Buying a boat in an LLC

[Pebbs2200]

Hi,
I'm new to CF and hoping y'all can help.
We're making an offer on a boat that's in a LLC. Is it worth buying the LLC as well? The boat is the only asset. I've done a little research online and have had a brief conversation w/an attorney. What I've learned is that we would save on sales tax but pay $800 a year to the Secretary of State (California). What are the pros and cons? Why is this done?
Thanks!!

[Calif.Ted]

People I know have used an LLC when the boat was used for charters due to personal liability concerns.

[belizesailor]

Wow, $800 a year...everything is more expensive in Cali.

If you do choose to buy the LLC be sure it is in good standing with the State and has no outstading judgements/liabilties...otherwise you are buying those too! And get a written contract to that effect so you have some recourse if something pops up.

You can of course easily form a brand new shiny LLC and avoid any such surprises. Then buy the boat in the name of the new LLC.

Having the boat in an LLC provides more legal protection in the event of a large liability claim...thats the primary advantage.

How do you plan to use the boat (recreational or commercial)?

[Pebbs2200]

We plan on recreational use. Thanks!

[belizesailor]

Originally Posted by Pebbs2200

We plan on recreational use. Thanks!

Holding in an LLC is not as adventageous for recreational use, but could still provide more legal protection if something bad happened....in the law suit happy USA. A little added piece of mind.

It wont protect you from gross/criminal negligence though...where you personally did something really agregious with the boat...like operated it drunk and killed someone.

Aside from that, generally your other personal assets would be protected.


Do you plan to keep the boat in Cali?

[Tayana42]

Avoiding sales tax on a boat in California is a big deal. If the boat sells for say $200,000 USD, 9 percent would be $18,000. Compared to that the annual tax on the LLC is pretty minor.

[Pebbs2200]

She would stay in California for about 5-years.
Then it's retirement baby!!
Out the "Gate" to parts unknown.

[nematon785]

Why on earth would you buy an LLC? you can create one of your own on your own good time when you feel like it if you want to try to protect your other assets from liability, and you think a pierce cannot be accomplished. also get ready to file extra forms galore come income tax settlement day.

Ignore B.S. about entities and tax structure, you are buying a boat, not a venture...or are you buying a venture?

Jeezus sales tax should be the big agenda here, that is cash out of your "venture" pocket if you f**k it up!

Worried about liability because someone trips and falls on your boat? "My neck and my back! call an ambulance!" Might as well be worried about all of your properties and get a big umbrella policy, and then begin requiring all crew and guests to sign a liability release and carry their own policies, and submit you a copy of your vessel and entity as additionally insured...Oh my gawd why bother

Treat the LLC as the seller. just buy the boat IMHO. LLC better be able to transfer title to you...

[nematon785]

Who told you a LLC pays lower sales tax than anyone else? why $800 in fees to register? why incorporate in CALIFORNIA of all GAWD forsaken places!!! who are you talking to? moving on...

I don't know anything, but I know my business runs out of Delaware, not California.

[Cottontop]

Two things:

1. Make sure this will really shield sales tax. Some states (and CA is really aggressive) are starting to look thru an LLC whose only asset is a boat or a plane and go after sales tax.

2. An LLC will not shield you from personal liability for your torts. In other words, if you negligently drive the boat into another, causing damage, injury, you will get personally sued. The LLC will also get sued, increasing your legal costs.

[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.

[S/V Illusion]

Only two certainties on which you can depend:
1. Don't rely on legal advice from strangers, and
2. Don't ask for legal advice here.

Corrolary to #2 - this forum is full of devious boating advice.

[14murs14]

Originally Posted by nematon785

Why on earth would you buy an LLC? you can create one of your own on your own good time when you feel like it if you want to try to protect your other assets from liability, and you think a pierce cannot be accomplished. also get ready to file extra forms galore come income tax settlement day.

Ignore B.S. about entities and tax structure, you are buying a boat, not a venture...or are you buying a venture?

Jeezus sales tax should be the big agenda here, that is cash out of your "venture" pocket if you f**k it up!

Worried about liability because someone trips and falls on your boat? "My neck and my back! call an ambulance!" Might as well be worried about all of your properties and get a big umbrella policy, and then begin requiring all crew and guests to sign a liability release and carry their own policies, and submit you a copy of your vessel and entity as additionally insured...Oh my gawd why bother

Treat the LLC as the seller. just buy the boat IMHO. LLC better be able to transfer title to you...

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!

[Paul L]

Originally Posted by S/V Illusion

Only two certainties on which you can depend:
1. Don't rely on legal advice from strangers, and
2. Don't ask for legal advice here.

Corrolary to #2 - this forum is full of devious boating advice.

And dubious advice

[bradfordharley]

I just sold a boat that was in an llc due to the fact that I had it in charter.
In short(as I'm typing on my phone) you need to balance the sales tax savings vs the amount the boat has been depreciated as an asset of the llc. This makes a difference if you ever sell the boat as the difference between sale value and depreciation is capital gains.

I wouldn't by a boat in an llc unless I knew I wasn't going to resell, knew it was not heavily depreciated(unlikely) and wasn't going to charter. My 2 bits.

Pm me if you want me to share my experience.