Has anyone any experience placing their Yacht in an LLC?

Discussion in 'The Tiki Bar' started by Carpediem44DB, Sep 4, 2019.

  1. Carpediem44DB

    Carpediem44DB Active Member

    504
    Aug 18, 2015
    Sanfransico Bay area
    2006 44 DB Sedan Bridge Raymarine gS165 w Quantum HD Radar
    cummins QSC 8.3 500 HD
    I've owned a couple of California LLCs over the years to hold aircraft with multiple partners and am considering forming an LLC to hold the 44 DB. I'm not concerned particularly with shielding myself from liability as much as making the boat more desirable to a buyer from a sales tax savings point of view. I'm trying to figure out if it really makes sense or not. To hire a law firm that is experienced in placing yachts in LLCs has been estimated to run $4000. I'm not convinced I need to have a lawyer do it. Since there will be no revenue produced by the LLC the tax docs should not be rocket science. I see many yachts advertised as LLC owned and I know you essentially purchase the LLC from the owner and as such the title of the yacht doesn't change hands so no sales tax is due. Just wondering if anyone has experience they might like to share especially if you found doing a low cost DIY LLC was successful.
    Carpe Diem
     
    Steve S and Blueone like this.
  2. El Capitan

    El Capitan Active Member

    441
    Jul 9, 2014
    Chicago IL./Vero Beach, Fl
    1970 SRV 180 w 2.5L Mercruiser.
    2000 Ford Expedition Eddie Bauer
    120HP Mercruiser
    I was under the impression that LLC ownership had additional benefits beyond taxation.

    The risk mitigation is often undervalued but see recent posts of accidents.

    If there are other assets attached to the LLC ie slip rental contracts etc wouldn’t that increase book valuation?

    Lastly I challenge the attorney who quoted you $4k.
     
  3. JVM225

    JVM225 Well-Known Member GOLD Sponsor

    Apr 8, 2008
    Farmingdale, NY
    2002 410 Sundancer, Monaco Edition.
    3126 Cats.
    Check the rules/laws in your State carefully before spending time and money on something like that.
    You may have to show you get business revenue from it or something.
    Here in the people’s republic of NY it is virtually impossible to legally avoid sales tax. Some have tried claiming the boat is registered in another northeast state to avoid it but NY goes after them.
    Hard to believe that California would be much different.
     
  4. Carpediem44DB

    Carpediem44DB Active Member

    504
    Aug 18, 2015
    Sanfransico Bay area
    2006 44 DB Sedan Bridge Raymarine gS165 w Quantum HD Radar
    cummins QSC 8.3 500 HD
    The personal property taxes can’t be avoided but sales tax only comes due when title changes and is reported by the documentation folks at the fed to the state. With an LLC held boat ownership of the LLC changes only so no sale of the assets is reported.
    Saves $30,000 on our boat in CA. Buying the LLC and financing the boat is what takes a little more legal assistance.
     
    Chris-380 likes this.
  5. Henry Boyd

    Henry Boyd Well-Known Member GOLD Sponsor

    Apr 24, 2007
    Newburyport, on the peaceful and serene Merrimack
    ‘09 Sabre 38 Hardtop Express “Serenity”
    Volvo D6 w/IPS450 Pods
    You already own the boat. Presumably you already paid any sales tax. I’m guessing boat is registered, or documented to you personally.

    If you create a LLC, the boat will have to be reregistered/re-documented with a new owner, the LLC. That’s going to trigger a sales tax obligation for the LLC. Unless there is a specific loophole, somebody is going to have to do some fast talking.

    Additionally, be careful not to assume that because the

    Over the years I’ve been involved in a number of lease financings involving fleet sized transactions on commercial vehicles (tractors, trailers, rail cars etc). Sale-lease backs where the current owner “sells” the vehicles to a lessor who leases it back to the owner can be very tricky on this topic. The big issue is how the state sta
    I’d be careful about that assumption. Registration, or Documentation, may trigger a notice to the sales tax people, but very the sale of an asset may obligate the buyer to sales tax regardless of notice. I know that is the case in Mass (look up what happened to then Senator John Kerry a couple years ago).

    H
     
  6. Henry Boyd

    Henry Boyd Well-Known Member GOLD Sponsor

    Apr 24, 2007
    Newburyport, on the peaceful and serene Merrimack
    ‘09 Sabre 38 Hardtop Express “Serenity”
    Volvo D6 w/IPS450 Pods
    You already own the boat. Presumably you already paid any sales tax. I’m guessing boat is registered, or documented to you personally.

