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-   -   Buying an LLC (https://www.trawlerforum.com/forums/s62/buying-llc-52331.html)

MYTraveler 08-01-2020 06:51 PM

Quote:

Originally Posted by Woodland Hills (Post 906751)
All the forum ďexpertsĒ can pontificate all they want, but having been through the process of buying a Delaware LLC, I know that this is a fully above board, completely legal process

Maybe in Jacksonville, but that doesn't mean it works in California. Anyone who knows California law will confirm that it does not.

MYTraveler 08-01-2020 06:53 PM

Quote:

Originally Posted by bligh (Post 906761)
Show me the 'law' you are citing

Or, you could google it yourself.

Comodave 08-01-2020 07:06 PM

I notice a thread inside a thread on this subject. It seems like everyone that has dealt with the California BOE says get a lawyer, everyone that has not dealt with them says go ahead and buy it since buying an LLC is so simple. Maybe the people that have actually dealt with the BOE know something...

bligh 08-01-2020 07:35 PM

Quote:

Originally Posted by Comodave (Post 906931)
I notice a thread inside a thread on this subject. It seems like everyone that has dealt with the California BOE says get a lawyer, everyone that has not dealt with them says go ahead and buy it since buying an LLC is so simple. Maybe the people that have actually dealt with the BOE know something...

Yes. There are those that have done this legally, some multiple times, who tell me to hire a lawyer to draw the paperwork (some have even referred me certain lawyers they used-which is exactly the information I needed).
Then there is everyone else who posted incomplete and/or wrong information that should have instead waited for a member who has knowledge and experience in these matters to post an educated reply.

Comodave 08-01-2020 07:56 PM

Yes, I went round and round with the BOE about 18 years ago. I was correct and they were trying to get me to bend over and pay tax when tax wasnít due. But I guess if people pay then they have gotten what they want. They then turned me in to the Arizona tax man. I went round and round with them but I was within the rules and didnít pay any tax to Arizona either. But they will fight you and bully you so it is best to let a knowledgeable attorney do the work and make sure you have everything correct so you donít owe any tax. Good luck.

mvweebles 08-01-2020 08:34 PM

My hunch is that the reason California tax authorities are so invasive has little to do with boats. The neighbor state to the east - Navada - does not have state income tax and is just a few hour drive from San Francisco. There are many, many, many people who have tried to arbitrage the high California taxes by claiming residence in Nevada. California is a big state, has a lot of wealth, and relatively high taxes so they've gotten good at enforcing tax codes. It's not enough to get a driver's license in Lake Tahoe, buy a car, and rent an apartment. They will go through cell phone logs and grocery receipts to see where you've been. They operate from the premise that it's better to convict 100 innocent people than allow one guilty person go free. Boats are just a byproduct of a highly profitable revenue system.

That said, my experience is that if you're on the up and up and not trying to defraud the system, it's a reasonable process. Having a trailblazer (attorney or similar) is a good idea to keep you from inadvertently going into a ditch. Chances are the fees you pay them are offset by leveraging legitimate deductions

To the OP - I'd be curious to hear how this turns out for you. Beautiful boat.

Peter

Art 08-01-2020 09:14 PM

Quote:

Originally Posted by mvweebles (Post 906983)
My hunch is that the reason California tax authorities are so invasive has little to do with boats. The neighbor state to the east - Navada - does not have state income tax and is just a few hour drive from San Francisco. There are many, many, many people who have tried to arbitrage the high California taxes by claiming residence in Nevada. California is a big state, has a lot of wealth, and relatively high taxes so they've gotten good at enforcing tax codes. It's not enough to get a driver's license in Lake Tahoe, buy a car, and rent an apartment. They will go through cell phone logs and grocery receipts to see where you've been. They operate from the premise that it's better to convict 100 innocent people than allow one guilty person go free. Boats are just a byproduct of a highly profitable revenue system.

That said, my experience is that if you're on the up and up and not trying to defraud the system, it's a reasonable process. Having a trailblazer (attorney or similar) is a good idea to keep you from inadvertently going into a ditch. Chances are the fees you pay them are offset by leveraging legitimate deductions

To the OP - I'd be curious to hear how this turns out for you. Beautiful boat.

Peter

"Beautiful boat" - Guess I missed the link/photo to that??? Did read $400K value in some early post. Where do I locate the boat? :popcorn:

bligh 08-05-2020 11:04 AM

Update
 
A TF member was kind enough to give me the contact information of a local attorney he used to handle his LLC transaction. I gave the attorney a call and he called me back within a few hours. After verifying a few things about the transaction he recommends keeping the LLC in place and that way I will save tens of thousands in CA sales tax. His costs are roughly $3000 to handle the transaction and paperwork . Annually, there is a fee to the state of Delaware for $300. I'm not sure but I may need to file a tax return for the LLC annually as well, so another couple hundo to an accountant.
It turns out that this attorney handled the last LLC transaction on this boat as well.

