guy with a boat
Guru
Sometimes trying to save money by not hiring a pro is actually far more expensive. This is one of those times.
Buying an LLC
- Thread starter bligh
- Start date
The friendliest place on the web for anyone who enjoys boating.
If you have answers, please help by responding to the unanswered posts.
If you have answers, please help by responding to the unanswered posts.
Sometimes trying to save money by not hiring a pro is actually far more expensive. This is one of those times.
SteveK
Guru
- Joined
- Jul 5, 2019
- Messages
- 5,071
- Location
- Gulf Isalnds BC canada
- Vessel Name
- Sea Sanctuary
- Vessel Make
- Bayliner 4588
Why was the boat owned by an LLC comes to mind? Tax benefit? Capital gains/loses?
What if you buy the LLC at market value of the boat that was depreciated for tax savings, are you liable for repaying the difference? Does the LLC have debt that you inherit?
Sure a lawyer may weed this out, but it would be easier to buy the boat from the LLC, pay the sales tax and not have to look over your shoulder.
Mind you if there is a lien on the chattel (boat) then that has to be cleared.
What if you buy the LLC at market value of the boat that was depreciated for tax savings, are you liable for repaying the difference? Does the LLC have debt that you inherit?
Sure a lawyer may weed this out, but it would be easier to buy the boat from the LLC, pay the sales tax and not have to look over your shoulder.
Mind you if there is a lien on the chattel (boat) then that has to be cleared.
guy with a boat
Guru
Bligh,
There are absolutely safe and legal tax management strategies available that will make a sizable difference in your tax bill. Consult with an attorney (Wenthur is great) as early in the deal as possible. There is no need to incur great expense or take on mysterious liabilities.
It’s amazing how much BS is posted in these LLC threads. I don’t know if people just repeat it from reading it somewhere else on the internet, or if they hear it on the docks. Regardless of the source, much of it is bad info.
I don’t claim to be an expert, but I’m smart enough to hire one. I do own and have owned quite a few LLC’s and have bought and sold them, with and without boats involved, and I am a long-time California resident. Just know the laws and follow them. California (and other) tax authorities are tough but follow the law and you can minimize taxes and still sleep like a baby.
There are absolutely safe and legal tax management strategies available that will make a sizable difference in your tax bill. Consult with an attorney (Wenthur is great) as early in the deal as possible. There is no need to incur great expense or take on mysterious liabilities.
It’s amazing how much BS is posted in these LLC threads. I don’t know if people just repeat it from reading it somewhere else on the internet, or if they hear it on the docks. Regardless of the source, much of it is bad info.
I don’t claim to be an expert, but I’m smart enough to hire one. I do own and have owned quite a few LLC’s and have bought and sold them, with and without boats involved, and I am a long-time California resident. Just know the laws and follow them. California (and other) tax authorities are tough but follow the law and you can minimize taxes and still sleep like a baby.
BruceK
Moderator Emeritus
- Joined
- Oct 31, 2011
- Messages
- 13,347
- Vessel Name
- Sojourn
- Vessel Make
- Integrity 386
Unless it`s different there, you don`t "buy" a corporation. It is a legal entity,in the same way as a person is a legal entity. It exists separate and apart from those with an "interest" in it.
You buy the issued shares(stock I think you call it) from the existing holders. The existing company officers resign and you and or nominees take on the roles. That way, you own the shares and gain control.
The Corporation owns what it owns, owes what it owes, comes with its history which may be good or frankly alarming. And hopefully indemnities from actual people you can recover from if it`s not all as claimed.
You definitely need legal advice.It`s an area fraught with risk. Probably all is well, but it needs to be approached carefully by knowledgeable people.
You buy the issued shares(stock I think you call it) from the existing holders. The existing company officers resign and you and or nominees take on the roles. That way, you own the shares and gain control.
The Corporation owns what it owns, owes what it owes, comes with its history which may be good or frankly alarming. And hopefully indemnities from actual people you can recover from if it`s not all as claimed.
