Cruisers Forum
 


Reply
 
Thread Tools Search this Thread Rate Thread Display Modes
Old 05-10-2020, 09:14   #1
Registered User

Join Date: Oct 2020
Location: Vancouver BC
Posts: 38
Canada. Buy a boat in the name of my corporation

I have a small corporation that has nothing to do with sailing (IT consulting) and some money in it that is enough to buy a boat. I want to avoid paying that money to myself as either salary or dividends (and paying personal income tax on it). So I want to buy a boat for the corporation, saying that I am going to use it for business: open a sailing school, charter it out, take tourists out for day sails, whatever.

This business does not need to actually generate an income (although that would be nice). My main goal is to avoid paying income tax that would decimate my capital, and not to be harrassed by CRA for it. And then charge all the boat improvements, marina fees etc as business expenses as well.

1. Has anybody pulled off anything similar?
2. Should I register a second corporation with a different business nature or I can use the same one?
3. Which kind of sailing-related business is the easiest to make look legit in CRA's eyes?
dmitrytoda is offline   Reply With Quote
Old 05-10-2020, 09:17   #2
Registered User
 
Mirage35's Avatar

Join Date: May 2015
Location: Sailing Lake Ontario
Boat: Mirage 35
Posts: 1,125
Re: Canada. Buy a boat in the name of my corporation

Step 1: Hire a good accountant.
__________________
Beam me up, Scotty. There's no intelligent life down here.
Mirage35 is online now   Reply With Quote
Old 05-10-2020, 09:24   #3
Registered User

Join Date: Oct 2020
Location: Vancouver BC
Posts: 38
Re: Canada. Buy a boat in the name of my corporation

I have an accountant already and will definitely consult him.
Was looking at personal experiences though.
dmitrytoda is offline   Reply With Quote
Old 05-10-2020, 09:30   #4
Registered User

Join Date: Jun 2020
Posts: 870
Re: Canada. Buy a boat in the name of my corporation

As mentioned above, speak with your very good accountant.


Unless you have an actual business plan, acquire things such as insurance, certifications and actually try to make a go of whatever it is you are proposing, CRA will see right through your ruse and nail you to the proverbial wall.


Also, the fact that you plan to live on it (I saw your other thread) adds a whole other level of complexity.


Long story short, I would be shocked if you could do what you want to do without raising the red flags at CRA unless you actually do open a legit business related to the boat. Even then, you will be personally liable for some taxes because you live on the boat.
NaClyDog is offline   Reply With Quote
Old 05-10-2020, 09:31   #5
Registered User
 
Mike OReilly's Avatar

Join Date: Sep 2011
Location: Good question
Boat: Rafiki 37
Posts: 14,140
Re: Canada. Buy a boat in the name of my corporation

You realize that while you don't have to make a profit, you have to intend to do so. This means you actually have to operate the business as stated. You actually have to operate "a sailing school, charter it out, take tourists out for day sails, whatever." None of these are easy businesses to run.

While profit is not necessary, persistent losses year over year is a classic red flag for the CRA. So I'd be careful if this is, as you appear to state, simply a tax avoidance plan.
__________________
Why go fast, when you can go slow.
BLOG: www.helplink.com/CLAFC
Mike OReilly is offline   Reply With Quote
Old 05-10-2020, 09:47   #6
Registered User

Join Date: May 2011
Location: Lake Ont
Posts: 8,547
Re: Canada. Buy a boat in the name of my corporation

Quote:
Originally Posted by dmitrytoda View Post
I have a small corporation that has nothing to do with sailing (IT consulting) and some money in it that is enough to buy a boat. I want to avoid paying that money to myself as either salary or dividends (and paying personal income tax on it). So I want to buy a boat for the corporation, saying that I am going to use it for business: open a sailing school, charter it out, take tourists out for day sails, whatever.
CRA is pretty good at catching that sort of stuff. Biggest giveaway is that the already declared intent (and history of income-earning) of your corporation is IT, not boating related.

