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

Swfla 08-08-2020 09:00 AM

LOL. San Diego has parking meters everywhere. Try to find a Walmart to park at. HEHE.

RickyD 08-08-2020 11:31 AM

Quote:

Originally Posted by bligh (Post 909599)
Quarterly corporate tax returns?! 800 a year minimum tax? Holy crinkly. Im calling this whole thing off!

No, I pay about $60 per year. No quarterlies, no tax returns, no income for my boat LLC. I have a business LLC that generates income and I pay $800 per year plus qtrs estimated taxes. Different deal.

BandB 08-08-2020 11:54 AM

Quote:

Originally Posted by RickyD (Post 909711)
No, I pay about $60 per year. No quarterlies, no tax returns, no income for my boat LLC. I have a business LLC that generates income and I pay $800 per year plus qtrs estimated taxes. Different deal.

Bligh was being sarcastic I'm certain.

Scottwb96 08-08-2020 12:01 PM

Your better off starting your own LLC and buying it from THEIR LLC to yours... As someone mentioned above, there could be a lot of hidden risks that come about... Example, someone got injured on the boat and it hasn't yet been reported or acted upon, based on statute of limitations...
Usually though, when a boat is in an LLC it's for tax purposes and to shield the owners from lawsuits. But breaching the LLC for an injury lawsuit is pretty easy. Just takes one credit card purchase from a personal account vs biz account. I would buy FROM the LLC, but 100% would not buy THE LLC... Good luck!!! :)

Art 08-08-2020 12:17 PM

Quote:

Originally Posted by BandB (Post 909719)
Bligh was being sarcastic I'm certain.

Boy - I Hope So!!!

Seevee 08-08-2020 12:35 PM

Quote:

Originally Posted by Scottwb96 (Post 909724)
Your better off starting your own LLC and buying it from THEIR LLC to yours... As someone mentioned above, there could be a lot of hidden risks that come about... Example, someone got injured on the boat and it hasn't yet been reported or acted upon, based on statute of limitations...
Usually though, when a boat is in an LLC it's for tax purposes and to shield the owners from lawsuits. But breaching the LLC for an injury lawsuit is pretty easy. Just takes one credit card purchase from a personal account vs biz account. I would buy FROM the LLC, but 100% would not buy THE LLC... Good luck!!! :)


Well, if you buy the asset, regardless of what entity buys it, you might be liable for sales tax, so you've defeated the purpose of buying the LLC to save that. I'd bet the lawsuit risk would be miniscule, and they'd most likely sue the operator, who is not shielded with the LLC. But worth discussing with the lawyer.


Buying and selling LLCs, Corps, etc., is done daily. There's many ways to protect one. But, that's state specific, so need a lawyer that knows the state statutes.



Now, from a personal point, one CAN transfer title to a trust for estate planning without triggering sales tax.


Again, get a good lawyer, and seems like the OP has done that. Would like to hear the "follow up".

Swfla 08-08-2020 12:45 PM

Quote:

Originally Posted by Swfla (Post 909665)
LOL. San Diego has parking meters everywhere. Try to find a Walmart to park at. HEHE.

I was being sarcastic as well!

ProMaritime 08-08-2020 02:51 PM

This is not rocket science. I have done this several times with state registered and US and foreign flagged vessels. I am also not a lawyer and I don't even play one on TV. If a US documented (flagged) get a title search from the National Maritime Center. State lien searches on boats are notoriously inaccurate and/or incomplete. Loan liens on US documented vessels should be by a Preferred Ship Mortgage. Other liens on documented vessels, such workmen charges, material suppliers, yard fees, moorage fees, and crew wages should be filed with the National Maritime Center to be effective. The date of filing determines the creditors preference.

bempey 08-09-2020 04:23 PM

6 pages of messages? :eek:



Maybe we need an article on the pros and cons of having a company (possibly an LLC) own your boat versus personal ownership. And versus having your existing company own the boat (for marketing purposes ... entertaining clients on your boat is no different from taking them to a fancy restaurant ... though likely more expensive).


I'm not a lawyer, but I have a half dozen companies in Canada, USA, and India and pay taxes to both CRA and IRS. I'm an engineer, but I have 6 lawyers for different tasks in North America, plus a corporate lawyer in India.

When I buy my next boat, I expect to create an LLC (maybe a "Close LLC" in Wyoming due to the lower overheads) and have the LLC place it into a charter fleet in Bellingham WA ( a half hour south of my Canadian home). That completely avoids the sales taxes.
I'll charter it in the summer, while I'm travelling inland by motorcycle. I'll live on it in the spring and fall. In the winter I'll be some place warm ... most likely Panama.

(where you pay no taxes on money earned outside the country).


The charter will more than cover all maintenance, insurance, and moorage.
So, now I've eliminated purchase taxes and operating expenses other than fuel.

I give up July and August use. A big price to pay, but I'm happy with that.


Without it being a charter boat in an LLC I wouldn't be able to write off insurance, moorage, maintenance, etc. as business expenses.

I'm hoping that all I'll need financially is a substantial down-payment to have it "float itself".


Please expose the holes in my plan.

I might be missing something that you know of and I don't. :)

drb1025 08-09-2020 05:20 PM

Quote:

Originally Posted by bempey (Post 910090)
6 pages of messages? :eek:



Maybe we need an article on the pros and cons of having a company (possibly an LLC) own your boat versus personal ownership. And versus having your existing company own the boat (for marketing purposes ... entertaining clients on your boat is no different from taking them to a fancy restaurant ... though likely more expensive).