Woodland Hills 08-05-2020 11:11 AM

Quote:

Originally Posted by bligh (Post 908635)
A TF member was kind enough to give me the contact information of a local attorney he used to handle his LLC transaction. I gave the attorney a call and he called me back within a few hours. After verifying a few things about the transaction he recommends keeping the LLC in place and that way I will save tens of thousands in CA sales tax. His costs are roughly $3000 to handle the transaction and paperwork . Annually, there is a fee to the state of Delaware for $300. I'm not sure but I may need to file a tax return for the LLC annually as well, so another couple hundo to an accountant.
It turns out that this attorney handled the last LLC transaction on this boat as well.

Exactly what I suggested in post #46: keep the LLC, hire an attorney and save tens of thousands of dollars.

Art 08-05-2020 11:13 AM

Quote:

Originally Posted by bligh (Post 908635)
A TF member was kind enough to give me the contact information of a local attorney he used to handle his LLC transaction. I gave the attorney a call and he called me back within a few hours. After verifying a few things about the transaction he recommends keeping the LLC in place and that way I will save tens of thousands in CA sales tax. His costs are roughly $3000 to handle the transaction and paperwork . Annually, there is a fee to the state of Delaware for $300. I'm not sure but I may need to file a tax return for the LLC annually as well, so another couple hundo to an accountant.
It turns out that this attorney handled the last LLC transaction on this boat as well.

Sounds as though you have items well in hand! :thumb:

Seevee 08-05-2020 11:45 AM

Bligh,


Glad you got an attorney, if NOTHING else, if the shit hits the fan you have someone to defend you, worth the price alone.


I would have done similar. LLCs, Corps, Trusts are sold and traded ALL the time, without the assets being taxed. Totally legal.



Been there and done that will several LLCs, but only have one left. And bought and sold in California. Yes, they are pricks, and will harass you. I simply sent them one letter stating that what I did was totally legal and they could bend over and f themselves. Never heard from them again. (well, there's an argument not to provoke them, but was fun)



Over the years I've gravitated to trusts for holding assets, a MUCH better option for me. No fees, no recording, no reporting, anonymous, situs anywhere (or hidden), etc.



One HUGE reason people use LLCs and Trusts is liability. If they are not operating the vessel, plane or car, there is zero liability. Been there, too.



As for sales tax, that's a state thing, so one needs to know that states laws. And, that's quite often base on where the boat is. As for a tax (federal) return on this stuff, perhaps not necessary, even if you're in business and it produces a profit (just have it flow thru to you personally or another entity).


Often, tax is triggered with the "owning" entity sells the asset to another entity, so title changes. There's still ways to legally avoid sales tax, on example is for estate planning purposes.


However, the absolute BEST advise here is, get a GOOD attorney if you don't know this stuff cold.

BandB 08-05-2020 12:17 PM

Quote:

Originally Posted by bligh (Post 908635)
A TF member was kind enough to give me the contact information of a local attorney he used to handle his LLC transaction. I gave the attorney a call and he called me back within a few hours. After verifying a few things about the transaction he recommends keeping the LLC in place and that way I will save tens of thousands in CA sales tax. His costs are roughly $3000 to handle the transaction and paperwork . Annually, there is a fee to the state of Delaware for $300. I'm not sure but I may need to file a tax return for the LLC annually as well, so another couple hundo to an accountant.
It turns out that this attorney handled the last LLC transaction on this boat as well.

Yes, you will need to file tax returns for the LLC. Glad you got a local attorney knowledgeable in this regard. What a coincidence he handled the previous transaction.

There was a key phrase, I want to point out and that is "After verifying a few things about the transaction." Even the most knowledgeable attorney can't give you an answer without a few questions and without getting very specific. That's why getting information from others is limited in value as your situation may not be exactly what theirs was.

texasnielsen 08-07-2020 09:59 AM

Quote:

Originally Posted by Art (Post 906994)
"Beautiful boat" - Guess I missed the link/photo to that??? Did read $400K value in some early post. Where do I locate the boat? :popcorn:

I believe it is this one. https://www.yachtworld.com/boats/198...ketch-3656943/

Best wishes to Bligh for a long, safe and enjoyable ownership of her. Sounds like your LLC questions have been addressed.

guy with a boat 08-07-2020 10:18 AM

Quote:

Originally Posted by BandB (Post 908666)
Yes, you will need to file tax returns for the LLC. Glad you got a local attorney knowledgeable in this regard. What a coincidence he handled the previous transaction.

There was a key phrase, I want to point out and that is "After verifying a few things about the transaction." Even the most knowledgeable attorney can't give you an answer without a few questions and without getting very specific. That's why getting information from others is limited in value as your situation may not be exactly what theirs was.

