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Old 07-05-2018, 15:29   #31
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Re: LLC,s Best state for sailboat ownership.

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Originally Posted by hellosailor View Post
How does having an LLC buying the boat get you any tax exemption?

And the implications of this year's tax law changes, LLC's and pass-throughs and whatever, apparently are giving all the tax attorneys a headache.

Not to mention, I would think that if a corporation, an LLC, owned the boat, you'd need insurance purchased at a *commercial* rate, rather than a personal recreational rate?
If you buy an LLC that owns the boat then you are not buying the boat directly (the title does not change owners) so generally there is no sales tax. BUT, you are also taking on all of the liabilities and liens, etc, known and unknown that have accrued to the LLC.

Using an LLC to buy a boat not owned by an LLC won't save sales tax. It will save the next owner sales tax as above.

There is also the possibility of use tax being due depending where you take it with the calculation being the Sales tax rate originally paid minus the Use tax rate where the boat is ultimately used.
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Old 07-05-2018, 15:31   #32
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Re: LLC,s Best state for sailboat ownership.

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While the OP should ultimately seek pro legal and financial/tax advice, there are many here with relavant experience in this subject area...some of them are even pros.

No harm in educating yourself on a subject via Internet searches and discussions, then consulting appropriate pros. You are better equipped to ask intelligent questions and make good decisions with some background knowledge.

Also, not all pros are created equal, Ive had experience with incompetent "pros" in these fields, good basic knowledge of the subject area can help to spot quacks too.
This.... You would be suprised how many "pro's" have different advice.

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OP: what is your State of residency?
Texas

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Does a "formal liveaboard" have a formal dining room?
LOL...Doubtful but we may have a formal sammach maker
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Old 07-05-2018, 15:38   #33
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Re: LLC,s Best state for sailboat ownership.

Woodland-
"Thus no use tax is triggered no matter who owns the llc." I wasn't discussing that. The new tax laws, mainly income tax laws, affect things like pass-through deductions and profits and expenses and how they are treated as personal versus corporate. If the LLC in question never has income or expenses...that wouldn't be an issue. But the fact that income tax laws HAVE changed regarding LLCs, means that if you have an LLC, you need to run things by your accountant to make sure nothing will affect you.

Genesis-
Sales tax is imposed on a sale within a geographic venue. So what you pay in sales tax depends strictly on WHERE the sale takes place. Meanwhile, most states impose a USE TAX which is set at the same rate as sales tax, and they impose that on sales made out of state by their residents, etc.
You will find that most states require you to register any motor vehicle--and that means boats with engines, too--IN THAT STATE if you remain in it for more than 90 continuous days. That's going to vary, in some cases 181 days, in some cases 90 days per year period, fifty states and eleven other places and heaven knows what the Indian reservations do. Take your choice, just be aware that if you stay in any one place for more than 90 days, the odds are that someone will want to call you a "resident" and ask for taxes of some kind. Sometimes, personal property tax instead of sales and use tax. Sometimes, steep titling fees apply as well.
Florida is oddly reasonable, allowing for dual registration for snowbirds, rather than requiring a title change as well as registration change. AFAIK they are the only ones who offer that.
There are plenty of older threads discussing the options and gotchas. Just be aware that they change in every state, and once the tax men say "You owe..." the red tape can be a nightmare. Way better to make sure they will have no grounds, i.e. you keep your fuel and dockage receipts to prove where you were at any given time.
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Old 07-05-2018, 15:45   #34
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Re: LLC,s Best state for sailboat ownership.

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When buying an llc the registered owner does not change, it is still the same llc. Thus no use tax is triggered no matter who owns the llc. Our insurance is not affected by the llc, we have policy through the MTOA as recreational users.
Actually it is that no sales tax is triggered in that scenario.

However, if the boat is subsequently used elsewhere then Use tax will come into play if the LLC has never paid or has paid a lower sales tax than the Use tax rate of the new State.

An LLC is treated like any other owner in that case.
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Old 07-05-2018, 15:48   #35
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Re: LLC,s Best state for sailboat ownership.

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Sorry for the belated reply.