I'm not a lawyer, but I have a half dozen companies in Canada, USA, and India and pay taxes to both CRA and IRS. I'm an engineer, but I have 6 lawyers for different tasks in North America, plus a corporate lawyer in India.

When I buy my next boat, I expect to create an LLC (maybe a "Close LLC" in Wyoming due to the lower overheads) and have the LLC place it into a charter fleet in Bellingham WA ( a half hour south of my Canadian home). That completely avoids the sales taxes.
I'll charter it in the summer, while I'm travelling inland by motorcycle. I'll live on it in the spring and fall. In the winter I'll be some place warm ... most likely Panama.

(where you pay no taxes on money earned outside the country).


The charter will more than cover all maintenance, insurance, and moorage.
So, now I've eliminated purchase taxes and operating expenses other than fuel.

I give up July and August use. A big price to pay, but I'm happy with that.


Without it being a charter boat in an LLC I wouldn't be able to write off insurance, moorage, maintenance, etc. as business expenses.

I'm hoping that all I'll need financially is a substantial down-payment to have it "float itself".


Please expose the holes in my plan.

I might be missing something that you know of and I don't. :)



The only thing you are missing is two months of the best boating in the world. [emoji6]

firstbase 08-09-2020 06:29 PM

Quote:

Originally Posted by syjos (Post 906532)
Difficulty arises when sales tax avoidance is the goal.

Which is exact the entire goal of this LLC. What business venture will the LLC engage or attempt to engage in? It would be worth $30K to me to be able to go to sleep at night without worrying about what the State of California was doing that day. CA is bonkers to begin with.

KnotYet 08-09-2020 07:35 PM

Quote:

Originally Posted by firstbase (Post 910129)
Which is exact the entire goal of this LLC. What business venture will the LLC engage or attempt to engage in? It would be worth $30K to me to be able to go to sleep at night without worrying about what the State of California was doing that day. CA is bonkers to begin with.

Yet overshadowed by 'Florida man'. :D

firstbase 08-09-2020 08:49 PM

Quote:

Originally Posted by KnotYet (Post 910155)
Yet overshadowed by 'Florida man'. :D

Yup. Somehow Agent Orange is bonkers on steroids.

BruceK 08-09-2020 08:58 PM

Corporate Regulators were unimpressed when a friend wanted to name a similar type of corporation "TaxLurque".

bligh 08-09-2020 10:06 PM

Quote:

Originally Posted by drb1025 (Post 910107)
The only thing you are missing is two months of the best boating in the world. [emoji6]



That and the fact that if you own a half dozen companies around the world, you should be able to afford a boat without having to charter it to a bunch of yahoos who will trash it. If you didnít know, engineers love perfection and go ballistic if things arenít just so. Youíll have to learn to turn multiple blind eyes if you are willing to hand the keys to your prized possession over to strangers.
Being a charter boat owner out of Bellingham is not the greatest deal . The PNW has the shortest charter season anywhere except maybe Antarctica and the North Pole. Thatís not a whole lot of money to work with after you are paying for detailing, mechanical work, turning fees and the charter company. And how do you think they are doing this year? Are all the boats chartered or are they at the docks? Canada isnít open and the San Juanís donít want you around. I would imagine most charter guests canceled their trips and did something else. I could be wrong, but we chose not to charter there this year.
If you are really serious about it I think I could get you in touch with people that have boats there and some that used to have boats there.

Art 08-09-2020 10:14 PM

Quote:

Originally Posted by bligh (Post 910200)
That and the fact that if you own a half dozen companies around the world, you should be able to afford a boat without having to charter it to a bunch of yahoos who will trash it. If you didn’t know, engineers love perfection and go ballistic if things aren’t just so. You’ll have to learn to turn multiple blind eyes if you are willing to hand the keys to your prized possession over to strangers.
Being a charter boat owner out of Bellingham is not the greatest deal . The PNW has the shortest charter season anywhere except maybe Antarctica and the North Pole. That’s not a whole lot of money to work with after you are paying for detailing, mechanical work, turning fees and the charter company. And how do you think they are doing this year? Are all the boats chartered or are they at the docks? Canada isn’t open and the San Juan’s don’t want you around. I would imagine most charter guests canceled their trips and did something else. I could be wrong, but we chose not to charter there this year.
If you are really serious about it I think I could get you in touch with people that have boats there and some that used to have boats there.

Bligh

Not all are as they represent... via rhetoric!

ProMaritime 08-10-2020 02:34 PM

Your statements. See my comments below.

Maybe we need an article on the pros and cons of having a company (possibly an LLC) own your boat versus personal ownership. And versus having your existing company own the boat (for marketing purposes ... entertaining clients on your boat is no different from taking them to a fancy restaurant ... though likely more expensive).

Comment: Don’t know about the other countries you have business interests in but so-called “business entertainment expenses” have been virtually eliminated as business and personal tax deductions by the US IRS.

I'm not a lawyer, but I have a half dozen companies in Canada, USA, and India and pay taxes to both CRA and IRS. I'm an engineer, but I have 6 lawyers for different tasks in North America, plus a corporate lawyer in India.

Comment: Probably should get a new one to help you with your US taxes.

When I buy my next boat, I expect to create an LLC (maybe a "Close LLC" in Wyoming due to the lower overheads) and have the LLC place it into a charter fleet in Bellingham WA ( a half hour south of my Canadian home). That completely avoids the sales taxes.
I'll charter it in the summer, while I'm travelling inland by motorcycle. I'll live on it in the spring and fall. In the winter I'll be some place warm ... most likely Panama.
(Where you pay no taxes on money earned outside the country).