    If you create a LLC, the boat will have to be reregistered/re-documented with a new owner, the LLC. That’s going to trigger a sales tax obligation for the LLC. Unless there is a specific loophole, somebody is going to have to do some fast talking.

    Additionally, be careful not to assume that because the

    Over the years I’ve been involved in a number of lease financings involving fleet sized transactions on commercial vehicles (tractors, trailers, rail cars etc). Sale-lease backs where the current owner “sells” the vehicles to a lessor who leases it back to the owner can be very tricky on this topic. The big issue is how the state sta
    I’d be careful about that assumption. Registration, or Documentation, may trigger a notice to the sales tax people, but very the sale of an asset may obligate the buyer to sales tax regardless of notice. I know that is the case in Mass (look up what happened to then Senator John Kerry a couple years ago).

    H
     
  7. Carpediem44DB

    Carpediem44DB Active Member

    504
    Aug 18, 2015
    Sanfransico Bay area
    2006 44 DB Sedan Bridge Raymarine gS165 w Quantum HD Radar
    cummins QSC 8.3 500 HD
    Definitely going to be an expert on the subject before I proceed. I don’t need any surprises down the road. I’m thinking this is why the law firms tend to charge big bucks to set up and maintain the LLCs as there are so many details that in the end can sink one that isn’t careful. I guess if it was a great idea and easy to do everyone would do it. I’ll post any pertinent details as to what I find out.
     
  8. Henry Boyd

    Henry Boyd Well-Known Member GOLD Sponsor

    Apr 24, 2007
    Newburyport, on the peaceful and serene Merrimack
    ‘09 Sabre 38 Hardtop Express “Serenity”
    Volvo D6 w/IPS450 Pods
    Sorry I have no idea why the middle two sections were included. I thought I had edited them out.

    Without going into detail, I’ve worked on transportation equipment financing transactions that involved a change of legal ownership, but not the physical custody and responsibility. That in turn inadvertently triggered sales tax obligations. That was the genesis for the first point about your creation of the LLC.

    The second point is that generally sales tax obligations are created by sales of assets regardless of the reporting channels. Basically there is some form of self reporting requirement built into the statute if the normal channels are bypassed. For example, you sell a vehicle to an entity that will use it off road.
     
  9. The Bill Collector

    The Bill Collector Well-Known Member GOLD Sponsor

    Jun 2, 2008
    Tacoma, WA
    450 Sundancer
    3126 Cat's
    I wish I had and didn’t pay the state of Washington $25K in f***ng sales tax...
     
  10. Carpediem44DB

    Carpediem44DB Active Member

    504
    Aug 18, 2015
    Sanfransico Bay area
    2006 44 DB Sedan Bridge Raymarine gS165 w Quantum HD Radar
    cummins QSC 8.3 500 HD
    It only works if you buy a boat that is in an LLC. You can't buy a boat and then put it in the LLC to save yourself the sales tax. It makes your boat more marketable, supposedly, as the next buyer will save the sales tax. We have been keeping our eyes open for the right Pilot House boat to move up to and our broker occasionally sings the praises of buying an LLC owned boat. He has suggested that we place ours in an LLC now should we ever want to market it. I think he is anticipating a recession in the near future as we all know is inevitable. He is just making sure we have the best chance to sell our boat fast in order to make the move should the right deal present its self. He is not offering to pay the fees to do it though:D
     
    The Bill Collector likes this.
  11. FootballFan

    FootballFan Well-Known Member PLATINUM Sponsor

    Jun 20, 2012
    Florida
    Marquis 59
    MTU Series 60
    I am assuming this is a CA specific scenario.

    What are the sales tax numbers for CA?

    In FL there is a cap that you pay. No difference between a 400K boat and a 4M boat.
     
  12. Carpediem44DB

    Carpediem44DB Active Member

    504
    Aug 18, 2015
    Sanfransico Bay area
    2006 44 DB Sedan Bridge Raymarine gS165 w Quantum HD Radar
    cummins QSC 8.3 500 HD
    Sales tax is based on the county you reside in. Tax rates very between 7.5% to over 10% in places like San Francisco. If you buy and keep the boat out of state for 1 year there is no tax liability either which is another strategy some use to save the tax on larger purchases.
     
