L.l.c.?

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Painless

Veteran Member
Joined
Dec 17, 2017
Messages
44
Location
Usa
Vessel Name
Reef Madness
Vessel Make
Mikelson 43 Sport Fisher
I have two questions that maybe our legal members could expound on:

1. I see some boats listed for sale as "Held in an L.L.C." besides the avoidance of State Sales Tax and the separation of the boat from your other assets, What are the advantages and disadvantages of having your boat in an L.L.C.?

2. If You go to the effort to obtain a "Captain's License " and something goes wrong, or someone gets injured aboard Your boat or by your boat, are You held to a higher standard as a Captain than just a regular boat owner as far as liability?

Thanks for any input on these two questions.
 
1) LLC’s only advantage is avoiding sales tax. You might receive some liability protection in some strange ways but if you are operating the boat tHe LLC will not give you any protection. The negative to a buying an LLC boat is that you get any past liabilities that are associated with the LLC. Such as a past accident where the claim has not yet materialized.

2). A captain’s license will not hold you to a higher standard. Operating for hire does in some ways increase the standard.

Thes are very general questions and as such you will receive very general answers. I wold seek professional advice before uising any advice here for making a decision.
 
I suspect our attorney members won’t want to answer these questions, but since I am just a dumb, retired engineer, I will give it a shot.

Yes, an LLC can avoid taxes. You transfer the LLC to anew owner when you sell. The boat is just an asset of the LLC, so since its ownership doesn’t change, no taxes are due. The only disadvantages I can see is the paper work to set it up and it might put off some potential buyers- it would me.

A captain’s license can cause additional liability. I have read on this forum that you can be held to a higher standard if you have a captain’s license in case of a accident-you are presumed to be more qualified.

Unless you plan to charter your boat with you as the captain or operate other boats for hire, I wouldn’t do it.

David
 
I'm of equal qualification as David but will offer my $0.02.... worth what you paid for the advice.
I would be asking your insurance agent about insuring a boat held in an LLC as well as the Capt license question.

Only insurance difference I could think of is the inability to bundle boat with vehicle & home insurance for the small discount. The other might be who is covered by the LLC insurance policy... is it only LLC officers, employees? What about family, friends, etc. If you have a personal home/ auto umbrella policy it likely won't cover the LLC boat.

I have heard both sides of the Capt argument... many repeat the "held to a higher std" but have also heard and read that's a myth and that responsibility in case of an accident will be apportioned based on the circumstances and what each party did or didn't do that contributed to the accident. Also important is what evasive actions were taken as ultimately both parties are responsible to avoid an accident even if other party is doing something incorrect.
I would think any good lawyer could argue that having knowledge and training should not transfer responsibility for others ignorance or inappropriate actions.

I have not heard of any credible situation where a Capt was held "more" responsible than other party and would have been better off without the training & certification.

Wouldn't the same argument hold true for those boaters having taken multiple / advanced USCG or USPS courses or holding advanced grades designations vs an uneducated, inexperienced operator?
I have not heard of a CDL licensed driver being held to any higher std when involved in a vehicular accident. They are held to a stricter blood alcohol limit whether driving for pay or in their own vehicle, but that seems a different case. I do know a licensed Capt has time limits for alcohol consumption but honestly don't know if that applies to recreational boating or only "for hire" activities.
 
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Can't speak on #1. But on #2 your license only comes into play when operating under authority of the license, in other words, for hire. On your own pleasure craft or as a guest on some one else's, the license is irrelevant. In a civil suite, the other guys lawyer might bring it up, but your lawyer should be able to shoot it down based on the above. Keep in mind that in almost all marine accident cases both operators are held liable. Sometimes equally. Being licensed does not change that, but it has led some to believe they were being held to higher standard. It's not like car crashes where almost always only one driver is charged, even though there may have been violations on both sides.
 
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Bacchus said:
I'm of equal qualification as David but will offer my $0.02.... worth what you paid for the advice.
I would be asking your insurance agent about insuring a boat held in an LLC as well as the Capt license question.

