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bligh 07-31-2020 04:30 PM

Buying an LLC
 
Hey all, as you know I am in contract to buy a boat. But the boat is in an LLC so apparently I am in contract to buy an LLC that owns a boat. I dont think the broker has any clue what to do. I know that the boat is in a Delaware corporation. But that is all I know. Can anyone steer me in th right direction so I am informed as to what procedures I need to take and what documents I need to sign, have signed , and file and with what entity to file?

:)

Comodave 07-31-2020 04:37 PM

Get a lawyer that knows maritime law and whatever state you are going to keep the boat. You may have a chance to not pay sales tax so it can be important that you handle it correctly. Good luck.

DavidM 07-31-2020 04:49 PM

Quote:

Originally Posted by Comodave (Post 906414)
Get a lawyer that knows maritime law and whatever state you are going to keep the boat. You may have a chance to not pay sales tax so it can be important that you handle it correctly. Good luck.

:iagree: David

caltexflanc 07-31-2020 05:00 PM

You are in a contract to buy a boat from an LLC. Not the LLC itself. If your contract reads otherwise, get the broker to straighten that out.

bligh 07-31-2020 05:22 PM

Quote:

Originally Posted by Comodave (Post 906414)
Get a lawyer that knows maritime law and whatever state you are going to keep the boat. You may have a chance to not pay sales tax so it can be important that you handle it correctly. Good luck.


Have you actually done this before?

Russell Clifton 07-31-2020 05:32 PM

I have done it. You do not need to buy the LLC. The boat is just a asset of the LLC and you are buying the boat. If you decide to buy both I would for sure consult with a lawyer familiar with maritime law.

Caphenning 07-31-2020 05:35 PM

Quote:

Originally Posted by bligh (Post 906410)
Hey all, as you know I am in contract to buy a boat. But the boat is in an LLC so apparently I am in contract to buy an LLC that owns a boat. I dont think the broker has any clue what to do. I know that the boat is in a Delaware corporation. But that is all I know. Can anyone steer me in th right direction so I am informed as to what procedures I need to take and what documents I need to sign, have signed , and file and with what entity to file?

:)

Do not accept those terms under any condition as you will be assuming all past liabilities of that LLC and you have no idea what they are. You need to be in a contract to buy the vessel from an LLC, and for that I would go through a title insurance company to handle the closing.

bligh 07-31-2020 05:43 PM

Quote:

Originally Posted by Russell Clifton (Post 906442)
I have done it. You do not need to buy the LLC. The boat is just a asset of the LLC and you are buying the boat. If you decide to buy both I would for sure consult with a lawyer familiar with maritime law.


I do need to buy the LLC. If I buy the LLC , then I avoid CA sales tax (8%).

Caphenning 07-31-2020 05:53 PM

Quote:

Originally Posted by bligh (Post 906448)
I do need to buy the LLC. If I buy the LLC , then I avoid CA sales tax (8%).

You are taking a big risk by doing so, you don’t know what the LLC liabilities are. Your required due diligence to assure that there isn’t a million dollar lawsuit hiding in the closet and insuring against it is going to cost you more than the tax most likely given the boats you’re looking at. Better to form a new LLC to buy the old one, this gives you a corporate shield that limits your potential personal losses to the boat.

MYTraveler 07-31-2020 05:58 PM

Quote:

Originally Posted by bligh (Post 906448)
I do need to buy the LLC. If I buy the LLC , then I avoid CA sales tax (8%).

Talk to a knowledgeable lawyer. It will not work, very likely you will get caught (though it may take a few years), no statute of limitations will protect you (since you will not have filed a return), so in addition to the tax (and I believe the rate is closer to 10%, but it does vary a little by county), you will have to pay penalties and interest.

caltexflanc 07-31-2020 06:13 PM

I should add, you don't need a maritime lawyer, just a business lawyer. You can get one there in Santa Cruz.

mvweebles 07-31-2020 06:18 PM

As I recall, asking price on this boat was close to $400k. Tax is in the range of $30k. California board of Equalization (the tax authority) is ruthless, and basically compels you to prove you do not owe a tax (vs they proving you do owe the tax).

You need an attorney or specialist on this one. Screw-up and you'll be fighting the State for years. And it won't end well for you. Doubtful there is anyone on any internet forum who can realistically assist. You have stumbled into a 30-year game of cat and mouse.

