Montana LLC

[ctjstr]

Nope, I always research opinions much further and saw how many lawsuits individual "owners" of LLCs were in and how liability suits have become.

LLCs may provide other great things, but liability protection for actions done by the owner doesnt seem to be one.

The real trick is the thin line lawsuits are drawing in negligence and gross negligence these days.

Heres another opinion....

https://www.legalzoom.com/articles/...-protect-your-personal-assets-as-an-llc-owner

1. Obtain LLC Insurance

If someone files a lawsuit accusing you of wrongdoing—whether it’s negligently maintaining your building, wrecking the company van or defrauding a customer—your*LLC*won’t protect you from personal liability. And the judgment in a personal injury lawsuit can be financially devastating.

For this reason, it is important to have a good liability insurance policy that will cover both you and your business if you get sued.

that's partially true. LLC's do provide asset protection in many instances. It completely depends on what the negligent act was and who committed it. Fox example, if you have an LLC as a construction company that company gets sued for the negligence of an employee, you personally are not liable even though the LLC is. If it was you who was negligent, its a closer call and you may have liabilty. As someone said, that's what insurance is for. LLC's are cheap and easy to form and can often add a layer of protection, so why not?

 

[psneeld]

Post #24.... just pointing out LLCs are not absolute protection.... either from liability or taxes...just depends.

Best to understand them completely and not just tidbits thrown about...especially as many may not really fit your situation well enough.

Especially from a seller trying to explain why its such a good idea.....for you....

 

[drb1025]

When a broker lists a boat for sale that is owned by an LLC, the paper trail includes offers and counter offers and the final purchase contract for the boat. If your intention is to buy the LLC to save the sales tax, make sure to officially cancel the purchase and sale agreement for the boat and include it with your documentation of the LLC transfer.

 

[Woodland Hills]

When a broker lists a boat for sale that is owned by an LLC, the paper trail includes offers and counter offers and the final purchase contract for the boat. If your intention is to buy the LLC to save the sales tax, make sure to officially cancel the purchase and sale agreement for the boat and include it with your documentation of the LLC transfer.

None of this matters if the ownership of the boat/asset does not change. If the same LLC continues to own the boat then no sales/use tax is due: the state does not care if the owner of the LLC changes as long as the LLC itself is unchanged. Any paper trail indicating negotiations over the value of individual assets of the LLC is irrelevant since as far as the state is concerned, ownership of the asset did not change hands.

 

[BrianSmith]

If an LLC legally lowers tax liability then it is not evasion. There is no requirement to pay one cent more tax then one owes legally, so why condemn those who follow the law when structuring their boat ownership?

I agree completely. However, in the vast majority of the cases where someone registers a boat in a state in which they don't live, and the boat isn't going to be - they're doing it to evade taxes, not to legally avoid them. If someone meets all the requirements of not having to pay sales taxes anywhere, great! Don't pay them! But that's rarely the case, IMO. (It certainly wasn't the case with my friend's multiple boats.)

 

[guy with a boat]

I agree completely. However, in the vast majority of the cases where someone registers a boat in a state in which they don't live, and the boat isn't going to be - they're doing it to evade taxes, not to legally avoid them. If someone meets all the requirements of not having to pay sales taxes anywhere, great! Don't pay them! But that's rarely the case, IMO. (It certainly wasn't the case with my friend's multiple boats.)

If the tax law allows that out of state LLC, then it is legal and is tax avoidance, not evasion. I understand that some feel it against the “spirit” of the law, but that is hard to define and of minimal relevance. The taxing authorities don’t give credit for “spirit of the law” if you are non-compliant with the letter of the law. Not sure why one shouldn’t follow the letter of the law when it is in their favor.

To be clear, I’m not endorsing any fraud or falsification of filings or information in order to minimize taxes. If one can be honest and complete and still use tax laws to their advantage, I see no problem whatsoever.

 

[ctjstr]

None of this matters if the ownership of the boat/asset does not change. If the same LLC continues to own the boat then no sales/use tax is due: the state does not care if the owner of the LLC changes as long as the LLC itself is unchanged. Any paper trail indicating negotiations over the value of individual assets of the LLC is irrelevant since as far as the state is concerned, ownership of the asset did not change hands.