You definitely need legal advice.It`s an area fraught with risk. Probably all is well, but it needs to be approached carefully by knowledgeable people.
Last edited:
Comodave
Moderator Emeritus
- Joined
- Jul 2, 2015
- Messages
- 21,273
- Location
- Au Gres, MI
- Vessel Name
- Black Dog
- Vessel Make
- Formula 41PC
I am not saying, or do I think that anyone was saying it is a tax dodge. Only thing I am saying is make sure you do it correctly and it is very easy not to do it correctly and incur tax and penalties. Just get a good lawyer. It will be worth it.
PPandE
Senior Member
I’ve done it both ways, with both boats and planes. I recently sold an LLC whose only assets were a plane and a checking account. Transferred the stock, no taxes. I also owned another LLC which owned a boat as well as other assets. The LLC sold the boat resulting in the buyer paying taxes.
Get a business savvy lawyer. Yesterday.
Get a business savvy lawyer. Yesterday.
caltexflanc
Guru
Let me assure you, after plenty of direct experience, there is NO asset that doesn't get the attention of California tax authorities.
psneeld
Guru
I have read at least one case where an LLC formed to protect ONLY a boat used solely by the owner for pleasure was actually "tax evasion" and was subsequently taxed the moment the boat entered the state.
I dont know as much as many here, but I would be leaning towards a tax attorney more than anyone. LLCs for boats, RVs and planes are pretty common ( a real cottage industry in some states) and depending on what tha states tax divisons think at the time might be the most useful.
Legal and tax advice from forums seems to be one of the most confusing topics and hard to sift out what really applies in your case.
One common thought is...just because it works for one person doesnt mean it will work for you.
I dont know as much as many here, but I would be leaning towards a tax attorney more than anyone. LLCs for boats, RVs and planes are pretty common ( a real cottage industry in some states) and depending on what tha states tax divisons think at the time might be the most useful.
Legal and tax advice from forums seems to be one of the most confusing topics and hard to sift out what really applies in your case.
One common thought is...just because it works for one person doesnt mean it will work for you.
Last edited:
Bligh - I recommend... Get a knowledgeable attorney.
From what I understand the boat price is in the $400K range. If you spend $4K on an attorney... that 1% cost for "legal" financial safety is a bargain! And, if the LLC has next to no background needing research the lawyer cost may be even more affordable.
I have owned a C corp in CA. I own an LLC in DE. And, a sole proprietorship in CA.
If you want to play in and go through "tax hell"... then, the "CA State Board of Equalization" is the operation to get into conflict with; their lawyers are treacherous, and, love to be thought of as such.
Good luck!
From what I understand the boat price is in the $400K range. If you spend $4K on an attorney... that 1% cost for "legal" financial safety is a bargain! And, if the LLC has next to no background needing research the lawyer cost may be even more affordable.
I have owned a C corp in CA. I own an LLC in DE. And, a sole proprietorship in CA.
If you want to play in and go through "tax hell"... then, the "CA State Board of Equalization" is the operation to get into conflict with; their lawyers are treacherous, and, love to be thought of as such.
Good luck!
Woodland Hills
Guru
Wow! So much misinformation.......
We bought the LLC that owned our boat a few years ago with no issues whatsoever. Just get a good attorney to draw up the papers and have the seller indemnify you for any outstanding debts that the LLC might have.
There will be no use or sales tax owed since the ownership of the boat will not change: it’s still owned by the same LLC. This is the same whether the boat is recreational or commercial.
There is nothing scammy or sketchy about this, it happens every day when a business is sold: buy a plumbing company owned by an LLC and the service trucks come with the business without owing sales tax on them. This is all routine in the business world: tax avoidance, not evasion. All perfectly legal and it will help you when you eventually sell the LLC and it’s assets since the next owner will save the tax too.
