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Old 13-02-2014, 06:40   #1
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Flag of Convenience

I am looking at buying a boat that is owned by a Delaware LLC.
It is suggested that I could either buy the company "asset" and transfer it to my own Delaware LLC (easy to form I'm told) alternately I could buy the existing one. (no so keen).
I'm a UK citizen btw.
Has anybody actually done this and have any advice.
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Old 13-02-2014, 07:05   #2
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Re: Flag of Convenience

Hey Capt.

Is the boat currently documented? If so check out:

USCG National Vessel Documentation Center, Fee Page

You will not be able to document her as you are not a US resident, however you can do research on the boat, existing mortgage etc.

A lawyer could better advise you on forming a shell corporation. That being said I'd be very wary of buying the whole LLC from the previous owner unless you want to own half their debt too.

Will you be bringing the vessel back to the UK?
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Old 13-02-2014, 07:22   #3
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Re: Flag of Convenience

Haven't done this but used to sell boats and am familiar with the process. Not all the difficult and not really expensive but if you plan to take the boat back to the EU why not go ahead and register the boat at home?

If you plan to keep the boat on this side of the pond I think you can avoid paying VAT by keep the US documentation.
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Old 13-02-2014, 07:39   #4
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Re: Flag of Convenience

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Originally Posted by skipmac View Post
Haven't done this but used to sell boats and am familiar with the process. Not all the difficult and not really expensive but if you plan to take the boat back to the EU why not go ahead and register the boat at home?

If you plan to keep the boat on this side of the pond I think you can avoid paying VAT by keep the US documentation.
I don't plan to bring it to the EU, have you seen the color of the sea here :-)
A lot will depend on where boat is located at the point of purchase but I will be heading to warmer (vat free) climes.
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Old 13-02-2014, 07:59   #5
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Re: Flag of Convenience

Assuming the flag of convenience is a US flag then documenting the boat would be technically illegal because only US citizens can do this and that corporation must be owned by a Us citizen and you have to fill out a form saying so. If you have to notarize that form then that might be construed as perjury, mail fraud and other crimes.

But the supreme court has ruled that corporations are people so maybe it is OK now.

The coast guard might disagree and you could lose your boat.

Or are you talking about a different flag?
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Old 13-02-2014, 08:02   #6
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Re: Flag of Convenience

Thanks Sandcrab

I got this from the website of one of these formation companies
"Company Formation Delaware
The incorporation in Delaware does not have any special requirements. You neither have to be a US citizen nor a US resident. You don't even have to be present in the USA at any time. The minimum age to incorporate in Delaware is 18 years. One person can be shareholder and director. A corporation in Delaware usually takes 3-5 days to be registered."
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Old 13-02-2014, 09:03   #7
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Re: Flag of Convenience

But that's just to form a Delaware corporation. Yes, as a UK citizen you can do that. Above and beyond that, though, the Coast Guard regulations say that you can only document the boat with the Coast Guard if the boat is owned by a U.S. citizen, or if the boat is owned by a corporation that is owned by a U.S. citizen.

So documenting the boat is a whole different issue from just creating a Delaware corporation.
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Old 13-02-2014, 09:08   #8
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Re: Flag of Convenience

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But that's just to form a Delaware corporation. Yes, as a UK citizen you can do that. Above and beyond that, though, the Coast Guard regulations say that you can only document the boat with the Coast Guard if the boat is owned by a U.S. citizen, or if the boat is owned by a corporation that is owned by a U.S. citizen.

So documenting the boat is a whole different issue from just creating a Delaware corporation.
Thanks I better look into that
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Old 13-02-2014, 09:16   #9
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Re: Flag of Convenience

I was previously under the impression that the US corporation had to be US owned to legally own and document a vessel but recently did some further research.

As I read the law there are requirements regarding some officers of the corporation that must be US citizens but the owner(s) of the corporation can be non-US citizens and legally document a vessel.