The richer you (or the corporation) are, of course the easier this scam is. eg "it's for entertaining". I know only one small businessperson who's successfully written off boat(s) to the business, but he's in the marine trade.

If you genuinely intend to generate income from the boat, maybe set up a second business for that. Your accountant will have the best advice on all this.

Otherwise, you'll just have to be a good taxpaying Canadian like the rest of us. Make your money in IT, take salary and/or profit, buy boat.
Lake-Effect is offline   Reply With Quote
Old 05-10-2020, 09:51   #7
Registered User

Join Date: Oct 2020
Location: Vancouver BC
Posts: 38
Re: Canada. Buy a boat in the name of my corporation

Operating sailing school seems as easy as
a. having a website
b. having a boat (probably with a bit of extra safety checks required by Sail Canada or Transport Canada, not sure)
c. having somebody licenced to be an instructor

I am not licenced now but I guess I could be in a year. And then if students come, great, if they don't, it's hardly illegal to run an unsuccessful business.

But I undetstand it can be tricky, that's why I'm looking for somebody who has done it
dmitrytoda is offline   Reply With Quote
Old 05-10-2020, 09:53   #8
Registered User

Join Date: Jun 2020
Posts: 870
Re: Canada. Buy a boat in the name of my corporation

Would you be so kind as to update this post when you get the relevant / required insurance for your going concern?


Cheers.
NaClyDog is offline   Reply With Quote
Old 05-10-2020, 09:54   #9
Registered User

Join Date: Oct 2020
Location: Vancouver BC
Posts: 38
Re: Canada. Buy a boat in the name of my corporation

Quote:
Originally Posted by Lake-Effect View Post
CRA is pretty good at catching that sort of stuff. Biggest giveaway is that the already declared intent (and history of income-earning) of your corporation is IT, not boating related.

If you genuinely intend to generate income from the boat, maybe set up a second business for that. Your accountant will have the best advice on all this.
Yes I understand that. Second business owned by the first one looks most legit so far.
dmitrytoda is offline   Reply With Quote
Old 05-10-2020, 09:56   #10
Registered User

Join Date: Oct 2020
Location: Vancouver BC
Posts: 38
Re: Canada. Buy a boat in the name of my corporation

Required insurance is a good point, haven't thought about that.
I am at very early stages of planning as you can see
dmitrytoda is offline   Reply With Quote
Old 05-10-2020, 10:07   #11
Registered User

Join Date: May 2011
Location: Lake Ont
Posts: 8,547
Re: Canada. Buy a boat in the name of my corporation

Quote:
Originally Posted by dmitrytoda View Post
Operating sailing school seems as easy as
a. having a website
b. having a boat (probably with a bit of extra safety checks required by Sail Canada or Transport Canada, not sure)
c. having somebody licenced to be an instructor

I am not licenced now but I guess I could be in a year. And then if students come, great, if they don't, it's hardly illegal to run an unsuccessful business.

But I undetstand it can be tricky, that's why I'm looking for somebody who has done it
It takes a bit longer than a year to go from zero to keelboat instructor. There might be a fast lane if you attend one of those sailing schools advertised in the back pages of sailing magazines. Here's one Canadian school.

You'll need liability insurance.

Btw, yes it is illegal to run a deliberately unsuccessful business.
Lake-Effect is offline   Reply With Quote
Old 05-10-2020, 10:19   #12
Registered User
 
Mike OReilly's Avatar

Join Date: Sep 2011
Location: Good question
Boat: Rafiki 37
Posts: 14,140
Re: Canada. Buy a boat in the name of my corporation

Quote:
Originally Posted by Lake-Effect View Post
It takes a bit longer than a year to go from zero to keelboat instructor. There might be a fast lane if you attend one of those sailing schools advertised in the back pages of sailing magazines. Here's one Canadian school.

You'll need liability insurance.

Btw, yes it is illegal to run a deliberately unsuccessful business.
Regardless of the difficulty of the marine business (which I think you are underestimating), the real point is you actually have to intend to make a profit. A business run perpetually at a loss is a tip off that it's not legit.