Only insurance difference I could think of is the inability to bundle boat with vehicle & home insurance for the small discount. The other might be who is covered by the LLC insurance policy... is it only LLC officers, employees? What about family, friends, etc. If you have a personal home/ auto umbrella policy it likely won't cover the LLC boat.

I have heard both sides of the Capt argument... many repeat the "held to a higher std" but have also heard and read that's a myth and that responsibility in case of an accident will be apportioned based on the circumstances and what each party did or didn't do that contributed to the accident. Also important is what evasive actions were taken as ultimately both parties are responsible to avoid an accident even if other party is doing something incorrect.
I would think any good lawyer could argue that having knowledge and training should not transfer responsibility for others ignorance or inappropriate actions.

I have not heard of any credible situation where a Capt was held "more" responsible than other party and would have been better off without the training & certification.

Wouldn't the same argument hold true for those boaters having taken multiple / advanced USCG or USPS courses or holding advanced grades designations vs an uneducated, inexperienced operator?
I have not heard of a CDL licensed driver being held to any higher std when involved in a vehicular accident. They are held to a stricter blood alcohol limit whether driving for pay or in their own vehicle, but that seems a different case. I do know a licensed Capt has time limits for alcohol consumption but honestly don't know if that applies to recreational boating or only "for hire" activities.
Click to expand...


Correct. I added "as a guest on some one else's" in my previous post as some one on here said that was the case. Ridiculous. That would be like a licensed driver riding as passenger on a bus being held responsible for the bus driver hitting someone. Ain't gonna happen. You have no duty or ability to act to prevent the collision and would be in big doo-doo if you tried.

The alcohol time limit is 8 hours before getting underway as I recall. That's commercial operation only, but is a good idea for pleasure boat too. Just like driving your car, there's no time limit prior, you just can't be under the influence when underway.
 
DavidM said:
I suspect our attorney members won’t want to answer these questions, but since I am just a dumb, retired engineer, I will give it a shot.

Yes, an LLC can avoid taxes. You transfer the LLC to anew owner when you sell. The boat is just an asset of the LLC, so since its ownership doesn’t change, no taxes are due. The only disadvantages I can see is the paper work to set it up and it might put off some potential buyers- it would me.

A captain’s license can cause additional liability. I have read on this forum that you can be held to a higher standard if you have a captain’s license in case of a accident-you are presumed to be more qualified.

Unless you plan to charter your boat with you as the captain or operate other boats for hire, I wouldn’t do it.

David
Click to expand...

If an LLC puts you off you can just buy the boat directly so it’s an option not a requirement.

The other advantage of an LLC not mentioned is it can provide privacy to the owner when you set it up with an agent listed not the owner.
 
I have followed "is a USCG licensed individual held to a higher standard?" and the only answer I can offer is..... it depends.

The USCG holds an administrative control over captain's licenses. It doesn't have to be a legal issue for them to act.

If you are present for an egregious maritime act and could have intervened...they may come after you on an administrative level.

Proving "neglect" in many cases where you are not the operator or operation of your vessel isn't in question....then they will be hard pressed to do much.

But in all the yes they can, no they can't articles/discussions I have read....I have to lean is yes they can but it is rare and a longshot on their part unless you confess.

On the simple level.... no...you are generally not held to a higher standard against standards that are necessary when executing your license.

As far as CDLs...that's different as you give up a regular driver's license from what I have been told and issued a CDL. I don't know for sure but every time that discussion comes up it seems like CDL ARE held to a different standard....sorta following that if you ger a BUI...it can result in the loss of your driver's license.
 
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jgwinks said:
Correct. I added "as a guest on some one else's" in my previous post as some one on here said that was the case. Ridiculous. That would be like a licensed driver riding as passenger on a bus being held responsible for the bus driver hitting someone. Ain't gonna happen. You have no duty or ability to act to prevent the collision and would be in big doo-doo if you tried.

The alcohol time limit is 8 hours before getting underway as I recall. That's commercial operation only, but is a good idea for pleasure boat too. Just like driving your car, there's no time limit prior, you just can't be under the influence when underway.
Click to expand...

