Ownership transfer to LCC

[Menlim3]

Greetings: I own a 45 foot sailboat that is currently registered under my name in Delaware. The boat physically resides in Israel most of the time and I will probably be paying taxes here sometime soon (when they catch up). In the meantime, I have created a limited liability corporation using a Delaware agent, and I now want to transfer ownership of the vessel to this LCC. The LCC has 3 other of my partners listed as managing members. Can someone please tell me how to enact the transfer of ownership? Is there a special bill of sale format that needs to be used and does it need to be signed by all managing members? Does it need to be signed by a notary public or lawyer? What do I then do with this bill of sale to make it official? Thanks!

[SailsWithFists]

First, you must establish multiple things. Just because your boat is in Israel, and your LLC is in Delaware does not mean that the new owner (LLC) is in Delaware, or where the boat will be registered.

Example: A person can purchase a Panamanian registered vessel from a Dutch corporation, with the new owner being a New Zealand Corporation who's owners are in Oregon, and the boat will remain registered in Panama.

Is your boat USCG Documented? If so, it would be best to leave it documented and simply transfer ownership to the LLC following the USCG procedures - no sale required.

If your boat is not USCG Documented, consider making the transfer from yourself, and its current form of registration to your LLC and a USCG Documentation following the USCG procedures.

If you do not want USCG Documentation, then follow the procedures of the jurisdiction in which you wish to register the vessel. It does not have to be Delaware, or even a US state, or even the United States. The vessel's registration (and hence the required procedures to transfer ownership) stands alone from its owner(s) and where they reside.

I own (actually my Trust owns) an LLC from one state with an address in a different state, that owns a vehicle from a third state, and my personal DL is from a forth state with an address in a fifth state.

Also, I would find it odd for Delaware to collect tax on property that is not in the state. But I don't do Delaware, so I am not sure.

[Menlim3]

Thanks. Maybe I wasn't clear.
I am looking basically for the procedures to transfer a Delaware private vessel to a Delaware LCC.

[SailsWithFists]

Originally Posted by Menlim3

Thanks. Maybe I wasn't clear.
I am looking basically for the procedures to transfer a Delaware private vessel to a Delaware LCC.

You were clear. But your questions cannot be answered without relevant data.

How is the boat currently registered? Not the person, but where and how.

When transferred, will the boat be registered in Delaware? Meaning will it have a title issued buy the state and hull registration numbers of Delaware?

If not, then where and how will the boat be registered? USCG Documentation, Israel, EU, some other state?

I was trying to explain that just because you live in Delaware, and you have a Delaware LLC, it has no bearing on the transfer or requirements.

What matters most is where (jurisdiction) and how (state, federal, etc.) you expect to register the vessel. The ownership, whether personal or a disregarded entity, are secondary.

You have choices, and those choices matter.

[Menlim3]

The vessel is currently registered in Delaware and we thought to leave it that way. Unless you think there is a reason to change. Thanks for the help.

[Cadence]

Originally Posted by Menlim3

Greetings: I own a 45 foot sailboat that is currently registered under my name in Delaware. The boat physically resides in Israel most of the time and I will probably be paying taxes here sometime soon (when they catch up). In the meantime, I have created a limited liability corporation using a Delaware agent, and I now want to transfer ownership of the vessel to this LCC. The LCC has 3 other of my partners listed as managing members. Can someone please tell me how to enact the transfer of ownership? Is there a special bill of sale format that needs to be used and does it need to be signed by all managing members? Does it need to be signed by a notary public or lawyer? What do I then do with this bill of sale to make it official? Thanks!

I think you need to ask your attorney. Obviously you set up the LLC to dodge taxes. No foul it's Del. law. I'd just like a nickel for every yacht I've seen with Wilmington De. on the stern or the Bahamas.

[belizesailor]

Originally Posted by Cadence

I think you need to ask your attorney. Obviously you set up the LLC to dodge taxes. No foul it's Del. law. I'd just like a nickel for every yacht I've seen with Wilmington De. on the stern or the Bahamas.

Nothing illegal or dodgy about a boat physically in foreign waters being registered in Delaware. As youve seen its very common...and I dont know of a single venue that categorize it as tax evasion.

[CaptRory]

Take the title and your corporate papers down to the DMV and tell them what you want to do. I did the opposite. I formed an LLC which purchased my boat. When I stopped chartering, I told the ladies at the DMV I wanted to transfer you my name and they told me to dissolve the LLC first, and bring the document of dissolution and they would just transfer title. If I transferred before dissolution, I would have to pay taxes. Good to know, depending on what your plans are for the future. I live and sail and am registered in Florida.

[SailsWithFists]

Originally Posted by Menlim3

The vessel is currently registered in Delaware and we thought to leave it that way. Unless you think there is a reason to change. Thanks for the help.

I assume "Registered in Delaware" means you have a Delaware state title of ownership and you carry Delaware registration numbers on the hull. If you sell to boat, and register in back in Delaware to the LLC, you will pay sales tax, title and registration fees on the sale. (In Delaware there may be a way to "transfer" ownership without selling it, but I do not know.)