Comment: First, you can’t employ a foreign flagged or registered vessel in US commerce.

Second, you can’t employ a foreign built vessel in US commerce without a waiver from the US Maritime Administration. Besides paying a fee for this waiver you must demonstrate that there are no other US built vessels in the intended geographical area of operation that can perform the service you are contemplating to offer.

Third, you can’t own a US Coast Guard documented (US flagged) if you are not a US citizen. If owned by a US LLC or other business entity, that entity must be more than 50% controlled by a US citizen or citizens.

Fourth, if you are a “US Tax Person” which means a citizen, legal resident (Green Card holder), illegal resident or if you spend more than a certain number of days in the US, you can be deemed a “US Tax Person” and/or “effective connected with a US trade of business” and be liable for US income tax on your worldwide income, with credit for any foreign income tax you may have paid, of course.

The charter will more than cover all maintenance, insurance, and moorage.
So, now I've eliminated purchase taxes and operating expenses other than fuel.
I give up July and August use. A big price to pay, but I'm happy with that.

Comment: I’ve owned charter boats in the Caribbean and French Polynesia. I’ve investigated bringing a boat to Bellingham or Anacortes since I’m a Washington resident and US citizen but the season is so short in the PNW and the typical rack rates (daily or weekly) are only about half of the rates in other venues I would even consider.

Comment: If you are the sole member of a US Limited Liability Company (LLC) you
may only be able to deduct from your personal income for US tax purposes, the business losses of an LLC if you personally spend (and can document) several hundred hours per year working exclusively on the business activities of that one LLC business. Otherwise the LLC losses must be carried forward on the books of the LLC (which may or may not be required to file its own tax return) and can only be deducted on the members’ personal tax returns when the business is terminated.

Comment: In our case, since our charter operations have generally been cash-flow positive, depreciation has offset any current taxable profit of the LLC. However, some or all of this net loss due to depreciation previously taken on the LLC books and carried forward may become taxable on termination of the business.

Comment: Since you own or control several other businesses, it’s doubtful that you can meet the “time spent” requirement, especially since there is no hard and fast rule. The IRS will determine what is properly documented and realistic for your business. If an LLC has other members, each member can only deduct his/her K-1 share of those losses and each must meet the “time spent” requirement to do so.

Comment: Unknown by most, a single-member LLC, depending on the US state in which it is organized, has very limited to no personal liability protection for its single member. An single-member LLC set up to own a personal pleasure craft which has no business use, affords no personal liability protection to the member and is a waste of time and money to set up for the average boat owner. By the boat in your own name and have plenty of insurance.

Without it being a charter boat in an LLC I wouldn't be able to write off insurance, moorage, maintenance, etc. as business expenses.
I'm hoping that all I'll need financially is a substantial down-payment to have it "float itself".

Comment: Definitely not true in the US and I doubt in Canada.

Please expose the holes in my plan.
I might be missing something that you know of and I don't.

Comment: My pleasure.

Seevee 08-11-2020 12:58 PM

Lot's of interesting comments... and perhaps not always correct for the situation.


Things to check out:
There is a difference between a single member LLC and multi member one, and often some advantages with the multimember.



Any entity, LLC, corp, trust or personally can operate a business for profit and loss.


Most folks that have never been in the charter business make negative comments about them. (or any business or activity). I loved my charter business, but was not with boats. Ran well, paid for all my toys, legit and worked out well. And when you dissolve the LLC it may or may not create a taxable situation.


One can have several businesses and meet the "time spent" requirement... not hard.



An LLC, in itself, may not prevent sales tax. And "used in business" clearly does not prevent sales tax. However, if you buy and LLC, or Corp (and trust in some cases) the sales tax is clearly NOT due. And nothing wrong with legally avoiding taxes, and most likely worth it. The issue comes when you register it, if you change states. May trigger some questions and you may need to provide where sales tax was paid in the past and in what state and the LLC will most likely be liable for the difference, if lower.


Personally, I feel a trust works better for toys, and it DOES protect you from liability, unless you are the operator, OR they can prove you were grossly negligent in maintenance or safety items which is HIGHLY unlikely. Heck, they (whomever they are) may never even connect you with the boat, without a court order. Very unlikely.

ProMaritime 08-11-2020 01:32 PM

Interesting, but nobody is immune from being named in a law suit in our current climate for the total disregard of the the rule of law. If you are an LLC member, a trustee, a beneficiary of a trust, a corporate officer, or have even a remote connection ( just a guy standing on a dock watching) with an incident regarding a money issue or personal injury you will be named in a law suit. At best it will cost thousands to get out of it even if totally innocent.

You also seem to think that there are iron-clad, take it to the bank, ways run a charter business, or any business for that matter, and not run afoul of the tax collectors. You are mistaken. In the US tax law you are guilty until proven innocent.

You can pay your money and take your chances and it will probably work out but if they want to make an example of you to scare others off they will do it.

Bryant 08-13-2020 04:36 PM

buying from LLC
 
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?

:)

We owned rental property in Colorado and converted it to an LLC. When we sold it we simply had to let the realtor know that it was an LLC. She did the rest and it was invisible to us and the buyers. I suspect that it's the same with boats. Your broker should be able to handle it. But in any case, you aren't buying the LLC. You are just buying property from an LLC.

Chrisjs 08-13-2020 04:47 PM

As discussed previous, you have the choice of buying the asset (boat) from the LLC and paying sales tax, redocumenting, etc
or
simply buying the LLC that owns the asset (boat).