  13. JVM225

    JVM225 Well-Known Member GOLD Sponsor

    Apr 8, 2008
    Farmingdale, NY
    2002 410 Sundancer, Monaco Edition.
    3126 Cats.
    New York is different in that all boats, documented or other wise, have to be registered and display a current registration sticker. That’s where they get their sales tax.
    Putting a boat in an LLC’s name wouldn’t circumvent the need to still register it and display a sticker but I suppose you could sell the LLC to a new owner instead of selling him the boat so that new owner would avoid paying sales tax again.
    The problem here though would probably be the state taking a hard look at the LLC and that particular entities tax filings.
    Tricky stuff! I’d probably want to consult a tax attorney before getting involved in anything like that.
    While NYS is very liberal in giving away benefits, they are ruthless about collecting taxes to pay for them.
    Based on what little I know about California’s reputation I suspect they are probably pretty ruthless too.
     
  14. Carpediem44DB

    Carpediem44DB Active Member

    504
    Aug 18, 2015
    Sanfransico Bay area
    2006 44 DB Sedan Bridge Raymarine gS165 w Quantum HD Radar
    cummins QSC 8.3 500 HD
    Ca requires state registration if not federally documented. The registration is actually less than the yearly documentation fees. We do pay personal property tax based on current market value of around 1 1/4%. If you put it in a CA LLC there is a minimum income tax the state charges of $750 even if you have no income or even operate at a loss. Add the costs of preparing a State income tax return and keep records of quarterly meeting minutes ECT, ECT and its probably hard to justify the PITA especially if you miss a step and get them after you.
    Nevada LLCs are supposed to be the toughest to go after and there is a big business built around the concept. Lots of tax and privacy perks. Im going to look into that approach.
    Kind of surprised that no one that has used this concept for their boat has chimed in.
    Cheers
     
  15. alnav

    alnav Active Member GOLD Sponsor

    867
    Sep 16, 2009
    West River, MD
    40 MY
    QSB 425
    I own a Virginia LLC which has employees and operations in CA. Actually the minimum LLC tax is $800 and applies to any LLC regardless of what state they are registered in as long as they operate in CA. So, if the boat is in CA I would think the state could come after its annual fee. I can testify that dealing with CA's bureaucracy to ensure tax and regulatory compliance is a PITA for a profit-seeking business. Second place is Washington state, then DC. It's a cost of doing business for me and I'm not complaining but wouldn't volunteer to do it for a tax advantage that might blow up anyway.
     
  16. b_arrington

    b_arrington Well-Known Member GOLD Sponsor

    Feb 21, 2007
    Setauket, NY
    2018 Back Cove 34
    Cummins QSB 6.7 480
    That's rough. New York imposes sales tax on the first $230,000 of a boat's purchase price. That caps it at right about $19,000. Florida and several other east coast states had already capped their tax and NY found they were loosing out on sales / registrations to other states. A bit of competition among states can be good after all! It certainly save me a bunch with my recent boat purchase.

    On stickers, I can confirm NYS still requires that a boat be registered and to display a sticker. While NYS can't require a boat to display registration numbers if it's USCG documented, they still required the annual registration and to display the sticker. They basically want the revenue.
     
    JVM225 likes this.
  17. Jeremygavin

    Jeremygavin Well-Known Member

    Mar 6, 2012
    Cape Cod, MA
    2011 520 Sedan Bridge
    2016 Sea Ray 19 SPX OB
    2019 Walker Bay Generation 340
    Cummins QSM11s
    Mercury 150 Fourstroke
    Honda 40hp
    MA is a crazy state to own a large boat. I can’t blame people for trying to figure out a way around it. 6.25% tax with no cap that I am aware of. I could have bought a nice new car with the amount of tax I paid on the 520DB.
    I looked into owning the boat in an LLC when I bought it but ultimately my CPA suggested against it as in his opinion to do it legally in MA there is no way out of the tax.
     
  18. bbwhitejr

    bbwhitejr Well-Known Member SILVER Sponsor

    Apr 14, 2013
    Lake Lanier GA
    2007 44DB
    Cummins QSC 8.3s
    GA is no cap and 7%....a private sale pays $0. A dealer or broker is flat 7%.

    Bennett
     
  19. JVM225

    JVM225 Well-Known Member GOLD Sponsor

    Apr 8, 2008
    Farmingdale, NY
    2002 410 Sundancer, Monaco Edition.
    3126 Cats.
    Heard horror stories about owners registering their boats in other states to avoid the NYS sales tax and then getting caught. Not sure, but I seem to remember something about Rhode Island being popular.
    State guys walk the docks and pull the annual docking contracts at the marina and then go from there.
    Also heard of others who documented their boats but didn’t register in NY getting nailed.
    The tax man is ruthless.
    Sometimes it’s just better to pay the piper.
     
    b_arrington likes this.

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