I would go with USCG Documentation. This is federal registration, and avoids state fees (especially taxes if the boat is out of the state/country.)

You can sell the boat to the LLC for $1 if you want, then do the Documentation paperwork. If you do not want the hassle, there are plenty of companies that will do it for you.

FYI: Ownership of the LLC must be at least 75% American owners for USCG Documentation.

If you do it yourself, it should cost less than $150. Here is the USCG Bill of Sale form

FAQ for transferring ownership

If you want to pay a few hundred dollars for someone else to do the leg work, contact Marie @ BoatDoc

[jmschmidt]

First of all I hate to hear about people who use “agents” or lawyers to set up something as simple as an LLC. In every state in the US this can be done online with single fill-in form and you only pay the filing fee which runs for $50 to maybe $200 max depending on the state. These so-called agents and even lawyers, are rip-offs.

As to you question…The information you provided is too incomplete to allow a precise and accurate answer. Delaware State “registered” and “located in Israel” is pretty much irrelevant. Are you a United States citizen? If not, you can’t document a boat with the US Coast Guard. Is the boat USCG documented now? If so a legal entity like an LLC or corporation controlled by non-US citizens can’t legally document a vessel with the USCG. Where was the boat built? Many countries are exempt from US import duty (South Africa for example). Pick you state (and Hailing Port) carefully. Some states (like Hawaii) don’t’ charge personal property tax on boats.

If none of the above are impediments to USCG documentation and your LLC is not majority controlled by non-US citizens you would use USCG Bill-of-Sale Form CG-1340. Like most USCG forms are online fillable. This form, or any kind of bill-of-sale should be notarized. This form should be used even if you don’t plan on USCG documentation but want to stay with just your Delaware registration. In either event any bill-of-sale is signed over by the current owner (you?) to the benefit of the new owner (the LLC?)

You should also obtain a “Builders Certificate” if possible.

I hope you understand that having an LLC, regardless of the number of managers in no way insulates any or all of the individuals from personal liability stemming from the operation of the vessel. You still need tons of insurance.

Finally, having four managers of an LLC or four partners in a general partnership is a recipe for disaster.

[Cadence]

Originally Posted by jmschmidt

First of all I hate to hear about people who use “agents” or lawyers to set up something as simple as an LLC. In every state in the US this can be done online with single fill-in form and you only pay the filing fee which runs for $50 to maybe $200 max depending on the state. These so-called agents and even lawyers, are rip-offs.

As to you question…The information you provided is too incomplete to allow a precise and accurate answer. Delaware State “registered” and “located in Israel” is pretty much irrelevant. Are you a United States citizen? If not, you can’t document a boat with the US Coast Guard. Is the boat USCG documented now? If so a legal entity like an LLC or corporation controlled by non-US citizens can’t legally document a vessel with the USCG. Where was the boat built? Many countries are exempt from US import duty (South Africa for example). Pick you state (and Hailing Port) carefully. Some states (like Hawaii) don’t’ charge personal property tax on boats.

If none of the above are impediments to USCG documentation and your LLC is not majority controlled by non-US citizens you would use USCG Bill-of-Sale Form CG-1340. Like most USCG forms are online fillable. This form, or any kind of bill-of-sale should be notarized. This form should be used even if you don’t plan on USCG documentation but want to stay with just your Delaware registration. In either event any bill-of-sale is signed over by the current owner (you?) to the benefit of the new owner (the LLC?)

You should also obtain a “Builders Certificate” if possible.

I hope you understand that having an LLC, regardless of the number of managers in no way insulates any or all of the individuals from personal liability stemming from the operation of the vessel. You still need tons of insurance.

Finally, having four managers of an LLC or four partners in a general partnership is a recipe for disaster.

My son formed an LLC when he got our business. Saved personal liability. I still needed to take out insurance as the property owner. Cheap, but if you can't get blood one place try another.

[Dave22q]

Be warned, the IRS is very alert to hobbys mascarading as businesses. You may expect to questioned if your LLC does not show profits.

[SailsWithFists]

Originally Posted by Dave22q

Be warned, the IRS is very alert to hobbys mascarading as businesses. You may expect to questioned if your LLC does not show profits.

That is only if the LLC is generating an income. When an LLC us used for the sole purpose to hold a non-income generating asset, it is not an issue since it is not being used for business.

[RickG]

We did pretty much the same thing. We purchased a vessel that was listed the Norway vessel registry, transferred it to USCG. The seller was an individual and the buyer was an LLC. All we needed was a bill of sale and the paper work showing that it had been delisted.

As someone else mentioned, just take your paper work to your registry authority. Take your LLC articles of organization or other documents showing that you are a member. "I want to transfer my boat to my LLC." Is about all it takes, with some forms to fill out.

As for an LLC being any kind of red flag for the IRS, it depends on what you try to do with it. We have no income, so we don't file taxes. We are not depreciating the vessel.

Cheers, RickG