Buying a boat in an LLC

[LJsail]

I am not a lawyer and am not in California. However, where I live, I have always been advised that it is better to buy the assets of an llc rather than the llc itself. Buying only the assets protects you from the unknown liabilities of the llc. If the same is true there, it would seem imprudent to take on that risk to save a few thousand dollars, no matter what your financial situation (even if you have no assets other than the boat, the boat is owned by the company, and would be fair game in any lawsuit).

[nematon785]

Originally Posted by 14murs14

Because no state has a sales tax on purchase of an LLC. Most have a sales tax on the purchase of a boat. If you buy the LLC that contains the boat, the ownership of the boat hasn't changed (it's still owned by the same LLC), so no sales tax is triggered. That can be a significant sum of money saved, that's why!

Ok, so the purchase of the LLC is essentially tax free. I guess I can ensconce all of my assets within an LLC and begin sales tax free transactions with anyone. good to know.

So the best way is to create a LLC, transfer assets to it (not sure how, but I guess pretty easy there) then I can sell any property and the buyer is immune to sales tax and liability! OUTSTANDING thread! this is the greatest legal and Tax advice for free ever given.

I will point out even AL Capone had to pay his taxes, the hard way.

So now my question is drilled down to its essence:

When I buy a limited Liability Corporation, what exactly am I buying? Am I buying a business? Am I exposed or totally immune to any risk? Do the assets become MY property? How do I file income tax on April 15th? Who do I insure the vessel under? me or the LLC? am I allowed to drive the LLC's boat, or do I need to be an officer of the company... When I moor the vessel, who's name is it under? Who's name is the insurance under? when I enter mexico how do I show ownership and registration is in fact entitled to me as the skipper when I enter customs? If I decide to sell the vessel ( Whoops I mean if the LLC decides to sell some of its assests) how is that handled? who represents the LLC? How do I title a vessel in an LLC's name? How does the LLC report income tax from guest charter of the vessel? is it a gift that we? can use it or should I plan to pay the charter rate to uit the insurance company, and list myself as an employee of theLLC, who pays me as an employed staff member, covering payroll and workmans compensation and I pay income tax on my salary? Should I carry my own liability policy and list the LLC as additionally insured?!!! If the vessel collides with another, who responds to the claims made by the aggrieved vessel? The LLC attorney on retainer presumably, or can I answer the call on my cellphone?Should the tender be registered and owned by my phantom corporation as well? If I have work done at a yard, do I need to make sure the corporation is listed as an additionally insured on the contractors liability policy? should the contractor have workmans compensation insurance and carry a professionally registered license? when I pay him, are the checks written from an account with the LLC as the signor?!!! Should I hire a bookkeeper to manage my new business/entity?

I am curious, and would really like to benefit from the vast inside business knowledge base available here

[sailpower]

Originally Posted by Kenomac

If one lives in California, there isn't a choice. Form an LLC or pay the tax. California doesn't care where you document the boat, as far as the state is concerned, if it's in Cali you owe Cali.

Not exactly.

If the OP buys the LLC that owns the boat, ownership of the boat has not changed so no tax due. Potential existing liabilities would be the con.

If the OP sets up a new LLC and buys the boat from the existing LLC then ownership has changed and sales taxis due.

[belizesailor]

Originally Posted by Pebbs2200

Thank you all for your input. We're looking at the pros and cons and of course we'll be talking to an attorney and an accountant. We had never heard of this and I'm glad we asked y'all.

As another post advised, seeking pro help is the best option.

We can offer anectotal opinions and experiences but only a pro in CA who knows the details can offer solid counsel.

[CaptRory]

There are advantages in liability issues in that it separates your business from your personal life. If the company is sued, it's only asset is the boat not your other life. But the main reason one uses an LLC is for a tax shelter. I live in Florida, where I had my accountant set up the LLC that bought my boat. It's not a lawyer that you need, it's an accountant who knows what they are doing. In Fla it's only about $250 a year to the state. I actively chartered for the first two years. You can depreciated the boat and write off EVERY penny you spend on it. The business looses money and being a "pass through corporation" your loses go straight on to your 1040 against your gross income. After doing this shelter for 5 years, I dissolved the LLC (reason- not profitable) and changed the registration on the boat over to me personally. To do this without paying sales tax, you must dissolve the corporation first. If you re-register it with out dissolving the LLC you will have to pay sales tax. The nice lady at the DMV saved me from that mistake. You must take them your dissolution paperwork. I cannot overemphasize the importance of an accountant that is familiar with boats and chartering to set it up and do your taxes. He cost me about $400 a year. I would do that and let your business purchase the assets of his rather than purchase the business and it's asset from him. Just to keep it clean with no surprises. You will also need a business related insurance policy that is about 50% more expensive. Repeat after me....Good Accountant.