Well maybe in Florida...but not in Washington. If you change ownership of the LLC and the boat is owned by the LLC, you are SUPPOSED to pay use tax. Use Tax here is the same rate as sales tax. You might get a slight discount depending on the use and/or depreciation of the boat, but in general, you'll need to file a Use Tax return, either in paper form or on line.

It only makes sense that the gov would do this, otherwise everyone would immediately form LLC's and put their cars/boats/motorhomes etc in them to beat the tax. LLC's take about ten minutes to form, so its not like its going to cost a bunch of money to do it. Forms are on line.

I suppose you can fudge on that if you want, but its at your own peril.

BTW, the above comes from the department of revenue and department of licensing here in WAshington.

 

[ctjstr]

Actually, I just checked with Florida and their D of Revenue agent told me that simply buying the LLC does NOT require the payment of a new sales tax, since the boat ownership stays in the same name. She was a bit hesitant about it, so I'd double check, but if it were me and I lived in Florida, I'd be looking in to it pretty hard.

The underlying question is, if you own a boat and you decide to form an LLC, can you transfer the boat to the LLC without tax. May not help you out, but may help out the next guy who buys your boat.
Interesting stuff. makes my head hurt.

 

[mahal]

The underlying question is, if you own a boat and you decide to form an LLC, can you transfer the boat to the LLC without tax. May not help you out, but may help out the next guy who buys your boat.
Interesting stuff. makes my head hurt.

This is exactly how I understand it and want to know if true. I purchased an LLC with a single asset which is my boat. I'm the third owner and I was told that it was the first owner that formed the LLC. I was also told that he paid the sales tax on the boat. The second owner and I did not have to. I guess people do this to make their boats, RV's and airplanes more attractive to buyers?

 

[ranger58sb]

The answer is yes.... I read a case in NJ where a NJ resident was taxed and fined in tax court for having a Delaware LLC with the boat purchased by it after he passed the boat through NJ waters. The court said even for 1 minute in NJ waters was good enough to show the sham....and said registration regs have nothing to do with tax regs.

That's the rub with tax laws, you may be good till one little "I gotcha"....his mistake was allowing the boat into NJ waters and at that point the tax court had jurisdiction and proved the LLC was just a shell for the boat to keep from paying use tax and therefore he owed the tax and penalty.

Similarly, I've heard (second-hand) of Delaware residents who keep their boat on the Chesapeake in Maryland being eventually handed a MD sales tax bill. Ditto MD (or PA) residents who register (I guess?) their boats in DE but eventually got taxed by MD -- because the boat was kept on the Chesapeake in MD water.

Not sure how that applies to documented boats, or if some of the boats in those "second-hand" situations we documented versus registered. MD mandates an inexpensive "We're documented" sticker for those boats, but that doesn't seem to have anything to do with sales tax collection.

More recently (last two years or so?) MD capped the sales tax liability on boats, and that may have had some positive impact.

-Chris

 

[BandB]

The underlying question is, if you own a boat and you decide to form an LLC, can you transfer the boat to the LLC without tax. May not help you out, but may help out the next guy who buys your boat.
Interesting stuff. makes my head hurt.

I'm sure every state has it's own rules. In Florida there is a three year rule. An individual may transfer property into a conduit entity tax free. Hence, to the LLC. However, if that conduit entity is then sold within 3 years, then the transfer of that property would be taxable. This is most frequently seen in LLC's holding real estate and the tax involved there is documentary tax or often called stamp tax.

The point is that there are so many issues. What if you buy the LLC and later find out it had debt? Does the LLC have an operating agreement and what does it say about selling membership shares? If an LLC owns your boat, then must you pay the LLC for the use of it and would that be subject to tax?

I would simply caution anyone dealing with LLC's, buying or selling them, putting boats into them, to consult with a knowledgeable attorney. They weill know how to deal with the issues, you haven't even thought of.

 

[FoxtrotCharlie]

Guess I'm lucky. In MS if you buy from an individual there is no sales tax, but if you buy from a dealer, then the tax applies. I'm registering in MS and with Fed Documentation (boat was already Documented).