On behalf of Sayer Regan & Thayer of Sayer Regan & Thayer, LLP posted on Thursday, February 16 , 2022.
While owning a yacht may be something you have always wanted to do, it’s important to be smart about how you go about it. In many cases, it’s wise to set up an LLC when purchasing a yacht. An LLC (Limited Liability Company) is a type of corporation. Its main purpose is to offer personal liability protection. Let’s more fully explore the reasons an LLC makes sense when buying your vessel.
When you put your yacht into an LLC, it’s the LLC that becomes responsible for liability associated with your boat. This would deter someone who was seriously injured while riding in your boat, for example, to sue you personally. Rather, it’s the LLC that would be sued, protecting your personal assets from any judgments.
The CTA requires reporting by corporations, limited liability companies (LLCs), and similar entities that have been formed under state law or that have been registered to do business in this country.
The LLC may be able to act as a tax shelter for a future buyer who hails from a state with high sales tax. This benefit would generally only crop up when you go to sell your boat in the future. When you buy a boat from a person, you must pay sales tax on the transaction. But if you buy a company that owns a yacht, you may not have to pay sales tax.
This is appealing to buyers who are purchasing a very large and expensive yacht, as this could save them thousands of dollars in sales tax. However, another layer of complexity is added to the transaction when it involves buying a company. Some buyers don’t understand this complex process and may not want to get involved.
Others would simply buy the boat from the corporation, and then you would be left with a shell of a company that would have to be dissolved. So, there are pros and cons to the tax shelter benefit aspect.
Daily Tax Implications
If you look at it from a daily tax standpoint, there are many advantages to buying your yacht through an LLC. Those benefits include:
• Ability to leverage accelerated depreciation schedules
• Ability to take losses for cleaning, maintenance, repairs, and utilities.
But there are negatives, too. It can be expensive to file a thorough and accurate tax return if you’re going to take advantage of every single available tax break. Unless you have a very good accountant it may be hard to enjoy all of the tax benefits when offset with the costs of forming and maintaining the LLC in the first place.
Contact Sayer, Regan and Thayer Before Buying Your Yacht
To learn more about how to set up an LLC when purchasing a yacht, contact us for your free consultation today at 866-378-5836 or click the Start Chat button now. We can address all areas of maritime or admiralty law cases. In fact, our team includes a RYA/MCA Yacht-Master and U.S.C.G. Master, a Maritime Professional Instructor, and a former America’s Cup sailor. Our lawyers remain eagerly involved in the yachting and commercial maritime communities, handling cases that range from vessel purchase, sale and finance to boat tax issues.
These materials have been prepared by SRT for informational purposes only and are not intended and should not be construed as legal advice.