BVI LLC owned boat USCG documented?

We are considering the purchase of a $500K power boat being sold in the US, which is owned by a Mexican citizen through a BVI LLC. We will keep the boat in the US (San Diego) and hope to finance it thru a US bank.

The US broker tells me we can purchase the BVI LLC. I know all about purchasing a boat owned by a California LLC but I am not familiar with the purchase of a non-US LLC.

Does anyone have any experience with purchasing a non-US LLC? What observations can you offer on that purchase? What kinds of problems could we experience and what should we watch out for?

If the boat is owned by a BVI LLC - can I document it with the USCG?

We could purchase the boat outside the LLC but that would cost $45,000+ dollars in California Use Tax.

Anything you have to offer about this kind of purchase, of which I know nothing, would be appreciated.

I found the following FAQ answers on the USCG website but do not understand them:
WHAT VESSELS MAY BE DOCUMENTED?
A vessel must measure at least five net tons and, with the exception of certain oil spill response vessels, must be wholly owned by a citizen of the U.S.

We are US Citizens

HOW DO I ESTABLISH U.S. CITIZENSHIP?
Citizenship is established by completion of form CG-1258. In addition to individuals, corporations, partnerships, and other entities capable of holding legal title may be deemed citizens for documentation purposes. Corporations must be registered in a state or the U.S; the chief executive officer and chairman of the board of directors must be U.S. citizens, and no more than a minority of the number of directors necessary to constitute a quorum may be non-citizens. In addition, at least 75% of the stock must be vested in U.S. citizens for a coastwise or fisheries endorsement.

The statement in RED seems to rule out USCG documentation.

It's a foreign flagged vessel. It will not be documented in the US.

As a foreign flagged vessel you will need to have and maintain a US cruising permit.

You really need to contact a good maritime attorney.

I recommend Moore & Company

Moore and Co

http://www.vandegriftinc.com/wp-content/uploads/2015/02/Cruising-Permits.pdf

Cruising Permits, boat registration, vessel register, USA

I would buy the boat, not the LLC. If there are any liabilities inside the LLC, you would get those along with the boat. Too much chance of surprises, IMO.

Pay your taxes like most of us slobs.

djmarchand said:

Pay your taxes like most of us slobs.

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Or be smart like Trump.

Capt.Bill11 said:

It's a foreign flagged vessel. It will not be documented in the US.

As a foreign flagged vessel you will need to have and maintain a US cruising permit.

You really need to contact a good maritime attorney.

I recommend Moore & Company

Moore and Co

http://www.vandegriftinc.com/wp-content/uploads/2015/02/Cruising-Permits.pdf

Cruising Permits, boat registration, vessel register, USA

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+1

Make your offer based on the costs involved. Take $45000 off the table, if that is what it costs you to register the boat.

bcam said:

Make your offer based on the costs involved. Take $45000 off the table, if that is what it costs you to register the boat.

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Based on the entire purchase situation no matter if it was purchased inside an LLC or directly I would be engaging the services of a maritime attorney / broker to ensure the transfer of title is as you hope.

Tacomasailor said:

We are considering the purchase of a $500K power boat being sold in the US, which is owned by a Mexican citizen through a BVI LLC. We will keep the boat in the US (San Diego) and hope to finance it thru a US bank.

The US broker tells me we can purchase the BVI LLC. I know all about purchasing a boat owned by a California LLC but I am not familiar with the purchase of a non-US LLC.

If the boat is owned by a BVI LLC - can I document it with the USCG?

We could purchase the boat outside the LLC but that would cost $45,000+ dollars in California Use Tax. [/I]

Click to expand...

The USCG will care about who owns the LLC. Call them.

Don't be certain you will avoid sales/use tax by buying the LLC. Some states are starting to look through those structures, especially if the only asset in the LLC is the boat. I don't know about California, other than California is very aggressive in collecting tax.

Cottontop said:

other than California is very aggressive in collecting tax.

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That is perhaps the understatement of the year

Don't forget to move your boat around while on that cruising permit as California inspects many marinas annually for that and other taxation purposes.

Tacomasailor said:

We are considering the purchase of a $500K power boat being sold in the US, which is owned by a Mexican citizen through a BVI LLC. We will keep the boat in the US (San Diego) and hope to finance it thru a US bank.

The US broker tells me we can purchase the BVI LLC. I know all about purchasing a boat owned by a California LLC but I am not familiar with the purchase of a non-US LLC.

Does anyone have any experience with purchasing a non-US LLC? What observations can you offer on that purchase? What kinds of problems could we experience and what should we watch out for?

If the boat is owned by a BVI LLC - can I document it with the USCG?