[nematon785]

Yer accountant just files yer tax forms. Yer bookkeeper sets it all up. unless you like to pay the accountants hourly rate all year long to hold your hand. Your Attorney advises you, and points you towards the most positive outcome and protects you if liabilitay appears, that is if he does not go bankrupt himself in the mean time. Get enough people involved in the management of your assets and you may come across one or more lie to you or progressively assigns a bunch of your assets to themselves, but we know all attorneys and finance people are looking out for your interest before their own right? They all just want to see you succeed, and will work endlessly pro bono to make it happen.

Keep a boat in Cali for a while and the tax man commeth. He does not care what your clever LLC arrangement is, he wants his money, and he is hardcore. Very serious and scary official letters chasing you all over for years as you try to sail away...They go down to the docks and personally record hull numbers, interview harbormasters about time spent at moorings, they are aggressive. better be real serious if you want to play the game with these guys. just sayin...

I'm sure it will all work out. Why not build in a bunch of complication where it is not needed, and pay a line of people with their hands out to create a complex entity owned asset solitary company who only has interest in making its assets and profits available to you for no charge or risk? I guess if you are already well established doing this sort of thing with several other ventures such as businesses and appartment buildings and construction companies buying a boat would be old hat, and fall right into your empire.

To begin your empire with a boat purchase? maybe not so clever.

[CSY Man]

. You will also need a business related insurance policy that is about 50% more expensive. Repeat after me....Good Accountant.

Good a good accountant.
As for insurance, my boat is insured with the LLC as the owner, no problem there.
Found Yacht insurance allowing 24 charters a year to be only $174 more expensive per year than regular pleasure insurance. Shop around.
Most if not all commercial boats are Documented and owned by corporations, nothing new here.
Tax benefits, legal protection, monetary protection, etc.
Don't see what all the resistance to an LLC owning your boat is?
(I only know about Florida, seems to work for me. No idea about California)

[CaptRory]

California has state income tax so may be some different rules. A good accountant will keep you square with the taxman. Do your own book keeping, take it to your accountant at tax time, which is February since corporate taxes are due in March. It's not a big deal. BTW... as a NATIVE ANGELENO I have some advice. Don't use the term "Cali", it makes people think you are not very bright. And if you use "SoCo" for Souther California, they'll know it for sure.

[marlin driver]

Originally Posted by nematon785

Yer accountant just files yer tax forms. Yer bookkeeper sets it all up. unless you like to pay the accountants hourly rate all year long to hold your hand. Your Attorney advises you, and points you towards the most positive outcome and protects you if liabilitay appears, that is if he does not go bankrupt himself in the mean time. Get enough people involved in the management of your assets and you may come across one or more lie to you or progressively assigns a bunch of your assets to themselves, but we know all attorneys and finance people are looking out for your interest before their own right? They all just want to see you succeed, and will work endlessly pro bono to make it happen.

Keep a boat in Cali for a while and the tax man commeth. He does not care what your clever LLC arrangement is, he wants his money, and he is hardcore. Very serious and scary official letters chasing you all over for years as you try to sail away...They go down to the docks and personally record hull numbers, interview harbormasters about time spent at moorings, they are aggressive. better be real serious if you want to play the game with these guys. just sayin...

I'm sure it will all work out. Why not build in a bunch of complication where it is not needed, and pay a line of people with their hands out to create a complex entity owned asset solitary company who only has interest in making its assets and profits available to you for no charge or risk? I guess if you are already well established doing this sort of thing with several other ventures such as businesses and appartment buildings and construction companies buying a boat would be old hat, and fall right into your empire.

To begin your empire with a boat purchase? maybe not so clever.

Owning a boat in an LLC isn't rocket science. You obviously haven't had positive experiences using professional services, but many of us have fared much better.