Filing a tax return on an LLC isnít necessarily required if that entity has no income or deductible expenses, as is often the case when its only asset is the boat. Filing a return would be required if the is boat being chartered or otherwise operated as a business. State requirements on this may vary, and the attorney handling the acquisition will be able to give advice specific to a given LLC.

Codger2 08-07-2020 11:04 AM

Quote:

Originally Posted by guy with a boat (Post 909295)
Filing a tax return on an LLC isnít necessarily required if that entity has no income or deductible expenses, as is often the case when its only asset is the boat.

Relative to my own LLC, that has been the advice my tax attorney has given me.:blush:

koliver 08-07-2020 11:13 AM

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.

At its simplest, the purchase of an LLC does not attract sales tax, as that is a tax on goods, not on the transfer of the owner of the goods. You are buying shares (all of them) in the owner of the goods, the goods (the boat) are not being sold. After the transaction the shares have a new owner, you, but the boat has stayed with the old owner, the LLC.

On the cautionary side, the liabilities of the LLC haven't gone anywhere, so you need to have your lawyer do the required due diligence to determine what liabilities exist, if any. Once you are satisfied with your lawyer's due diligence, the shares can transfer to you and no sales tax liability is attracted.

When it is time for you to sell, you can choose to sell the LLC and face the skepticism of buyers over those liabilities again, or you can sell the asset, and the buyer will have to pay the tax.

You will also need to educate yourself as to the annual responsibilities of the LLC. You have to maintain the LLC in its State registry, get an annual report done by an accountant and file an income tax return for the LLC. The costs involved will eat into your savings by not having attracted sales tax. Those expenses will continue as long as the LLC exists, so may exceed your initial savings if the purchase price is low.

That is how it works in Canada, where boats can be held by a Provincially or Federally registered Corporation, or Limited Liability Corporation (LLC). The same concepts should apply where you are.

Seevee 08-07-2020 11:44 AM

A few more comments worth discussing with your attorney..... (and tax man):


First an LLC does not have to file a tax return, regardless if it make money or not. Ask you accountant.


Second, the fees for the LLC are not humongous I just renewed mine for $138 (FL), annual report is a non issue and has no real info, other than what the state already has, so there is no personal info, corp records, amendments (unless you change info the state has, resolutions, etc. Had and IL and WI one, too, and suspect most states are similar


Third, there IS a way to transfer the stock from the LLC to another LLC or corp without a tax consequence, but eliminates any liability of the first one. Went thru that in the sale of one of my businesses, but the legal fees were up there.


Forth, there "might" be a way to transfer the stock to a trust, worth asking but I've never personally done that.


Fifth, the trust has all the benefits (and more) of the LLC, without the costs or hassles (for the purpose of boat ownership). Worth asking about. I've created and use hundreds of trusts..... that's my thing. But I do get educated and attend class every now and then to stay current. My ladder is owned by a trust... ask me why. Now, the ladder trust has never been challenged but I've benefited MANY time from a liability standpoint with a trust. However, one must know the ins and outs.... there are gotchas. Now, using a trust for a business is not thought of as a good idea, but great for holding stuff.


Now, here's a question that might come up.....


Let's say you buy the LLC, and it's situs is the state of X. But you live in the state of Y and want to purchase a registration to use the boat in state of Y, what issues might you come across? And, if you move the trust to state Y to use it there, you still register it.... issues? Never done that one, yet.

Chrisjs 08-07-2020 12:44 PM

I established a Delaware LLC. Funded the LLC with my capital. LLC purchased vessel. Kept vessel in RI. No sales tax. I did continue funding the LLC adequately to cover costs like insurance, dockage, repairs and LLC-related fees. Being a bit anal, I also kept track of all incomings (nil) and outgoings in a simple accounting software package. It was quite interesting to see where all the money went during my ownership (of the LLC)!!!
Several years later, sold LLC which still owned vessel. Buyer paid no sales tax in MA or anywhere else. Management of LLC is child's play. Fees are minimal. Tax return not needed because there is no business being transacted - no income to report. Only, annual report and fees to Delaware. Did not need to do this - my LLC was clean and buyer was not concerned - but would seem reasonable to get an indemnity from the seller who presumably would know of any reasons for liability concerns.

Ross Macdonald 08-07-2020 12:58 PM

We used Paul Trusso right in Pt. Loma. He handles the purchase and sale of LLC's where the boat is the sole asset of the corporation. He will do a search to see if any liens are against the LLC or any prior taxes are owed. We found the LLC our boat was in when we bought it in Seattle had Washington taxes owed. So we refused to buy the LLC and purchased the boat out of the Corporation. He can do a search for you and if it is clean then you purchase the LLC. It does make it easier to sell a boat in California as far as tax liability. Ross

pjnorth 08-07-2020 01:13 PM

Quote:

Originally Posted by caltexflanc (Post 906430)
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.

... actually he IS buying the LLC which owns the boat. This approach voids sales tax since an LLC is not personal property.


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