We could purchase the boat outside the LLC but that would cost $45,000+ dollars in California Use Tax.

Anything you have to offer about this kind of purchase, of which I know nothing, would be appreciated.

Click to expand...

There are two issues. The first is flagging. Whether you purchase the existing LLC or form your own or whatever you choose, you can flag offshore, cruise on a permit, take out of the country periodically and not stay in one state long enough to have to register or pay sales tax. A lot of effort to try to circumvent taxes that you may still not avoid. Many states have 60 day or 90 day limits. California has "state of principal use" and basically you would have to prove it isn't California. What is your intended home for the boat and place of use? If it's California, you might as well bite the bullet. By choosing to live in California you do choose certain taxes. Doesn't matter what other states do or if you think it is fair.

The second is legal ownership. Regardless, as others noted, purchasing a boat owned by a foreign LLC you must use a good maritime attorney and/or documentation (and title) company. You also should probably consult with your regular attorney about form of ownership that makes sense for you. LLC, Corporation, Individual. It depends on any liability you're attempting to reduce.

As to financing, each lender has their own rules and guidelines, but they're all going to want a lien on the boat and your signature and perhaps guarantee. Some US lenders will finance foreign flagged vessels and some will not.

Tacomasailor said:

I found the following FAQ answers on the USCG website but do not understand them:
WHAT VESSELS MAY BE DOCUMENTED?
A vessel must measure at least five net tons and, with the exception of certain oil spill response vessels, must be wholly owned by a citizen of the U.S.

We are US Citizens

HOW DO I ESTABLISH U.S. CITIZENSHIP?
Citizenship is established by completion of form CG-1258. In addition to individuals, corporations, partnerships, and other entities capable of holding legal title may be deemed citizens for documentation purposes. Corporations must be registered in a state or the U.S; the chief executive officer and chairman of the board of directors must be U.S. citizens, and no more than a minority of the number of directors necessary to constitute a quorum may be non-citizens. In addition, at least 75% of the stock must be vested in U.S. citizens for a coastwise or fisheries endorsement.

The statement in RED seems to rule out USCG documentation.

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No it doesn't. Those are two separate issues. First is the Corporation or LLC, which must be registered in a state. Second is the boat, owned by the Corporation or LLC which is to be documented.

You're dealing in legal entities and issues you have limited understanding of and you really need to use a Maritime Attorney and/or Documentation/Title company as well as talk to the lender about their requirements.

If you're keeping a boat in the US, live in the US, use it in the US, then trying to flag it offshore carries a lot of complexity and risk or taxes and little benefit. It can be done. It's done by many in Florida. I know someone who ran their 37' Boston Whaler to Bimini and back on Friday to get a new cruising permit. Fortunately, the maximum sales tax on a boat in Florida is $18,000 and there is no property tax on one. I realize it gets expensive in California. I don't have the legal knowledge of California law to know how to avoid that nor am I supporter of efforts of circumventing taxes in that manner.

Oh, California is not the only diligent state. The ones more diligent there and elsewhere are the property tax people, so states with property taxes on boats are generally diligent.

We set up a Delaware LLC (on-line) to purchase our trawler. Coupled that with docking in RI (no tax on boats), there was no sales tax at purchase and we subsequently sold the LLC (including the vessel) and the new owners (of the LLC) did not need to pay sales tax. Worked out well all round.
Unfortunately, I do not think this will work for you. I do not think you are able to transfer ownership in a BVI LLC to a domestic LLC, and putting the vessel into an LLC after you have purchased will not save any tax.
Lastly, if you bring the vessel into US ownership in order to document it, you may well find yourself having to pay customs duty on the imported vessel in addition to sales tax.

Thanks for all the great info and advice. I wanted, and received here, a lot of good information that will allow me to ask better questions of our maritime attorney who does much of the expensive boat purchase work in San Diego.

Buying the boat outside an LLC is now my preferred choice.

Details:

- the broker says the first owner of the boat was a US Citizen and it was imported legally into the US by Norseman USA.

- If we decide to continue this transaction we will use the same marine attorney who helped us with our last attempt to purchase a boat owned by a California LLC.

- We are California residents who currently live aboard our boat full time and will continue to do so on the next boat

Since I posted this message I found a 2006 50' OA Classico in Seattle for which I am truly lusting. I would be very happy to buy it there in early 2017 and spend the summer cruising in the Salish Sea before returning to sunny and warm San Diego in the fall of 2017.

That would allow us to defer the California Use Tax until 2018.

hmason said:

Or be smart like Trump.

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I guess some just cant leave politics out of a thread.