The reason for an LLC (in this case) is My brother wants 10% ownership, I would also like to protect my 401k as this is the bulk of cruising kitty. My forementioned brother has an existing LLC we can use but it is Texas. I was trying to field real world experience on cost savings for use and taxes. (I know Florida/Texas...ect are 6% sales tax but Delaware is less.) We will base out of Florida initially but probably never longer than a few months at a time. Pretty sure there is a way to do sales tax. (BTW...Gross negligence is what it is) more about dragging, minor mishaps with structures, boats, enviromental ect...
If you are not operating the vessel as a business, a New Mexico LLC is $49 one time. You do not need to file any paperwork once formed to keep up the LLC. You will never need to make any other payments to the state, ever - No annual upkeep fees! You do not need to list the members with the state upon formation or anytime afterward. You will need to maintain a registered agent in NM - I pay $50 per year for this.

It depends on where you purchase the vessel, how you register it, and where the vessel will be within the first 90 days of ownership as to whether or not you will pay sales tax. I legally paid ZERO sales tax on my last vessel purchase using a NM LLC (50/50 ownership), Documenting with USCG, while residing in another state, and the vessel being located in third state.

If you truly wish to protect your assets completely, you should register the boat in Nevis, but the NM LLC disregarded entity will protect quite well. But an umbrella policy is still a good idea.
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Old 07-05-2018, 15:51   #36
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Re: LLC,s Best state for sailboat ownership.

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Sorry for the belated reply.

The reason for an LLC (in this case) is My brother wants 10% ownership, I would also like to protect my 401k as this is the bulk of cruising kitty. My forementioned brother has an existing LLC we can use but it is Texas. I was trying to field real world experience on cost savings for use and taxes. (I know Florida/Texas...ect are 6% sales tax but Delaware is less.) We will base out of Florida initially but probably never longer than a few months at a time. Pretty sure there is a way to do sales tax. (BTW...Gross negligence is what it is) more about dragging, minor mishaps with structures, boats, enviromental ect...
Protect your 401K from liability you mean?

In addition to the usual annual filings, Texas has a required Franchise Tax filing which can be a PITA to straighten out if you let it lapse. The actual Franchise Tax only kicks in over a certain corp income level, but even if LLC has $0 income you still must file.

FL has only the annual corp filing ($138 IIRC), they send you an email reminder and you can file and pay online in a matter of minutes. Easy to form an LLC online in FL too.
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Old 07-05-2018, 15:52   #37
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Re: LLC,s Best state for sailboat ownership.

You can stay in Florida up to 6 months with extensions for about $300. Just don’t screw up, they are very aggressive at revenue capture.
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Old 07-05-2018, 15:59   #38
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Re: LLC,s Best state for sailboat ownership.

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...
Not to mention, I would think that if a corporation, an LLC, owned the boat, you'd need insurance purchased at a *commercial* rate, rather than a personal recreational rate?
The key for insurance is usage not ownership. If not in commercial use, it can be insured for recreational use at recreational rates even is owned by an LLC.
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Old 07-05-2018, 16:23   #39
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Re: LLC,s Best state for sailboat ownership.

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First of all there are no tax (or personal limited liability) benefits for an LLC, or any other form of entity ownership for a boat that is primarily for personal use, including live-aboard. Write-offs like the boat's loan interest and personal property tax (if any) perhaps, but you can do that as a "second home" by owning it in your own name.

If your boat is in legitimate commercial use, you may only use it for personal use 14 days per year. Stay on board for 15 days and you get nothing, not even the first 14 days. This is just like a mountain or beach cabin that you rent out during the year. If you rent or charter it for your personal use, or use it for more than 14 days in a year, you must pay the owner (your LLC) the "rack rate" which is the fair market value that commercial customers would pay.

You also must prepare and maintain a complete set of books and financial accounts in accordance with Generally Accepted Accounting Principles (GAAP).

Here's a shocker. If you can't document that you spent at least 750 hours per year working exclusively on managing your LLC and the boat it owns, as a legitimate business for the purpose of making a profit, you may not be able to write off any net losses of the LLC business. This is called "passive activity losses, which must carry forward to subsequent years until you dispose of the activity (meaning sell or sink the boat) that gave rise to the losses. But if your LLC actually makes money (fat chance) you must pay taxes on the profits in a timely manner (quarterly or annually)

And this all assumes your LLC boat business passes the IRS and state tax authorities' requirements as a legitimate business, not a hobby farm, as the tax service guys call them. Good luck.

If your LLC owned boat is US Coast Guard documented vessel you better make sure that your document does not say "RECREATIONAL" on it. These IRS guys are, surprisingly, not stupid. This would be the first thing they will ask to see.
If you live on your boat but operate a small business (chartering few weeks/year, scuba diving or fishing trips few week-end/Y, whatever activity you decide to use your boat for so you can actually make money to survive), and can document you spend 750hours/y doing this, wouldn't the LLC model be exactly what is needed here?
I don't see why a lawyer would be required, but certainly a good CPA with this type of business experience would be important.