In the latter case, you probably will not owe sales tax if you maintain the Delaware LLC. Also, apart from minor changes you do not need to completely re-document because the vessel ownership has not changed. You can maintain radio call signs, MMSI etc because once again the boat ownership has not changed. It is owned by the LLC, not by you. You and (spouse, etc) will own the company (LLC) that owns the boat. There are some liability protections afforded by keeping the vessel in the LLC in that it provides a degree of separation from your personal assets.

But again, as previous, if concerned talk to a maritime attorney. This is not an unusual situation.

Bryant 08-13-2020 04:55 PM

buying from LLC
 
Quote:

Originally Posted by Chrisjs (Post 911658)
As discussed previous, you have the choice of buying the asset (boat) from the LLC and paying sales tax, redocumenting, etc
or
simply buying the LLC that owns the asset (boat).

In the latter case, you probably will not owe sales tax if you maintain the Delaware LLC. Also, apart from minor changes you do not need to completely re-document because the vessel ownership has not changed. You can maintain radio call signs, MMSI etc because once again the boat ownership has not changed. It is owned by the LLC, not by you. You and (spouse, etc) will own the company (LLC) that owns the boat. There are some liability protections afforded by keeping the vessel in the LLC in that it provides a degree of separation from your personal assets.

But again, as previous, if concerned talk to a maritime attorney. This is not an unusual situation.


What you said is true, to a certain extent. If you own an LLC, you have legal protection provided that you can prove that there are no co mingling of personal funds with LLC assets. You have to maintain an amount of money in the LLC account to cover operating expenses, maintenance etc. Otherwise from a legal point of view, it's a scam to avoid liability. Best bet is, stay out of buying the LLC. Buy the property and own and insure it as a private entity.

ProMaritime 08-13-2020 05:43 PM

Bryant, your situation is very different. Rental real estate has certain advantages in a properly organized LLC depending on state laws.
This guy actually wants to buy an LLC that owns a boat which he not doubt plans to use exclusively for his and his family and friends own pleasure. He probably believes the BS that is floated on this forum and others that he can write off all the expenses of the boat against his personal income tax.
He has probably been told that many people do this. I'm sure that part is true, right up to the point when they are audited by state and federal tax agencies or someone rats them out to those agencies.

BandB 08-13-2020 08:18 PM

Quote:

Originally Posted by ProMaritime (Post 911675)
Bryant, your situation is very different. Rental real estate has certain advantages in a properly organized LLC depending on state laws.
This guy actually wants to buy an LLC that owns a boat which he not doubt plans to use exclusively for his and his family and friends own pleasure. He probably believes the BS that is floated on this forum and others that he can write off all the expenses of the boat against his personal income tax.
He has probably been told that many people do this. I'm sure that part is true, right up to the point when they are audited by state and federal tax agencies or someone rats them out to those agencies.

You're stating what he believes and coming from your very distorted view point. The only thing he's indicated he believe is that by purchasing the LLC instead of the boat he can avoid paying sales tax. He's consulted with a well recommended California attorney who has so advised him. He has no business intent and is under no illusion that it will help him avoid or reduce any other taxes.

Planes and boats are sold within LLC's all the time and in most states it's perfectly legal and there is no sales tax consequence. There is no ratting out or anything else or benefit from bad internet information. I advised the OP to discuss with a local attorney and he did that.

Plenty of us have LLC's that we don't use for any form of income tax savings. Whether we have any liability protection by having things within LLC's is a far more complicated subject that not even good lawyers can answer completely. The reason is that it depends on how we're acting personally. For instance if your LLC owns a boat but you're operating the boat at the time of liability then the LLC would be liable and you also could be as operator. If the LLC owns a piece of land and you're 1000 miles from it and someone gets injured on it through no fault of yours, then the LLC would be liable and most courts would rule you were not but you could still be sued and a jury could still decide otherwise. Issues like this are why we consult with lawyers and good lawyers tell us the remaining risks.

Bryant 08-13-2020 09:17 PM

Llc
 
Quote:

Originally Posted by ProMaritime (Post 911675)
Bryant, your situation is very different. Rental real estate has certain advantages in a properly organized LLC depending on state laws.
This guy actually wants to buy an LLC that owns a boat which he not doubt plans to use exclusively for his and his family and friends own pleasure. He probably believes the BS that is floated on this forum and others that he can write off all the expenses of the boat against his personal income tax.
He has probably been told that many people do this. I'm sure that part is true, right up to the point when they are audited by state and federal tax agencies or someone rats them out to those agencies.

You totally missed my point. What I was saying is that owning an LLC is not in and of itself, a sinecure against liability and can, in fact, result in bigger problems in and of itself simply by owning it under the wrong circumstances. This advice is based upon personal experience and a lot of very expensive legal council and advice. Iím not concerned with the tax ramifications. Iím simply saying that if youíre buying a boat for personal use, avoid the LLC trap of thinking that it protects your personal assets. It doesnít and may in fact be harmful. Do with that advice what you will.

ctjstr 08-13-2020 11:46 PM

A lot depends on how your state will handle it. (and yes, I've done these transactions before). First, absent something unique about your state, you want to purchase the LLC. As stated above, you're not buying the boat directly, just the company that owns it. (If the boat still has a title, make sure you get that and make sure it has the LLC on it as owner. I'd also double check with Coast Guard if documented to be sure they show the LLC as owner) So, in theory you don't owe sales tax. But here is the rub. Your state will have a "use tax" which is essentially the same thing. Depending on how aggressive your state revenue department is, when the LLC shows up with new ownership or even a change of adress, it may trigger questions about the assetts of the LLC if more than half of the ownership is changed. If Revenue discovers that the assetts include the boat and there has been more than a 50% ownership change, you'll get hit for the use tax.
But in theory, since there is no actual sales tax, if the cards all fall your way, you can avoid both the sales and use tax.

there are a host of other things to consider/deal with. Check to be sure there are no maritime liens recorded. I'd also check locally (state)for any UCC filings that might include the boat or LLC. Those should not be present, but checking is easy. You can check under both the LLC name and the prior owner's name.