We bought the LLC that owned our boat a few years ago with no issues whatsoever. Just get a good attorney to draw up the papers and have the seller indemnify you for any outstanding debts that the LLC might have.
There will be no use or sales tax owed since the ownership of the boat will not change: it’s still owned by the same LLC. This is the same whether the boat is recreational or commercial.
There is nothing scammy or sketchy about this, it happens every day when a business is sold: buy a plumbing company owned by an LLC and the service trucks come with the business without owing sales tax on them. This is all routine in the business world: tax avoidance, not evasion. All perfectly legal and it will help you when you eventually sell the LLC and it’s assets since the next owner will save the tax too.
psneeld
Guru
And one more post saying it is OK could just as well be misinformation...
At least a lawyer has insurance to cover mistakes over advice on the internet.
The research that I have done all warns that LLCs to buy individual assets that are not held for increased valuement or any sort of business is sometimes seen by courts as "solely avoiding" liability and or taxes an does not afford the owner protection.
Now if done differently, different story.
At least research the crap out of it if you don't get an attorney....well beyond this thread.
At least a lawyer has insurance to cover mistakes over advice on the internet.
The research that I have done all warns that LLCs to buy individual assets that are not held for increased valuement or any sort of business is sometimes seen by courts as "solely avoiding" liability and or taxes an does not afford the owner protection.
Now if done differently, different story.
At least research the crap out of it if you don't get an attorney....well beyond this thread.
Not myself being a lawyer... but knowing some of the pitfalls that Bligh might face:
Your input regarding the trucks "being used" as business income producing entities would therefore be a well functioning portion of the LLC and therein tax exempt from, during and after purchase of the business.
However... in this case being discussed: if the PO of the boat set up an LLC specifically and only to best as possible skirt tax or other costs regarding the boat, without "truly" using the boat as a functioning portion of the business... could create considerable conflict with state tax authorities.
That is just another penny of my two cents. Again, I recommend to Bligh - Get a competent lawyer involved!
Woodland Hills
Guru
You could always call the State Board of Equalization or whatever the local taxing agency is called and ask them directly. I did in Florida and was transferred to the actual head of the agency in Tallahassee, who answered all my questions. I was told that the use of an LLC was “a well-known loophole” and was routine and legal.
I am reminded of MA Senator Kerry's attempt to claim his yacht was registered and docked in tax free Rhode Island when in fact it was docked at Nantucket all summer. $7Mil boat, owned by a PA LLC. He paid the $437K MA tax and annual $70K excise tax.
There is a difference between selling an actual business and a tax avoidance scheme.
There is a difference between selling an actual business and a tax avoidance scheme.
Last edited:
MYTraveler
Guru
As logical as your intuition may be, California's law sees right through that. It deems the transfer of a majority interest in an LLC as a transfer of its assets, thereby triggering tax just as if the boat were sold directly.
Russell Clifton
Guru
Woodland Hills
Guru
Tax avoidance is fully legal in all 50 states, tax evasion is not. One is under no obligation to pay one cent more in taxes than what is owed.
You example has nothing to do with buying an LLC whose sole asset is a boat, instead it is a dispute over state of residency and taxes owed as a result. This is a completely different matter and is governed by a different set of statutes and regulations.
All the forum “experts” can pontificate all they want, but having been through the process of buying a Delaware LLC, I know that this is a fully above board, completely legal process that saved us $24,000. And that in over two years, there have been no liens or outstanding debts connected with the LLC. Just do your due diligence.......like any other large purchase.
Last edited:
Woodland Hills
Guru
mvweebles
Guru
- Joined
- Mar 21, 2019
- Messages
- 7,218
- Location
- United States
- Vessel Name
- Weebles
- Vessel Make
- 1970 Willard 36 Trawler
psneeld
Guru
I agree consult a tax attorney in the state you live....and/or call the state taxing authority that would review any LLC sales.
Don't believe ANY specific advice here.... as what happens one day in tax court isn't the same as the next for various reasons.