If I recall correctly the majority of the officers must be US or maybe just the principal officers. However since the owners of a corporation will control the actions and assets of the corporation it doesn't matter if the president is a third party.

But still comes down to why would you want to keep US documentation? If you move the boat to the EU I believe you have 18 months before you get dinged for the VAT no matter where the boat is registered or owned.
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Old 13-02-2014, 09:21   #10
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Re: Flag of Convenience

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Originally Posted by skipmac View Post
I was previously under the impression that the US corporation had to be US owned to legally own and document a vessel but recently did some further research.

As I read the law there are requirements regarding some officers of the corporation that must be US citizens but the owner(s) of the corporation can be non-US citizens and legally document a vessel.

If I recall correctly the majority of the officers must be US or maybe just the principal officers. However since the owners of a corporation will control the actions and assets of the corporation it doesn't matter if the president is a third party.

But still comes down to why would you want to keep US documentation? If you move the boat to the EU I believe you have 18 months before you get dinged for the VAT no matter where the boat is registered or owned.
Thanks for that, regarding the VAT, I am not planning to move the boat to the EU, I'm trying to get away :-)

It seems complicated I guess I need to do a lot more work on it. I do know it is a popular method in Turkey with Turkish Citizens so I'm guessing there is a workaround.
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Old 13-02-2014, 09:29   #11
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Re: Flag of Convenience

I'm now finding out that one of the officers or directors has to reside in the state, seems they charge about $500 pa for this "service"
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Old 13-02-2014, 11:26   #12
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Re: Flag of Convenience

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I'm now finding out that one of the officers or directors has to reside in the state, seems they charge about $500 pa for this "service"
Not certain of the exact charges but there are many companies in Delaware that offer this service and will supply company officers, fulfill any residency requirements, etc. But it will cost you at least a few hundred US$ for the service and that is a yearly fee.

Something to consider. In the USA there are two different ways to "register" a boat. The first, more formal process is properly called "documentation" and is handled by the US Coast Guard. This is the procedure you're dealing with and has the requirements for citizenship.

There is a second, easier, less expensive method which is registration with a state. This method has no requirements for citizenship, is typically $100-$300 and generally needs nothing more than a mailing address which is easily arranged.

The downside, the paperwork is not as "official" looking and you might have a problem clearing into some countries without the USCG papers. From experience I can confirm that state registration is accepted in the Bahamas and parts of the Caribbean so this is a subject you might want to research.

Bottom line, you will have to donate a pound of flesh to someone, somewhere to register the boat. Will just depend on how much you donate and how much red tape is involved to do it.
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Old 13-02-2014, 11:37   #13
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Re: Flag of Convenience

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Originally Posted by Captain Ludd View Post
I'm now finding out that one of the officers or directors has to reside in the state, seems they charge about $500 pa for this "service"

I think you've got it!! Yes I knew an Israeli couple that did this. Their boat was US flagged. You will hear a lot of chatter that you have to be a US citizen but that's incorrect. A lawyer in Delaware will look after everything for a fee.

At one time you had to be a US citizen to skipper a US flagged recreational vessel but that was changed about 15 years ago.
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Old 13-02-2014, 12:07   #14
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Re: Flag of Convenience

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I'm now finding out that one of the officers or directors has to reside in the state, seems they charge about $500 pa for this "service"
Simply stick her on the UK ssr, you only need to be a UK resident.....at least initially, can then re register her later at own convenience......maybe into Jersey .

I think the only adavantage of keeping the US boat reg (if you can - my suspicion is that the Delaware route works outside the USA becoz the locals dont know the US rules the same as the uscg does)) is that the boat will not be foreign in the USA and therefore not require govt permission to move around.....but if not keeping in the USA likely no point to having a US flag.
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Old 13-02-2014, 13:09   #15
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Re: Flag of Convenience

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.......that the boat will not be foreign in the USA and therefore not require govt permission to move around..
Yikes I didn't know that, can you explain.
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