You'd want to draw up a decent contract making sure that there has been full disclosure of all possible liabilities, that all liabilities remain with the seller of the LLC, not the LLC or you, the buyer. It should include a hold harmless and indemnification clause as well.
YOu want to see what records the previous owner has about the LLC, get copies of all that he has. You can also get copies of lots of corporate docs from your sec/state's office. Get what's available. One last thing I do is have the previous LLC owner sign a release of interest or bill of sale to you personally. If the whole deal gets turned up side down, you will have the document that you can actually use to change the title if necessary.
all of this is perfectly legal, LLC's and their assetts get transferred every day.AS LONG AS YOU DON'T FIB ABOUT ANYTHING TO ANY STATE AGENCY, in particular on any Use Tax return you end up having to file.

I've been involved in one transaction where the department of revenue got all the info and insisted on the use tax. There was no penalty in that instance, but no savings either since use tax was paid on the sales price.

I'd run it by my lawyer to check for dotting i's and crossing t's. (Listening to internet lawyers is the quickest way to get in trouble.) Lawyers are like accountants; the advice you get is often the most conservative, since they don't want to get sued. So with this type of deal, you're likly to get all sorts of warnings and "do it at your own peril' statements. Have fun.

Seevee 08-14-2020 12:33 PM

Quote:

Originally Posted by ProMaritime (Post 910906)
Interesting, but nobody is immune from being named in a law suit in our current climate for the total disregard of the the rule of law. If you are an LLC member, a trustee, a beneficiary of a trust, a corporate officer, or have even a remote connection ( just a guy standing on a dock watching) with an incident regarding a money issue or personal injury you will be named in a law suit. At best it will cost thousands to get out of it even if totally innocent.

You also seem to think that there are iron-clad, take it to the bank, ways run a charter business, or any business for that matter, and not run afoul of the tax collectors. You are mistaken. In the US tax law you are guilty until proven innocent.

You can pay your money and take your chances and it will probably work out but if they want to make an example of you to scare others off they will do it.


Promaritime,


Well, that depends on the state statute. Most states prevent any liability from the Trustee and they cannot easily be sued (as the trustee). Somewhat similar with the Beneficiary, however, no one might even know who they are without a court order. Similar with the LLC.


For the most part these are reasonably bullet proof IF you do your homework, the Trustee being the best (but that's only a title holder and person or entity that manages the trust.... but with the direction of another)


There's a STRONG argument to do ones homework, and if not competent, hire someone that is, like has been suggested in this thread.



A business is a different story, easily sued, as are the owners (maybe). However, this thread has NOTHING to do with operating a business.... that was all thread drift and really belongs in another thread.



And, if you're illegally sued, pretty easy to get out with no dollars or you can make a case of it.

ProMaritime 08-14-2020 01:48 PM

It's still absurdly risky to acquire the property of someone else, be it real estate, a boat or whatever, by way of purchasing the entity holding title to such property. To do so is to assume all potential liabilities, known and unknown, solely for the purpose of sidestepping state and local sales and use taxes or personal property taxes.

This technique has little to support it in significant case law. Of course lawyers and accountants will tell you it will work, they want your business. In tax law you are guilty until proven innocent. Remember, all states, counties and cities are flat broke and in a state of technical bankruptcy. They need the money. Why else have police departments given up on real crime and focus on revenue sources like ticketing only people who appear prosperous enough to pay and letting vagrants and vandals go? Rest assured, if the potential collection is big enough, todays aggressive state tax personnel will get their pound of flesh one way or another.

I've been buying and selling real estate, boats and airplanes for over fifty years. I would not consider this approach to save a relative a pittance in a one-time state or local tax.

Seevee 08-14-2020 02:45 PM

Quote:

Originally Posted by ProMaritime (Post 911990)
It's still absurdly risky to acquire the property of someone else, be it real estate, a boat or whatever, by way of purchasing the entity holding title to such property. To do so is to assume all potential liabilities, known and unknown, solely for the purpose of sidestepping state and local sales and use taxes or personal property taxes.

This technique has little to support it in significant case law. Of course lawyers and accountants will tell you it will work, they want your business. In tax law you are guilty until proven innocent. Remember, all states, counties and cities are flat broke and in a state of technical bankruptcy. They need the money. Why else have police departments given up on real crime and focus on revenue sources like ticketing only people who appear prosperous enough to pay and letting vagrants and vandals go? Rest assured, if the potential collection is big enough, todays aggressive state tax personnel will get their pound of flesh one way or another.

I've been buying and selling real estate, boats and airplanes for over fifty years. I would not consider this approach to save a relative a pittance in a one-time state or local tax.


ProMaritime,


I suspect you've probably never done it, and that's understandable, and can certainly understand your hesitation. And, once you get into corporate acquisitions, it's a different ball park (I've only done that once, but worked great).


I've also been buying and selling real estate, boats, plane and junk for about the same time and find this technique does have some advantages and for the most part, minimal risk. AND, just buying the asset, you can still have the same risk.