Don't believe ANY specific advice here.... as what happens one day in tax court isn't the same as the next for various reasons.
OP
OP
bligh
Guru
Show me the 'law' you are citing
Last edited:
OP states "I know that the boat is in a Delaware corporation. But that is all I know." Find out more from brokers that's why they are there. They have access to the agreement. Once you can give us more info, then any misunderstands we have can be cleared up. Hope that Bligh can provide more specific info. I'm sure forum members want the best for you. Three pages of posts based on this limited info is perhaps a symptom of COVID boredom.
Last edited:
The dispute was not over residency. The dispute was over where the boat was docked. If you dock a boat in MA for 6 months, you pay. LLC doesn't waive the requirement unless you apply for an exemption.
The taxman cometh.
OP
OP
bligh
Guru
That is property tax here in California. Not to be confused with sales tax.
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?
Please, please, please get a local lawyer you trust to advise you. Some of the advice given in this thread is so far off base but then you asked a legal question on a boating forum. You need help as you said LLC and then Delaware Corporation which is the first clue you don't know as an LLC is not a corporation.
This has the potential of saving your a lot of sales tax dollars so worth a few hundred in legal fees. However, it also could potentially saddle you with debt or other obligations you have no knowledge of, coming along with the LLC and you need protection from that.
Also, even simple words in your sales contract can change what you're doing significantly, so even the best lawyer here wouldn't be able to give the advice you need without seeing it.
In general by buying an LLC you may or may not avoid state sales tax as some states still go after the transfer as a taxable event when an LLC changes hands. Also, by acquiring an LLC you acquire all it's assets and liabilities. Your potential loss is limited to them, no personal exposure beyond, but everything inside the LLC is at risk.
Nothing unusual about selling LLC's which own boats, planes, homes. Nothing though that a layman should do without an attorney.
Woodland Hills
Guru
Last edited:
Comodave
Moderator Emeritus
- Joined
- Jul 2, 2015
- Messages
- 21,273
- Location
- Au Gres, MI
- Vessel Name
- Black Dog
- Vessel Make
- Formula 41PC
People from other states will say just do it. They have never dealt with California BOE. Do not take anyones advice from Florida or anywhere else, get a lawyer that is intimately knowledgeable in California tax laws AND how it applies to boats and LLCs.
psneeld
Guru
https://www.thelog.com/ask-the-attorney/should-i-form-a-corporation-or-llc-to-own-my-boat/
from the above link...
"Similarly, corporate or LLC ownership will have almost no effect in California on the assessment of sales tax or on the annual assessment of personal property tax. It may be possible to transfer a boat into a newly formed corporation, or to purchase the corporation itself, without the assessment of sales or use tax. This may provide some savings when the boat will be owned by several partners, but the legal and practical requirements of these strategies are very complex and should not be considered without consulting a lawyer or tax professional.
Similarly, there may be some income tax benefits to corporate boat ownership, but your tax advisor will tell you that some form of business enterprise must accompany the operation and ownership of the boat."
from the above link...
"Similarly, corporate or LLC ownership will have almost no effect in California on the assessment of sales tax or on the annual assessment of personal property tax. It may be possible to transfer a boat into a newly formed corporation, or to purchase the corporation itself, without the assessment of sales or use tax. This may provide some savings when the boat will be owned by several partners, but the legal and practical requirements of these strategies are very complex and should not be considered without consulting a lawyer or tax professional.
Similarly, there may be some income tax benefits to corporate boat ownership, but your tax advisor will tell you that some form of business enterprise must accompany the operation and ownership of the boat."
Mark P
Senior Member
yes, as others have said, get a lawyer and, I would add, get an accountant, too! IMHO assets like these (boats, planes, buildings) are sometimes put in LLCs to take depreciation against taxes - there may be some recapture if you sell it or the LLC liquidates. Also, if you are buying the LLC itself be careful on other liabilities the LLC may have.
Similar threads