Good luck. Would appreciate an update on where you land.

Peter

Comodave 07-31-2020 06:46 PM

Quote:

Originally Posted by bligh (Post 906439)
Have you actually done this before?

No, I have not but have seen people get in trouble because they didnít do it right.

bligh 07-31-2020 06:50 PM

Quote:

Originally Posted by mvweebles (Post 906464)
As I recall, asking price on this boat was close to $400k. Tax is in the range of $30k. California board of Equalization (the tax authority) is ruthless, and basically compels you to prove you do not owe a tax (vs they proving you do owe the tax).

You need an attorney or specialist on this one. Screw-up and you'll be fighting the State for years. And it won't end well for you. Doubtful there is anyone on any internet forum who can realistically assist. You have stumbled into a 30-year game of cat and mouse.

Good luck. Would appreciate an update on where you land.

Peter


Technically, the boat will not have a change of ownership. It is owned by a Delaware based LLC. Transfer of ownership of an LLC does not trigger sales tax. Sales tax is triggered when a boat changes ownership.
I agree I need specialist on this one. I was hoping someone could refer me to a lawyer or accountant they have used for the same purpose.

bligh 07-31-2020 07:02 PM

Quote:

Originally Posted by MYTraveler (Post 906457)
Talk to a knowledgeable lawyer. It will not work, very likely you will get caught (though it may take a few years), no statute of limitations will protect you (since you will not have filed a return), so in addition to the tax (and I believe the rate is closer to 10%, but it does vary a little by county), you will have to pay penalties and interest.


What do you mean 'get caught?' I am not doing anything illegal.


If I sell my business, which is a corporation, all the assets go with it, including vehicles that are owned by the corporation (on the title) and the titles of all the vehicles remain the same. None of the vehicles would be subject to sales tax since they would not be transferring ownership.

And I would also expect I would have to file an annual return. If I buy the existing LLC, I expect that I would get all the returns form the past 7 years as well.

SoWhat 07-31-2020 07:15 PM

You can not avoid the CA sales tax simply via an LLC. You would have to certify the vessel was in commercial use such as a charter boat or fishing boat. Now you're playing with fraud charges in addition to penalty and interest charges.
If the boat is used in CA, it must pay sales tax in CA, or qualify for one of the exemptions.

bligh 07-31-2020 07:21 PM

Quote:

Originally Posted by SoWhat (Post 906488)
You can not avoid the CA sales tax simply via an LLC. You would have to certify the vessel was in commercial use such as a charter boat or fishing boat. Now you're playing with fraud charges in addition to penalty and interest charges.
If the boat is used in CA, it must pay sales tax in CA, or qualify for one of the exemptions.


If the boat does not transfer ownership, how can it be subject to sales tax?

syjos 07-31-2020 07:31 PM

Quote:

Originally Posted by Russell Clifton (Post 906442)
I have done it. You do not need to buy the LLC. The boat is just a asset of the LLC and you are buying the boat. If you decide to buy both I would for sure consult with a lawyer familiar with maritime law.


Listen to Russell.

Buy the boat from the LLC as an individual. If you want to own it as a LLC, form another LLC after you buy the boat.

A LLC is just a like a person and sole proprietors and partnerships form it to protect their assets without having to form an actual corporation. I have several LLC's for businesses and other than having to fill out the annual state report and pay the annual fee, not a big deal. And anyone can fill out the online application, pay the fee and form a LLC. It's pretty simple. And the LLC gets treated like a sole proprietorship or partnership by the IRS. I'm not a lawyer.

We don't own our boat under a LLC.

drb1025 07-31-2020 08:02 PM

Contact Wenthur Law Group wenthurlawgroup.com in San Diego. They can assist you with the purchase of an LLC that owns a boat. Nothing illegal about it.

Comodave 07-31-2020 08:06 PM

Quote:

Originally Posted by SoWhat (Post 906488)
You can not avoid the CA sales tax simply via an LLC. You would have to certify the vessel was in commercial use such as a charter boat or fishing boat. Now you're playing with fraud charges in addition to penalty and interest charges.
If the boat is used in CA, it must pay sales tax in CA, or qualify for one of the exemptions.

This is why I said get a lawyer that knows maritime law and is knowledgeable about the sales tax issue. Whatever the lawyer says it will still be you that the BOE comes after and fines. Get one that know what they are doing.


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