Delaware question

I'm considering registering my boat in Delaware under a corp. Now if I sell the boat to which I have Florida title what does this mean? My intentions are to keep in Louisiana for the foreseeable future.

Can I sell the boat to the corporation for less than I paid? That way if Louisiana does come after me I don't have to pay as much in taxes? Can I even own the corporation if this is the case?

Regards,

Nick, "newbie boater"

I don't have an answer for Nick, but I'd like to piggyback on his question. Since he's asking about Delaware Corporations, has anyone used a Montana LLC? We have an existing Montana LLC and would perhaps have our company buy a boat. This can also be done with recreational vehicles, as I understand.

You two need a tax attorney that works for scotch, and not some cheap blend either.

This is one of those things you really have to consult an expert. This question has been answered several times on here and other boating forums - but in general there are a few things to consider.

1. Insurance - Insurance will have to be in the corporations name - this generally requires a commercial policy and may be more expensive than a personal policy.

2. Financing - Same deal - you can't get a personal loan on a boat held in a corporations name. A business loan on a boat is going to be much more expensive if available to you at all.

3. Resale: Can be attractive to a buyer on a large boat because if they purchase the business there is no sales tax due - on smaller boat to personal buyers can be a deterrent because they either don't understand it or because the complexities of the transaction to buy it out of the corporation result in greater expenses at the sale closing.

4. Taxes/Record Keeping: If you run a business you have to keep records like a business if you intend to take advantage of depreciation write offs etc. The hassle and expense of record keeping/filing/etc. is worth considering.

5. Legality/Taxes: In general to operate a business and take advantage of business related tax policies the IRS says there should be a legitimate reason for the business to exist (IE: Not solely to dodge taxes and liability).

People definitely do use these kinds of schemes to avoid taxes and liability and get away with it. A lot more think it is a great idea and then upon further investigation realize it isn't as sweet a deal as they thought and not worth the hassle - especially on a modest boat. Others probably have gotten audited and hammered by the IRS - though I don't know really how real the risk is - the IRS doesn't really have the resources to go after little stuff like this.

Anyway, lots of complexity here and if you think its something you want to do I would consult an expert.

CPseudonym said:

You two need a tax attorney that works for scotch, and not some cheap blend either.

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Ha! actually yes I do, and he works for free lunches! He is no hack either, the yale type of an attorney!

Devorenm, thank you for your detailed reply! I had not considered there could be any difficulty upon resale. I will have to give this further research, and I will take my time, since I am probably at least two years away from purchase. One of the benefits I was hoping to achieve would be insulating my personal estate from liability should an incident occur where I might be at fault. I have no reason to think or fear my ability to handle a boat, but just being cautious. Many facets to examine. Again, thank you!

Are you thinking a LLC? As mentioned in a few other posts, consult a good attorney and accountant that specializes in these type of transactions. That state the company is formed has no bearing on where the assert is being stored. Spending a little money will save you much in the future.
Good luck


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Capt. Don

As a tax attorney, I generally do not work for scotch, even the good stuff, but I am negotiable on a good, high end, single barrel bourbon. My first question would be (no bourbon required!)- "Why are you considering a DE corp or LLC? What advantages do you think such ownership will bring you." Devore mentioned some of the complexities you may face. Quite honestly, without knowing more, I can see no advantage to be gained by setting up a DE corp or LLC. I assume your other choices are to register in your home state of LA either in your name or in an LA LLC. Why are those choices not acceptable? The DE corp does not provide you any tax advantages of any kind, and the DE corp will not provide any additional liability limitation advantages over an LA LLC. I take from your post you think there may be some ability to manipulate the sales price to avoid some sales tax. There will not be. You will be the sole owner of either the LLC or corp. As such, any sale transaction will be considered to be between "related parties" and the corporate entity thus ignored. The sales price from the sale by the original owner will be the prce used to determine sales tax. Again, without much more info, you will be introducing a lot of avoidable complexity, and complexiy costs money, and will gain no advantage.

lensming said:

Devorenm, thank you for your detailed reply! I had not considered there could be any difficulty upon resale. I will have to give this further research, and I will take my time, since I am probably at least two years away from purchase. One of the benefits I was hoping to achieve would be insulating my personal estate from liability should an incident occur where I might be at fault. I have no reason to think or fear my ability to handle a boat, but just being cautious. Many facets to examine. Again, thank you!

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You are responsible for your own torts; having the boat in a corp or LLC won't shield you if you are responsible for damaging another. Having the boat in a corp or LLC might (but might not) shield you if someone else is driving the boat, but that's probably not what you're worried about.

nwiederatz said:

I'm considering registering my boat in Delaware under a corp. Now if I sell the boat to which I have Florida title what does this mean? My intentions are to keep in Louisiana for the foreseeable future.

Can I sell the boat to the corporation for less than I paid? That way if Louisiana does come after me I don't have to pay as much in taxes? Can I even own the corporation if this is the case?

Regards,

Nick, "newbie boater"

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I am reminded of those who post on facebook about the clever crime they committed and are surprised when the police show up. Jeesh.