Buy a $300K boat in CA and you pay $24K in sales/use tax. Buy the LLC that owns that boat and you pay no tax on the purchase, but it costs you $800/yr for the LLC. Which do you prefer? It is legal and not complicated. Your comments about tax officials walking the docks is relevant to personal property tax, which is paid at roughly 1% of the boat value ($3K per year in our example). That is paid regardless of how you hold title to the boat, as long as it resides in CA.

For a boat with substantial value, buying the LLC that owns it is a big bonus due to the tax savings. Selling that LLC and boat to a knowledgable buyer can bring you a premium for the same reason. The liability protection debate is not as important to me because I carry plenty of insurance coverage.

The LLC that holds the boat exists to hold the boat and has no other assets or business, so there aren't other issues to complicate things.

I also hold investment properties in LLCs and limit each entity (LLC) to a single property for these reasons. Very common arrangement and entirely legal, including from a tax standpoint.

You might consider saving your criticism for topics on which you have some knowledge.

[bradfordharley]

Originally Posted by marlin driver

Owning a boat in an LLC isn't rocket science. You obviously haven't had positive experiences using professional services, but many of us have fared much better.



Buy a $300K boat in CA and you pay $24K in sales/use tax. Buy the LLC that owns that boat and you pay no tax on the purchase, but it costs you $800/yr for the LLC. Which do you prefer? It is legal and not complicated. Your comments about tax officials walking the docks is relevant to personal property tax, which is paid at roughly 1% of the boat value ($3K per year in our example). That is paid regardless of how you hold title to the boat, as long as it resides in CA.



For a boat with substantial value, buying the LLC that owns it is a big bonus due to the tax savings. Selling that LLC and boat to a knowledgable buyer can bring you a premium for the same reason. The liability protection debate is not as important to me because I carry plenty of insurance coverage.



The LLC that holds the boat exists to hold the boat and has no other assets or business, so there aren't other issues to complicate things.



I also hold investment properties in LLCs and limit each entity (LLC) to a single property for these reasons. Very common arrangement and entirely legal, including from a tax standpoint.



You might consider saving your criticism for topics on which you have some knowledge.

Agreed with marlin. I've also have had 2 boats in an llc in California. Just beware of depreciation and section 179. Obviously talk to a tax guy.

[denverd0n]

Originally Posted by CaptRory

Don't use the term "Cali", it makes people think you are not very bright. And if you use "SoCo" for Souther California, they'll know it for sure.

Yes, much better to refer to it by the technically correct name of "Crapifornia."

[Woodland Hills]

Originally Posted by denverd0n

Yes, much better to refer to it by the technically correct name of "Crapifornia."

Says Florida Man........ Just turn on the news: all the wacko stories begin with "a Florida man today......"

You live in the land of face eating meth freaks and think California is crappy? Wow!

[14murs14]

Originally Posted by denverd0n

Yes, much better to refer to it by the technically correct name of "Crapifornia."

That's a bit of a jerk statement, was that really necessary?

[timbenner]

Originally Posted by CSY Man

I am selling my boat in an LLC: saves the buyer $9k in Florida sales tax, cost $138 per year to the State of Florida.
Already Documented with the CG as the LLC being the owner.
Good deal. Can't think of any negatives really.

I agree, my boat is in an LLC as well. One advantage no one has mentioned is how you can smoke the title to the boat. An LLC owns my boat and every child (3), wife, dog, cat and bird in the family have a small ownership share in it. My Regulations give me the sole power to undo all of that if I want to sell, but if a creditor ever tried to come after it, they would give up because there are so many Partners.

Assuming that it's a pleasure boat, there are NO Federal income tax issues, because there's nothing deductible, except the sales tax when you buy it. My boat is leased on Airbnb ( https://www.airbnb.com/rooms/15041212 ) most every weekend, but my deductions are limited to my income.

[denverd0n]

Originally Posted by Woodland Hills

Says Florida Man...

That's "Flori-DUH!" Or "The Gun-shine state." (Silly nicknames for my state don't get my panties all in a wad, so call it whatever you want.)

Sorry if anyone took offense, but really, criticizing someone for referring to California as "Cali" is pretty much the very definition of pointless nit-picking. I was simply trying to highlight the absurdity of getting upset about that. Maybe I should have added a smilie.