For OUPV I believe the rule is 0.04 BAC...not even a time limit.
 
Another advantage I've heard about with an LLC is that your slip/moorage can stay with the boat upon transfer. This often happens anyway, but the marina has to approve the new owner. If the moorage contract is with the LLC, in theory a new owner of the LLC won't need to re-apply for the slip.

That said, I remember reading in my contract with the San Diego Mooring Company some language meant to circumvent that protection so YMMV.
 
It's so sad that our society thinks that being stupid or incompetent will get you in less trouble, therefore it's better to be stupid and incompetent.


My own feeling is:


1) The training and knowledge required to get a license will go a long way to keep you out of trouble in the first place.


2) If you do get in trouble, a well trained mariner is more likely to take the right mitigating actions. Knowing and doing the right things is your best defense.


So unless you did something specific and stupid, you will carry less culpability, not more.
 
You see a lot of people who insist that having a license means you will be held to a higher standard, even when you are not operating under the authority of that license. I have done a lot of searching on this question. I have never -- NEVER! -- found even one, single case of this happening to anyone. I have heard people claim that their brother's cousin knows a guy who was held to a higher standard. But never any first-hand, real world, documented cases of it happening.


So, for anyone who is sure that a captain can be held to a higher standard of care, when operating entirely in a recreational capacity, I ask for a reference. A case number. A CG document. Any hard, verifiable evidence that it has EVER actually happened. I have asked for this many times. No one has ever provided any such evidence.


I know what MY conclusions are. I leave you to draw your own conclusions.
 
denverd0n said:
...
So, for anyone who is sure that a captain can be held to a higher standard of care, when operating entirely in a recreational capacity, I ask for a reference. A case number. A CG document. Any hard, verifiable evidence that it has EVER actually happened. I have asked for this many times. No one has ever provided any such evidence.
...
Click to expand...

There was a poster on this forum, or Cruiser Forum, who was in court and the judge brought up the issue of a higher standard for someone holding a license. That is the only reference to an actual court case I have ever read.

I think it is more than fair to say that the chance of a higher standard being applied to a captain operating recreationally is pretty low. Flip side is that the chance of having an incident should be greatly minimized by using the knowledge that one has to get the license.

I don't ever see getting captain's credentials just due to the paperwork and cost since I will not be operating commercially. If it saved on insurance that is very likely to change my opinion. :D

Later,
Dan
 
I held a merchant mariner's master's license (captain's license) for 35 years and get a significant discount on insurance. Before you race out to get your 6 pack license, understand that the insurance company is going to ask you for a copy of your first license (when you got it) and the commercial capacity that you used it. Having the license with out time and commercial use is probably as valuable as the online state boating safety course and certificate.

Ted
 
I had my last 3 boats within an LLC, not just to limit liability, but also because
the boats were in charter as in a legit business. (looks better in case of an IRS audit)
I also have a recreational boat owned by the LLC, no downside and maybe easier to sell
later. (No sales tax)
As for licensed captain being held to a higher standard: Heard it many times, but never
seen it, probably an old wife's tale.
 
tiltrider1 said:
1) LLC’s only advantage is avoiding sales tax. You might receive some liability protection in some strange ways but if you are operating the boat tHe LLC will not give you any protection.
Click to expand...

If you are not operating the boat when an injury occurs, you will likely not have personal liability unless it is shown that you acted negligently in some way. For example, if you let an unqualified person take the helm that is sufficient negligence to create personal liability. Similarly, if the injury is not the fault of the driver, but instead results from equipment failure, you may have liability for failing to adequately maintain the boat. At the end of the day, you can count on plaintiff's lawyers to sue everyone, use discovery to figure out the best claims against each, then count on all of the insurers to contribute toward a global settlement, if only to avoid the expense and nuisance of litigation.
 
My attorney who is also a friend told me not to get a captains license because it may cause me to be held to a higher standard in a trial with a jury.

I also have had all my boats owned by a corporation (Also my homes). The new buyer can buy the corporation or just the asset.
 
Bigsfish said:
My attorney who is also a friend told me not to get a captains license because it may cause me to be held to a higher standard in a trial with a jury.

