Advantages to setting up an LLC?

[Water Dragon]

I read somewhere that it's desirable to set up a business entity when you're fixing up an old boat, because you can get wholesale prices on parts and supplies.

Another advantage I can think of is a matter of privacy: Coast Guard documentation being public record which anyone in the world can look up on the internet, I would prefer for someone looking up my boat's name to see "Lunkhead Marine LLC" (haha) instead of my name and address.

Are there other advantages? Is it easy and cheap to set up a business? I'm not really looking for a tax deduction for buying a boat.

[SausalitoDave]

Easy and cheap to set up using Legal Zoom or similar. Google, setting up an LLC. You would likely have a single member LLC, with you as the only member. The main benefit of incorporation is limited liability, although it can be easy to pierce that veil, especially in case of negligence our undercapitalization. Another advantage, that is not fully supportable, is that when you sell someone could buy the LLC and attempt to avoid paying sales taxes on the purchase (where applicable). I don't agree that this works in every situation and there are risks to the buyer if the LLC has undisclosed liabilities. There are also on-going fees, in California at least $800 per year, and potentially other costs. If this is a very costly boat, it is worth exploring.

[Paul Elliott]

An LLC doesn't guarantee anonymity. At least some LLC information is readily available on-line. If I search for my LLC I find my name and mailing address at a minimum.

Liability protection, and ease of transfer are the main benefits. If you have a legitimate business-use for the boat there can be other advantages, but no matter what you are still going to be paying taxes on any income within the LLC, minus business-related losses and expenses. Non-related expenses can't be deducted.

As Dave mentioned, there are significant annual costs and paperwork to maintain an LLC. You should discuss this with a CPA or lawyer to see it the benefits outweigh the costs for you.

[FollowingCs]

Originally Posted by Paul Elliott

An LLC doesn't guarantee anonymity. At least some LLC information is readily available on-line. If I search for my LLC I find my name and mailing address at a minimum.

If you pay Legal Zoom or an attorney or other on-line companies to be your AGENT for the LLC, then you can remain anonymous. All legal papers would be served to your Registered Agent. The cost here can vary widely. Some states require the public listing of 'officers' anyways, so need to check in to that also. And then some states have yearly filing documents that if you file yourself, your name is now "in the system" and find-able, even though you are still paying the AGENT. So you need to file some of those through your agent, which again, can be a pain in the arse.

~ Following Cs ~

[SVNeko]

To get wholesale pricing you generally need a tax ID no. and for that you need to be a real business.

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[Paul Elliott]

My LLC has a taxpayer ID # (necessary for filing the proper tax forms), but I wouldn't use that to get wholesale pricing on non business-related purchases. That is only legal if I am not the end consumer. I know people who do that, but I try to stay squeaky-clean when it comes to the tax code -- I don't need the grief!

[sheldon957]

Just a note of clarification. There is the State Resale Tax ID, which is for State sales tax filings, and business to business dealings are going to want a copy of this.

Then there is the corporation tax id number, the same thing as your Social Security number, but for a business. Business to business sometimes want this, but usually only if you are the recepient of money. Then they would also want a W9 which has the tax ID, so they can verify if they have to 1099 you or not.

[Paul Elliott]

Originally Posted by sheldon957

Just a note of clarification. There is the State Resale Tax ID, which is for State sales tax filings, and business to business dealings are going to want a copy of this.

Then there is the corporation tax id number, the same thing as your Social Security number, but for a business. Business to business sometimes want this, but usually only if you are the recepient of money. Then they would also want a W9 which has the tax ID, so they can verify if they have to 1099 you or not.

Correct. I should have been more clear. I've had State tax ID #'s before, but that was when I had a business where I sold a product. It's been a long time...

[a64pilot]

I just got through liquidating my corporation, I needed it at the time, but it was always a little bit of a PIA, filing separate taxes, paying yearly to the State etc.

[Sailingcouple13]

two points coast gaurd documentation is not a requirement unless you have a loan on the vessel, then your financing company may require it. If you set up an LLC for the vessel and are getting a loan you will be paying commercial interests rates which can be twice as much. If you just want to buy wholesale you can just set up a business as an LLC or sol proprietor for boat repair not connected to your vessel. Many suppliers are keen to this and will require extensive info on your business basically setting up a credit line with them.

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