Do not select your form of entity without a lawyer in your state.

There are even differences on property taxes. Some exemptions are based on personal ownership. There are also tax selections to be made to determine how an LLC is treated for tax purposes. In most states it can be either as a partnership or Corporation. There may also be franchise taxes based on assets held.
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Old 04-25-2016, 08:49 AM   #70
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A US LLC is a hybrid between a corporation/company and a partnership. Like a corporation the "owners" are not responsible for debts. Like a partnership the taxes and control issues are passed directly to the "owners".

Very useful device where there is more than one owner or where one owner is taking the property (boat) to different jurisdictions.
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Old 04-25-2016, 09:06 AM   #71
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LLCs are common in the oil and gas business allowing many passive investors to plunk down money without bearing responsibility for after the fact liabilities. Think clean up of a pumping site say 10 years down the road.

I came close to buying a CA LLC vessel which as best I understand would have avoided a sales tax, being as I lived in UT at the time. But then it became murky as to which west coast state to berth it without being termed a scofflaw - THD?
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Old 04-25-2016, 11:54 AM   #72
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When I purchased my boat, it was in a WA LLC. I saved the sales taxes but pay the annual WA registration excise/use tax and a small annual fee to keep the LLC active. My wife and I own the LLC membership shares and I am the managing member. Insurance, registration, and documentation are in the name of the LLC. From a legal ownership perspective, it has been owned by the LLC since it was purchased new. Sales taxes were paid at that time. We used a law firm specializing in marine LLCs for the transfer of ownership and related paperwork. Those fees were a few thousand $$, but much less than the sales taxes (10%) would have been without the LLC. So there is a point where the value of the boat doesn't support the use of an LLC simply to save on taxes, but in a high sales tax state like WA, it can be advantageous. Oregon on the other hand, not so much. And if it is a charter boat or otherwise income (loss) producing, that is another matter.
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Old 04-25-2016, 12:02 PM   #73
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So there is a point where the value of the boat doesn't support the use of an LLC simply to save on taxes, but in a high sales tax state like WA, it can be advantageous. Oregon on the other hand, not so much. And if it is a charter boat or otherwise income (loss) producing, that is another matter.
In California, it is a common misconception that the transfer of LLC ownership will not trigger state sales tax on a vessel owned by the LLC for which sales tax was either previously paid or exempt. That is wrong, although as a practical matter it may be that the state will not assert the sales tax liability because it will not notice the LLC transfer. That may be true, but several years that state began making an effort to identify such transfers (which, more importantly, have property tax reassessment implications under California's prop 13 which limits reassessments between ownership changes).

I cannot speak to WA, but would be careful to confirm that no tax is triggered by the transfer of LLC ownership.
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Old 04-26-2016, 11:58 AM   #74
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Think about all the pressure on the government to keep white collar types honest and paying taxes.

Trying to hide something so obvious as an expensive boat for personal use is like asking a special ops sniper to shoot a buffalo in the back yard.

If you are lucky enough to hit the loopholes just right...great...but in today's world those loopholes can become nooses unless you are absolutely sure.

Pay the best around to may sure....
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Old 04-26-2016, 12:05 PM   #75
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The legal avoidance of boat, resort, second home, airplane etc related taxes is alive and well. Don't expect to see them bandied about on the internet though.
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Old 04-26-2016, 12:22 PM   #76
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The legal avoidance of boat, resort, second home, airplane etc related taxes is alive and well. Don't expect to see them bandied about on the internet though.
Don't get me wrong...yes there are perfectly legitimate tax advantages...

Just too many have been changed and misinterpreted... to take it lightly enough to not have a true expert on your team.

I went to a great tax accountant when I had too many short sale properties to know how deep I was. It was new to him but agreed to learn the ropes with no charge...turned out he didn't even know military retirement wasn't taxed in NJ....and he was one of the best around. Thankfully I was one of the few military guys he had....bad fo him as he went back all those years for hi few military clients to get back amended taxes.

Usually only a few around are really the best at what you want....want to stay out of audis? Really understand or hire the right one.
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Old 04-26-2016, 01:24 PM   #77
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As far as use taxes go, PSN is generally correct. You can buy a boat in Florida. And you can avoid paying Florida sales taxes. But you have to have the boat out of FL in a certain amount of time. I think it is 30 days. Now whether they would levy the sales tax on day 31 or a use tax, I do not know. But if you were then taking the boat to Texas, you would have to pay sales tax here when you register it here. If you do not, you would have to pay a use tax. How do you avoid a use tax? I think in Texas it may be 90 days(maybe 30). Regardless, if you take the boat out of Texas and can prove it, you can bring the boat back in for another 90 days(or 30...I can't remember). Use taxes are usually levied on boats that stay in a particular place for longer than an allotted time. NJ is a good example. I had heard of a case where someone totally ignorant/oblivious to the law was levied a very steep tax against their boat simply because the boat had been in the state longer than the allotted time. I honestly do not believe that was the intent of the use tax...but it was the law. The intent of the use tax was to nail people that did not pay taxes in the state purchased and were trying to avoid them in the new state.

Texas was a state where you could sign a piece of paper allowing you to take care the sales tax on your own. That lasted until a little after the turn of the millennium when the state realized boat owners were not paying sales tax. So we had to start displaying registration stickers. Let's just say many people did not pay sales tax on lots of boats up until just a decade or so ago. An LLC would not avoid sales tax in Texas. You would either get hit with sales tax at 6.25% or you would pay a use tax at....wait for it....6.25%. Enforcement is based on displaying that sticker. Maybe you could just continue to pay that fine and still be ahead???? I do hear it is a fairly steep fine at something like $500 for failing to display the sticker.
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Old 04-26-2016, 01:43 PM   #78
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I celebrated the anniversary of buying Stillwater last month by sending the California Franchise Tax Board payment for "use tax". I could have bought a really nice car with the amount of money I sent them. Of course, I would have had to pay sales tax on the car...
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Old 04-26-2016, 02:01 PM   #79
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Think about all the pressure on the government to keep white collar types honest and paying taxes.

Trying to hide something so obvious as an expensive boat for personal use is like asking a special ops sniper to shoot a buffalo in the back yard.

If you are lucky enough to hit the loopholes just right...great...but in today's world those loopholes can become nooses unless you are absolutely sure.

Pay the best around to may sure....
Boats and planes. A lot is individual agents and they don't have boats and planes so question them always. Definitely an area that gets targeted but then so does all travel and entertainment.

There is one other thing that the IRS always has to fall back on and they have used it and shown their clout. That is that anything designed with a sole purpose of avoiding a tax is disallowed and you're responsible for the tax.
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Old 04-26-2016, 02:23 PM   #80
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Boats and planes. A lot is individual agents and they don't have boats and planes so question them always. Definitely an area that gets targeted but then so does all travel and entertainment.

There is one other thing that the IRS always has to fall back on and they have used it and shown their clout. That is that anything designed with a sole purpose of avoiding a tax is disallowed and you're responsible for the tax.
I think that nails what I had posted about the NJ taxation court ruling where the guy did everything to avoid paying tax on his boat. I don't remember exactly but he took the boat from the south, through New Jersey for only an overnight or something so he could show his friends, then on to New England for the summer.

The tax court ruled something like...... all the juggling was nothing more than smokescreen on his personal vessel and because it did hit NJ waters...so does his use tax. The only way to have avoided it was to pay the equal amount to another jurisdiction.

Much like they are harping on internet sales these days...I fill in something in that block because zero would raise a flag as almost everyone does buy something on the internet these days tax free.
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