I also have had all my boats owned by a corporation (Also my homes). The new buyer can buy the corporation or just the asset.
Click to expand...

Said like you'd expect a lawyer to speak, but did he have any admiralty court experience? Experience not a license is the best bet for avoiding boat-related court appearances. My thinking is that Joe Average boater who has no military/commercial experience under a license and is looking to reduce his insurance premiums by obtaining a low-level license is not going to see much of a discount. I already had almost 20 years at sea as a naval officer when I first applied for trawler insurance and naturally got a discount for my experience - naval officers do not normally get USCG licenses. Two years later, I went to the USCG and obtained, after extensive testing, my unlimited tonnage master upon oceans license to use in my retirement, and the premium did not really change that much. This leads to my concluding that just maybe any premium discount Joe Average is going to get will have more to do with experience than with any nickel and dime level license. Get a license if you need it to work, not as a bragging right.
 
LN-RTP said:
What is a nickel and dime level license? :rolleyes:
Click to expand...

In the commercial world pretty much anything from 100 ton down but OUPVs are a dime a dozen.

Doesn't mean they were easy to get...but past 25T or 50T masters, they thin out pretty fast. (my experience is getting old now as I last taught in 2007 or so.)

My experience with people commenting on the licenses, is if you haven't owned and proved a lot of boats in different parts of theUS, thenany USCG helps as it was given based on "proven" sea time.

But yes, my last couple insurance companies did say at some point of even boat ownership/experience and low claim rate...you do max out on discounts.
 
psneeld said:
In the commercial world pretty much anything from 100 ton down but OUPVs are a dime a dozen.

Doesn't mean they were easy to get...but past 25T or 50T masters, they thin out pretty fast. (my experience is getting old now as I last taught in 2007 or so.)

My experience with people commenting on the licenses, is if you haven't owned and proved a lot of boats in different parts of theUS, thenany USCG helps as it was given based on "proven" sea time.

But yes, my last couple insurance companies did say at some point of even boat ownership/experience and low claim rate...you do max out on discounts.
Click to expand...

Yeah, I get insurance discounts for both experience and tickets, OUPV, 50t then 100 ton. My initial sea time was all commercial, tankers, bulk cargo and a passenger ship. (Norwegian Merchant Marine) The USCG loved it as it was all documented in my Sea Time Logbook)

I have also worked in aviation as B747 Captain, but never looked down my nose and ridiculed younger guys, with lesser tickets flying smaller planes calling them nickel and dime pilots or holding nickel and dime licenses.
We all started somewhere and we have all been low time as well as learning, whether airborne or on the water. Mutual respect.
 
LN-RTP said:
Yeah, I get insurance discounts for both experience and tickets, OUPV, 50t then 100 ton. My initial sea time was all commercial, tankers, bulk cargo and a passenger ship. (Norwegian Merchant Marine) The USCG loved it as it was all documented in my Sea Time Logbook)

I have also worked in aviation as B747 Captain, but never looked down my nose and ridiculed younger guys, with lesser tickets flying smaller planes calling them nickel and dime pilots or holding nickel and dime licenses.
We all started somewhere and we have all been low time as well as learning, whether airborne or on the water. Mutual respect.
Click to expand...

I don't think many of the really high time (but 100 ton or less) commercial guys I worked with looked down on anyone unless they opened their mouths and tried to insinuate their license was really big time but their conversation showed how little they really knew.

Look at some of the licensed captains here that routinely incorrectly state some of the most common NAVRULEs..... gotta wonder when they should be able to put their fingers on a reference very quickly before they post to make sure they don't sound silly.
 
I don't think many of the really high time (but 100 ton or less) commercial guys I worked with looked down on anyone unless they opened their mouths and tried to insinuate their license was really big time but their conversation showed how little they really knew
Click to expand...

My comment was in response to the Navy guy who said
will have more to do with experience than with any nickel and dime level license.
Click to expand...

Seems like he felt anything below his level was nothing..
 