I typically use trusts, but have used LLCs also... not so much corps. Out of some 141 transactions I have yet to have an issue, especially with sales tax people (and, yes, they are MUCH worse than the IRS). And, yes, there has been some sales tax paid when appropriate. All above board and legal.


As for a pittance, I'd bet most of us feel that the sales tax on a ~$400k boat is not a pittance. Heck, that's more than I make after a whole days work.



I've even bought some stuff with tax liabilities, and gone to the taxing authority and negotiated an interest-free loan to pay them.... loved it! (And, occasionally you find a human being in their office).


One just needs to do their homework, or get someone that knows. I could also argue to take re-current training if one does a lot of this stuff.


Food for thought....

JLD 08-14-2020 04:07 PM

Quote:

Originally Posted by BandB (Post 911739)
You're stating what he believes and coming from your very distorted view point. The only thing he's indicated he believe is that by purchasing the LLC instead of the boat he can avoid paying sales tax. He's consulted with a well recommended California attorney who has so advised him. He has no business intent and is under no illusion that it will help him avoid or reduce any other taxes.

Planes and boats are sold within LLC's all the time and in most states it's perfectly legal and there is no sales tax consequence. There is no ratting out or anything else or benefit from bad internet information. I advised the OP to discuss with a local attorney and he did that.

Plenty of us have LLC's that we don't use for any form of income tax savings. Whether we have any liability protection by having things within LLC's is a far more complicated subject that not even good lawyers can answer completely. The reason is that it depends on how we're acting personally. For instance if your LLC owns a boat but you're operating the boat at the time of liability then the LLC would be liable and you also could be as operator. If the LLC owns a piece of land and you're 1000 miles from it and someone gets injured on it through no fault of yours, then the LLC would be liable and most courts would rule you were not but you could still be sued and a jury could still decide otherwise. Issues like this are why we consult with lawyers and good lawyers tell us the remaining risks.


This has been an interesting thread.

I think I understand the LLC process and the tax discussion around the LLC's assets.

The post above, leads into my related question regarding personal use of a LLC asset.

Is the personal use of a LLC asset a non-business use of the asset? Does it impact on the income tax return of either the LLC or the user of the asset (the owner of the LLC)?

Jim

ProMaritime 08-14-2020 04:16 PM

Dear Seevee, I know you think I'm a BSer. But we actually managed to close the sale of our to a NYSE listed company of our family SUB. S business which was founded in 1885.

We had to leave a portion of the proceeds in escrow for up to three years to clear with federal and state (Illinois) environmental protection agencies but that is standard practice for an industrial company like ours that had occupied the same piece of ground over a hundred years.

As I'm sure you know, to sell the business only (plant, equipment, receivables, patents, trade names, etc., requires a myriad of lawyers and accountants and it would still be necessary to deal with the environmental issues to sell the land. Our approach saved several hundred thousands in legal and accounting costs for both parties.

More to the point (me being a BSer), a partner and I bought a French flagged Leopard 47 Cat and imported it into the US after doing a deflag to reflag (deflag from French/reflag to US). Recently I imported into the US a Leopard 47 Power Cat which was already US flagged from its build date. Much easier except the US Customs no longer allows the duty-free importation of South Africa built boats as they did with the first and those of several other boat owners I spoken with.

Customs people in PR tell me it seems they have a new hotshot lady lawyer in DC who would like to make a name for herself by making strained interpretations of the law.
The Federal government is broke too so they are violating their own laws and treaties to make money. Oh well, its the New Normal.

ljk 08-14-2020 04:48 PM

Llcs
 
Quote:

Originally Posted by ProMaritime (Post 911990)
It's still absurdly risky to acquire the property of someone else, be it real estate, a boat or whatever, by way of purchasing the entity holding title to such property. To do so is to assume all potential liabilities, known and unknown, solely for the purpose of sidestepping state and local sales and use taxes or personal property taxes.

This technique has little to support it in significant case law. Of course lawyers and accountants will tell you it will work, they want your business. In tax law you are guilty until proven innocent. Remember, all states, counties and cities are flat broke and in a state of technical bankruptcy. They need the money. Why else have police departments given up on real crime and focus on revenue sources like ticketing only people who appear prosperous enough to pay and letting vagrants and vandals go? Rest assured, if the potential collection is big enough, todays aggressive state tax personnel will get their pound of flesh one way or another.

I've been buying and selling real estate, boats and airplanes for over fifty years. I would not consider this approach to save a relative a pittance in a one-time state or local tax.

I buy and sell companies for a living, and have spent lots of money on very competent lawyers. Not one lawyer I have used in the last 20 years would even be involved in the purchase of a company as an LLC for exactly the reason ProMaritime states. Unknown liabilities.

catalinajack 08-14-2020 07:27 PM

Said the same way early in this thread.
Quote:

Originally Posted by ljk (Post 912043)
I buy and sell companies for a living, and have spent lots of money on very competent lawyers. Not one lawyer I have used in the last 20 years would even be involved in the purchase of a company as an LLC for exactly the reason ProMaritime states. Unknown liabilities.


markpierce 08-14-2020 07:45 PM

Hmmm, tax avoidance can be a pain.

BandB 08-15-2020 09:18 AM

Quote:

Originally Posted by JLD (Post 912028)
This has been an interesting thread.

I think I understand the LLC process and the tax discussion around the LLC's assets.

The post above, leads into my related question regarding personal use of a LLC asset.