Also if your business doesn't do very good one year - and in this case may indeed be a bit like liveaboard cruising - but you refrain of claiming any loss, would the IRS bother ?
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Old 08-05-2018, 00:45   #40
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Re: LLC,s Best state for sailboat ownership.

The US sales taxes and (where it's moored) taxes and annual "property taxes" can be eliminated if it's a vessel purchase for export - (foreign flagged vessel).

So, if in fact you intend to export the vessel - and you can make the case - then you still have to deal with the rules of/for the foreign destination/home port country - usually some foreign location/country where you have, prior to the purchase, established residency and an LLC // or are US military and other US employees assigned overseas or dual citizens with a US and another country passport - or your LLC is already foreign flagged and you are adding the vessel as a LLC asset.

So, if you decide later - to "move the LLC stateside" (because of reassignment or retirement) then the vessel US registration and home port taxes would be for a used vessel in your state of residence.
The "for export" and importation rules are overseen by the US State Department.
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Old 08-05-2018, 03:52   #41
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Re: LLC,s Best state for sailboat ownership.

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The US sales taxes and (where it's moored) taxes and annual "property taxes" can be eliminated if it's a vessel purchase for export - (foreign flagged vessel).
This is not the information I have, at least in Florida regarding sales tax. I had a question about this from another forum member and contacted the main Florida tax office in Tallahassee and spoke with the person in charge of tax compliance issues.

He was quite clear that any vessel new or used, purchased in the state unless removed from FL in less than 90 days, was liable for the FL sales and use tax. Even if the purchaser was not a US citizen and the boat was immediately registered in a foreign country, if the boat remains in Florida for more than 90 days after purchase it is subject to a 6% (or more if there is a local surcharge) sales tax.

One can get an extension if the boat is in a yard for maintenance or repair otherwise the state wants its pound of flesh.
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Old 08-05-2018, 05:14   #42
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Re: LLC,s Best state for sailboat ownership.

HMmmmm,
I wonder how all those boats from Delaware fit in that small state??!!??
Better yet---- WHY
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Old 08-05-2018, 05:26   #43
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Re: LLC,s Best state for sailboat ownership.

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The reason for an LLC (in this case) is My brother wants 10% ownership, I would also like to protect my 401k as this is the bulk of cruising kitty.
Shared ownership is a good reason to have an LLC.

If you're wanting to protect your 401(k) from general creditor liability, you're already protected. Unless you list the 401(k) as collateral, and in some states other qualified plans, are creditor protected. This includes bankruptcy protection. If you are sued, you can claim bankruptcy and keep your pension/401(k). Generally, ERISA plans are protected. Non-ERISA plans, such as IRAs, may be protected depending on state laws.

None are protected against the US Gov.
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Old 08-05-2018, 06:02   #44
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Re: LLC,s Best state for sailboat ownership.

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This is not the information I have, at least in Florida regarding sales tax. I had a question about this from another forum member and contacted the main Florida tax office in Tallahassee and spoke with the person in charge of tax compliance issues.

He was quite clear that any vessel new or used, purchased in the state unless removed from FL in less than 90 days, was liable for the FL sales and use tax. Even if the purchaser was not a US citizen and the boat was immediately registered in a foreign country, if the boat remains in Florida for more than 90 days after purchase it is subject to a 6% (or more if there is a local surcharge) sales tax.

One can get an extension if the boat is in a yard for maintenance or repair otherwise the state wants its pound of flesh.
Used to live in FL and thats my knowledge too, never heard of the "export" status referenced above. Anyone have a citation for this?
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Old 08-05-2018, 06:05   #45
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Re: LLC,s Best state for sailboat ownership.

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Shared ownership is a good reason to have an LLC.

If you're wanting to protect your 401(k) from general creditor liability, you're already protected. Unless you list the 401(k) as collateral, and in some states other qualified plans, are creditor protected. This includes bankruptcy protection. If you are sued, you can claim bankruptcy and keep your pension/401(k). Generally, ERISA plans are protected. Non-ERISA plans, such as IRAs, may be protected depending on state laws.

None are protected against the US Gov.
Yes, thus my question to OP earlier, in most case your retirement savings are off the table anyway.
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