Awe, not sure he meant it that way as much as the guys who go through the captain mills and get a six pack just to call themselves "captain" and have never run anything bigger than a Grady White walkaround and never more than 50 miles from home. Saw plenty of them in my classes.

Most knew their limitations, a few were just loudmouth jerks...ya know...like the rest of society. :D
 
psneeld said:
Awe, not sure he meant it that way as much as the guys who go through the captain mills and get a six pack just to call themselves "captain" and have never run anything bigger than a Grady White walkaround and never more than 50 miles from home. Saw plenty of them in my classes.

Most knew their limitations, a few were just loudmouth jerks...ya know...like the rest of society. :D
Click to expand...

Aha, so you were teaching classes?
Yes, I can see how a few would feel the need to be an Instant Captain but lose sight of the big picture, like responsibility and taking good care of your passengers who thrust you with their lives.
The "Captain" stuff and the stripes are meaningless if the holder is just there for the glory: Empty suit :(
 
psneeld said:
Awe, not sure he meant it that way as much as the guys who go through the captain mills and get a six pack just to call themselves "captain" and have never run anything bigger than a Grady White walkaround and never more than 50 miles from home. Saw plenty of them in my classes.

Most knew their limitations, a few were just loudmouth jerks...ya know...like the rest of society. :D
Click to expand...

:thumb:

Wasting USCG time and resources.....
 
If the owner thinks that he might ever charter the boat, an LLC is pretty much required for liability protection. In most case as long as the owner is nowhere near the boat when the accident happens then only the LLC can be sued capping the owner’s loss at the value of the boat. This protection does require that the owner be careful to preserve the separation. The LLC should have a bank account and credit card that be used for all boat related expenses.

A boat being actively chartered can also be run as a business as an LLC so expenses and revenue offset each other. Depreciation can even be taken. However if the boat business loses money every year, the IRS is likely to reclassify the business as a hobby and deny the deductions. A audit of prior years could leave you paying. Buying an LLC exposes you to all the past accounting practices and is a bad idea unless your accountant goes over the previous tax returns carefully.


The LLC does have to pay sales tax in the initial purchase. It only avoids sales tax for later purchasers if they take over the LLC - which as mentioned has downsides.
 
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CarlF said:
In most case as long as the owner is nowhere near the boat when the accident happens then only the LLC can be sued capping the owner’s loss at the value of the boat.
Click to expand...

Even though your view is commonly held, at least among non-lawyers and others who believe that the US justice system operates the way it "should", I am skeptical that an owner can escape liability for negligent maintenance and hiring practices that contribute to a loss, even if the owner is nowhere near the boat when the accident happens. For example, look at the liability faced by the owner of Conception, the dive boat that burned and sunk off Santa Barbara island a few years ago. The reality is, liability for one's negligent acts of commission and omission is virtually impossible to escape, at least in the absence of a knowing assumption of risk. Moreover, even when one isn't negligent, it is easy enough for a plaintiff's lawyer to allege circumstances that would create liability to get the question in front of a jury. And even winning there is a big loss, given the cost of high stakes litigation. FWIW, I am qualified by both personal experience and education to be confident of my thoughts.
 
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I could make an argument that an LLC is a lousy entity to hold a boat in, UNLESS, you're using the boat in a business. There is "some" protection, to the limits of the assets of the LLC, but one's books need to be impeccable.



If you're the operator, no entity will protect you from liability, and the first line of defense is a good liability policy. If you're a stockholder, lender or trustee, there is virtually NO liability issues.


I really like trusts to own things, especially anything that moves, holds people, cuts, chops or is something that one can fall off of. The trustee and the beneficiary have virtually NO liability issues, and you can easily hide a trust. There are no records of a trust, unless it owns property, and then the only thing you see on title is the Trustee, who is protected from liability by law (at least in Florida).



As for insurance, the trust can have an insurance policy which might name you as an operator or decision maker.


I only have one LLC and that's for property management. Trusts for all property, boats, planes, cars, cycles, chain saws, lawn mowers, and ladders.



As for using an LLC to sale sales tax ....... "maybe", but the other disadvantages have already been mentioned.
 
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