Buying an LLC

[Comodave]

Have you owned a business before? Get ready to pay $800 per year minimum tax, and file quarterly corporate tax returns. A tax firm charges a lot to do business taxes. Just buy the asset, unless it's a charter and you actually want to go in business and make profit with the boat. Don't let some person talk you into something you are not required to do.

I owned an LLC for almost 20 years and didn’t have any of these issues.

 

[ProMaritime]

As mentioned, if you buy the LLC the boat will still belong to the LLC. If the LLC has other debts, liabilities or pending or existing law suits that have nothing to do with the boat they will still go right along with the LLC if you buy it as a means to acquire the boat.

If the boat or the LLC or both have liens against them those creditors may be able to attach the boat, an asset of the LLC, and force a sale to satisfy the creditors.

If so you could end up with an empty LLC, no boat and lots of money down the drain. Could be a very expensive way to beat the California tax collector.

 

[Swfla]

ANY boat can have a lien on it preventing transfer of title. It's not just LLCs. Liens and lawsuits must be filed with the courts. A search can be done in the name of the LLC before closing. I'm confident that Scott will continue to check on things. The fact that he's here and discussing it shows that he's aware and exercising care. He's already discussed this with the law office who dealt with this exact LLC during the sale to the current owners. I think he'll have more headaches driving through LA traffic than from the LLC!

 

[OldDan1943]

The owner of the LLC can remove/buy that particular asset from the LLC then, sell the asset (boat) to you.
The owner can dissolve the LLC by removing all assets from the LLC or you can wait until the LLC expires.
I am not an attorney.

 

[Seevee]

Have you owned a business before? Get ready to pay $800 per year minimum tax, and file quarterly corporate tax returns. A tax firm charges a lot to do business taxes. Just buy the asset, unless it's a charter and you actually want to go in business and make profit with the boat. Don't let some person talk you into something you are not required to do.

SDR,
I find this info hard to believe. Many of us have had business, LLC and other entities. I've never heard of the above tax. And quarterlies may or may not be required. AND, you don't need a tax firm to do this, but in a small business I'd be surprised that you couldn't get a competent accountant that would do everything for way south of $3K a year... more like half that.


Depends on what you need. I typically hire my own bookkeeper who will do 95% of the work pretty reasonable, and have an outside accountant, NOT a CPA, but who will fight the IRS for you, if needed, and that is pretty cheap.

 

[Seevee]

ANY boat can have a lien on it preventing transfer of title. It's not just LLCs. Liens and lawsuits must be filed with the courts. A search can be done in the name of the LLC before closing. I'm confident that Scott will continue to check on things. The fact that he's here and discussing it shows that he's aware and exercising care. He's already discussed this with the law office who dealt with this exact LLC during the sale to the current owners. I think he'll have more headaches driving through LA traffic than from the LLC!

Swfla,



Totally true, and often pretty easy. ANY liability that can be perfected can be found out, most likely in the courts. Buying LLCs and other businesses is done ALL the time. Not rocket science.



Sounds like the OP is certainly on the right track.

 

[BandB]

Have you owned a business before? Get ready to pay $800 per year minimum tax, and file quarterly corporate tax returns. A tax firm charges a lot to do business taxes. Just buy the asset, unless it's a charter and you actually want to go in business and make profit with the boat. Don't let some person talk you into something you are not required to do.

Have you ever owned one that wasn't doing business? You don't have to pay $800 per year minimum tax and you don't have to file quarterly corporate tax returns. Your entire post is just totally inaccurate for the LLC he's dealing with and it's purposes.

He does have the $300 annual tax to Delaware and he has to file but not pay anything an annual partnership or S Corporation federal return depending on his election of treatment.

 

[drb1025]

So much fear mongering. I purchased an LLC that owns a boat almost 10 years ago. No sales taxes but I paid $5k for a good lawyer’s diligence. Since then I’ve paid $60 annually to file a report with the state to keep the LLC active. No tax returns or other reports needed. That’s it.

 

[RickyD]

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.

Its best to buy the LLC that owns the boat as I did. Done properly you will avoid State sales tax. There should be no sales tax on a business purchase. When you buy a business you don't pay sales tax on all the office equipment, etc.

 

[bligh]

Quarterly corporate tax returns?! 800 a year minimum tax? Holy crinkly. Im calling this whole thing off!

Have you owned a business before? Get ready to pay $800 per year minimum tax, and file quarterly corporate tax returns. A tax firm charges a lot to do business taxes. Just buy the asset, unless it's a charter and you actually want to go in business and make profit with the boat. Don't let some person talk you into something you are not required to do.

 

[Swfla]

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

 

[RickyD]

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]

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]

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]

Bligh was being sarcastic I'm certain.

Boy - I Hope So!!!

 

[Seevee]

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]

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

I was being sarcastic as well!

 

[ProMaritime]

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]

6 pages of messages?



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]

6 pages of messages?



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]

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]

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'.

 

[firstbase]

Yet overshadowed by 'Florida man'.

Yup. Somehow Agent Orange is bonkers on steroids.

 

[BruceK]

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

 

[bligh]

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 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.

 

[Art]

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]

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]

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]

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]

buying from 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?

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.