Is the personal use of a LLC asset a non-business use of the asset? Does it impact on the income tax return of either the LLC or the user of the asset (the owner of the LLC)?

Jim

If the use of an LLC is completely non business then it has no impact on the income tax return. There is no reportable income and no deductible expense. So, there's nothing.

Now, does it have to file? Depends. If it's a one member LLC then it is automatically treated by the IRS as a proprietorship and files no return. If it has two or more members then by default it's treated as a partnership and must file a partnership return even if just to report no income. However, it may have elected to be treated as a Corporation and, in that case, have to file a corporation return.

All these situations though have no tax implications. Simply, if you don't have income you don't owe taxes. And if you aren't for profit then you can't deduct expenses.

BandB 08-15-2020 09:24 AM

Quote:

Originally Posted by ljk (Post 912043)
I buy and sell companies for a living, and have spent lots of money on very competent lawyers. Not one lawyer I have used in the last 20 years would even be involved in the purchase of a company as an LLC for exactly the reason ProMaritime states. Unknown liabilities.

There is a huge difference between a business LLC and a personal holding LLC. I would never buy the business LLC or a corporation as I always buy assets only. However, if it's an LLC with just a boat or plane, it's much easier to do due diligence and protect oneself. If I was going to save $50,000 I'd consider buying the LLC in that situation. If I would only save $5000, I wouldn't. Everything in between I'd have to think more about.

We're talking about two entirely different situations-an LLC conducting business versus one that has never conducted business.

In FL, sales tax maxes out at $18,000 and that doesn't generally lead to a lot of LLC sales.

Woodland Hills 08-15-2020 03:10 PM

Quote:

Originally Posted by markpierce (Post 912110)
Hmmm, tax avoidance can be a pain.

True that!

Then again, you can be well compensated for your pain. And if the LLC’s sole asset is a documented vessel it’s relatively easy to find any liens or liabilities, so there is a very low risk involved.

ProMaritime 08-15-2020 04:25 PM

Why quibble? Here are the facts.

Buying a Boat or Airplane for Business Purposes
Depreciation and Expense Deductions for Entertainment Facilities

By Jean Murray MBA and Ph.D. in small business management and entrepreneurship
Updated December 29, 2018.

It's spring, and as a business owner, you may be thinking about buying a boat for getting out on the river, lake, or stream. Or maybe you are thinking of buying an airplane and renting it out through a general aviation facility. And, hey, perhaps we can use the boat or airplane or business purposes and write it off.

Before you buy that airplane or boat, think carefully about how you want to use it for business purposes. If you're going to use the boat or airplane for entertaining customers, vendors, or business associates, you need to know about whether expenses associated with it are deductible. The same tax regulations apply to motor homes, and other similar vehicles and facilities.

What are Entertainment Facilities? A boat, like an airplane, or a fishing lodge, or a vacation home, can be considered by the IRS to be an "entertainment facility. The IRS says: An entertainment facility is any property you own, rent, or use for entertainment. Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort.

The IRS does allow a business to deduct expenses for entertaining on your boats, such as food and beverages, catering, gas, and fishing bait. But you can't deduct the direct expenses of using the boat for entertainment.

Deducting Costs of Entertainment Facilities as Business Expenses. Generally, the IRS says you cannot deduct any expense for the use of an entertainment facility, including a boat or airplane. This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection.

Entertainment Expenses on a Boat or Airplane. You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait that you provided during entertainment at a facility, like a boat. These are not expenses for the use of an entertainment facility. As with other entertainment expenses, however, you must be able to document that these expenses are directly related to or associated with your business. And all entertainment expenses are subject to the 50% limit; that is, only up to 50% of allowable expenses may be deducted.

If you are entertaining employees, you must be able to show that the entertainment on your boat has a business purpose. For example, a "team building" exercise on a boat may or may not pass the IRS's scrutiny and your employees who may have to declare as personal income, the cost of these items that they take advantage of or consume if the IRS flunks the whole "business" as a hobby farm.

Boats and Airplanes as Businesses. If the boat or airplane is used as a business (for hire, for example), you can get some tax benefits from this business.
1. Depreciation. You can depreciate the boat or airplane as a business asset, over its useful life, if it qualifies as a business asset (see below).
2. Expenses. You can deduct expenses for operating the boat or airplane for business purposes. Gasoline, maintenance, mooring fees, insurance, and repairs can be included in the deductible expenses. Sounds like a good deal? Maybe.
3. Document business use. You must be able to provide documentation about the use of the boat for business purposes. The documents must be (1) contemporaneous: at the time of the event, and (2) include specifics: when was it used? Who was it used for (include names and titles)? What was the specific business purpose? Depreciating the boat or airplane IRS has designated a particular category of business assets called listed property, which includes computers, autos, boats, and other assets that can have both business and personal uses. So, if you use your boat or airplane for charter business purposes, and you also take it out for personal reasons, you must document what percentage of the time you use it for business.

To be eligible for depreciated, a listed property must be used predominantly (more than 50%) for business purpose.
1. Personal use becomes income. Once you have established the boat or airplane as a business asset, any personal use becomes a benefit to you personally, and, yes, you must pay taxes on this personal use.
2. Boat or airplane as a business vs. a hobby. If you buy a boat or airplane for business use, you must be able to show that you are running a legitimate business, and are not just taking out fishing or flight charters as a hobby. To avoid IRS scrutiny under "hobby loss" rules, you must keep good business records, show that you intend to make a profit.