Also, you talk about protecting your capital. But a boat is a depreciating asset. It's hard to see how this makes sense as a way of protecting capital. Probably much better to buy land or gold.
__________________
Why go fast, when you can go slow.
BLOG: www.helplink.com/CLAFC
Mike OReilly is offline   Reply With Quote
Old 05-10-2020, 11:40   #13
Registered User

Join Date: Oct 2020
Location: Vancouver BC
Posts: 38
Re: Canada. Buy a boat in the name of my corporation

Quote:
Originally Posted by Lake-Effect View Post
It takes a bit longer than a year to go from zero to keelboat instructor. There might be a fast lane if you attend one of those sailing schools advertised in the back pages of sailing magazines. Here's one Canadian school.

You'll need liability insurance.

Btw, yes it is illegal to run a deliberately unsuccessful business.
I'm not at zero, I have Sail Canada Intermediate Cruising with all the prerequisites so looks like I can go straight to instructors clinic for Basic Cruising Instructor.

And of course I'm not trying to run a "deliberately unsuccessful business". I'd love to make money with it, but I understand there is a lot of competition so I'm just not very optimistic about getting a lot of students in my first couple of years.
dmitrytoda is offline   Reply With Quote
Old 05-10-2020, 11:40   #14
Registered User
 
Mike OReilly's Avatar

Join Date: Sep 2011
Location: Good question
Boat: Rafiki 37
Posts: 14,140
Re: Canada. Buy a boat in the name of my corporation

Quote:
Originally Posted by Mike OReilly View Post
Regardless of the difficulty of the marine business (which I think you are underestimating), the real point is you actually have to intend to make a profit. A business run perpetually at a loss is a tip off that it's not legit.

Also, you talk about protecting your capital. But a boat is a depreciating asset. It's hard to see how this makes sense as a way of protecting capital. Probably much better to buy land or gold.

Damn ... sorry LE, I should have quoted dmitrytoda, not you. I was agreeing with you, so should have worded it this way. Sorry for the confusion .
__________________
Why go fast, when you can go slow.
BLOG: www.helplink.com/CLAFC
Mike OReilly is offline   Reply With Quote
Old 05-10-2020, 11:45   #15
Registered User

Join Date: Oct 2020
Location: Vancouver BC
Posts: 38
Re: Canada. Buy a boat in the name of my corporation

Quote:
Originally Posted by Mike OReilly View Post
Regardless of the difficulty of the marine business (which I think you are underestimating), the real point is you actually have to intend to make a profit. A business run perpetually at a loss is a tip off that it's not legit.

Also, you talk about protecting your capital. But a boat is a depreciating asset. It's hard to see how this makes sense as a way of protecting capital. Probably much better to buy land or gold.
Running a successful and profitable marine business is of course hard, I do not doubt that. Running a business that honestly tries to make a profit but does not necessarily manage to do so because, well, it is hard there is a lot of competition and whatnot, that does not sound sound so bad.

The main goal is not to protect the capital, the main goal is to own a boat. The choice is not between "spend the money on the boat" and "invest elsewhere", the choice is between "pay it to myself as dividends, pay income tax, buy a boat" and "start a marine business with this money that may or may not be profitable".
dmitrytoda is offline   Reply With Quote
Reply

Tags
boat, Canada

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes Rate This Thread
Rate This Thread:

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Conyplex Corporation Contest 33 w1651 Monohull Sailboats 168 23-04-2022 00:22
selling boat owned by corporation Mrawle General Sailing Forum 5 10-08-2019 16:47
LOST MY BILL OF SALE!!! and Corporation Boat tgjournal Dollars & Cents 4 08-05-2019 07:52
We Bought a Boat / Corporation from Guernsey Meck Rules of the Road, Regulations & Red Tape 3 26-11-2009 17:35

Advertise Here


All times are GMT -7. The time now is 09:45.


Google+
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.
Social Knowledge Networks
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.

ShowCase vBulletin Plugins by Drive Thru Online, Inc.