PS: My comments. Actually making a profit periodically strengthens your case with the IRS. If you are a licensed Merchant Mariner, either Master or Engineer, you can obviously take the boat out for sea trials periodically, especially after haul-outs or any major work has been done on the boat but document these voyages with detailed log info, dates, times, receipts for work done, etc.

guy with a boat 08-15-2020 04:58 PM

Quote:

Originally Posted by ProMaritime (Post 912448)
Why quibble? Here are the facts....

While that is fascinating reading, none of it it relevant to the OP’s plans or original question. Might be helpful to someone considering those things.

Seevee 08-16-2020 11:43 PM

Quote:

Originally Posted by ProMaritime (Post 912448)
Why quibble? Here are the facts.

Buying a Boat or Airplane for Business Purposes
Depreciation and Expense Deductions for Entertainment Facilities

By Jean Murray MBA and Ph.D. in small business management and entrepreneurship
Updated December 29, 2018.

It's spring, and as a business owner, you may be thinking about buying a boat for getting out on the river, lake, or stream. Or maybe you are thinking of buying an airplane and renting it out through a general aviation facility. And, hey, perhaps we can use the boat or airplane or business purposes and write it off.

Before you buy that airplane or boat, think carefully about how you want to use it for business purposes. If you're going to use the boat or airplane for entertaining customers, vendors, or business associates, you need to know about whether expenses associated with it are deductible. The same tax regulations apply to motor homes, and other similar vehicles and facilities.

What are Entertainment Facilities? A boat, like an airplane, or a fishing lodge, or a vacation home, can be considered by the IRS to be an "entertainment facility. The IRS says: An entertainment facility is any property you own, rent, or use for entertainment. Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort.

The IRS does allow a business to deduct expenses for entertaining on your boats, such as food and beverages, catering, gas, and fishing bait. But you can't deduct the direct expenses of using the boat for entertainment.

Deducting Costs of Entertainment Facilities as Business Expenses. Generally, the IRS says you cannot deduct any expense for the use of an entertainment facility, including a boat or airplane. This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection.

Entertainment Expenses on a Boat or Airplane. You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait that you provided during entertainment at a facility, like a boat. These are not expenses for the use of an entertainment facility. As with other entertainment expenses, however, you must be able to document that these expenses are directly related to or associated with your business. And all entertainment expenses are subject to the 50% limit; that is, only up to 50% of allowable expenses may be deducted.

If you are entertaining employees, you must be able to show that the entertainment on your boat has a business purpose. For example, a "team building" exercise on a boat may or may not pass the IRS's scrutiny and your employees who may have to declare as personal income, the cost of these items that they take advantage of or consume if the IRS flunks the whole "business" as a hobby farm.

Boats and Airplanes as Businesses. If the boat or airplane is used as a business (for hire, for example), you can get some tax benefits from this business.
1. Depreciation. You can depreciate the boat or airplane as a business asset, over its useful life, if it qualifies as a business asset (see below).
2. Expenses. You can deduct expenses for operating the boat or airplane for business purposes. Gasoline, maintenance, mooring fees, insurance, and repairs can be included in the deductible expenses. Sounds like a good deal? Maybe.
3. Document business use. You must be able to provide documentation about the use of the boat for business purposes. The documents must be (1) contemporaneous: at the time of the event, and (2) include specifics: when was it used? Who was it used for (include names and titles)? What was the specific business purpose? Depreciating the boat or airplane IRS has designated a particular category of business assets called listed property, which includes computers, autos, boats, and other assets that can have both business and personal uses. So, if you use your boat or airplane for charter business purposes, and you also take it out for personal reasons, you must document what percentage of the time you use it for business.

To be eligible for depreciated, a listed property must be used predominantly (more than 50%) for business purpose.
1. Personal use becomes income. Once you have established the boat or airplane as a business asset, any personal use becomes a benefit to you personally, and, yes, you must pay taxes on this personal use.
2. Boat or airplane as a business vs. a hobby. If you buy a boat or airplane for business use, you must be able to show that you are running a legitimate business, and are not just taking out fishing or flight charters as a hobby. To avoid IRS scrutiny under "hobby loss" rules, you must keep good business records, show that you intend to make a profit.

PS: My comments. Actually making a profit periodically strengthens your case with the IRS. If you are a licensed Merchant Mariner, either Master or Engineer, you can obviously take the boat out for sea trials periodically, especially after haul-outs or any major work has been done on the boat but document these voyages with detailed log info, dates, times, receipts for work done, etc.


Pro,


No, I don't think you're a BSer..... The above has a lot of good info.


But, the discussion here is for the ownership of a personal boat. Nothing to do with business, entertainment expenses or the like.



As Band B stated.... different situations.



A few of us (and the OP) are of the mind that the purchase of an LLC to save thousands on taxes could be a viable and reasonably safe option. And, there are ways to minimize the risk of unknown liabilities, also done all the time with escrows, security papers, liability agreements, etc.



Personally, I prefer trust for this, for my own reasons.... one of the being is that I go to classes on trusts and stay up to date on the stuff. Also, much easier and more privacy.


====
But you did mention business.....
I could make a STRONG argument to be super cautious with entertainment expenses for any reason. As a rule, in my businesses, entertainment was extremely conservative. And, I could arguer that the word airplane, boat, vacation house, etc., should never show up on any return.


I've also done the airplane business thing, charter, rental and business purpose, some 100% write-offs. But all legit, above board and a lot of fun. Charter the most fun, I took a lot of the fun trips and had other pilots who were happy with the grunt trips. Met a lot of high rollers, most really neat folks, and I learnt a lot. Jet setting around got to be habit forming, especially when someone else was paying the bill.


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