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Old 04-09-2014, 06:45 AM   #1
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Downside of a Montana LLC?

I am trying to research the possibility of forming an LLC in Montana and purchasing and insuring my new motorhome through a Montana LLC. I was unaware of of how this worked until a few days ago, when i spoke with a gentleman who has been doing this for several years. My questions around this are:
  1. Is it legal? (I live in MA)
  2. What happens if I never visit Montana?
  3. Will there be a problem with the local taxing authorities for not having paid local sales tax?
  4. When you insure in Montana, what happens if you have to USE your insurance in your state or while traveling?

I am new to this whole topic and I would love to take advantage of how that works if I don't get in trouble or create a risk for myself and family.

Thanks for your help!
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Old 04-09-2014, 06:55 AM   #2
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I had a Montana LLC to buy a motorhome and avoid Texas sales and use tax. In that sentence is why you should NOT do it. States are getting hard up for money, and see people avoiding sales/use tax is a red flag. Especially California and Colorado are really cracking down on this.

Yes, you may avoid sales tax for some time, maybe forever. But if you get caught you could be liable for back taxes and penalties.

Also, if you finance, you may have difficulty for a Montana LLC. Banks like to have something solid to use as collateral and an LLC is not something they like.

When I bought my new MH 4 years ago I dropped my LLC and paid the sales tax I was obligated to. Much safer in the long run.
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Old 04-09-2014, 06:56 AM   #3
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Call your local taxing authority and ask. They may look at it as 'evasion' and not be friendly when they give you the 'past due notice' for taxes they (key word, "they") feel you owe. JMO
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Old 04-09-2014, 07:03 AM   #4
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I am not a lawyer so take what a I say carefully. I purchased a new coach two weeks ago and looked at doing the same. No problem getting insurance in LLC name and if I had wanted to finance that would not have been a problem either. Bank and insurance company need to know that the LLC owns the coach.

I have heard of many people successfully avoiding taxes with LLC, but have also heard less stories of people who got caught. Some states have started watching for this.

I choose not to do it because I believe it to be tax fraud, but may be a legal tax loop hole in most states. For me I choose to pay thousands and not worry about getting caught because the penalty can and will be severe. You have to weigh the chance of getting caught vs. savings.

Just be aware that the Montanna lawyer will tell you no problem, but he does not have to pay the penalty. IMHO

Good luck.
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Old 04-09-2014, 07:24 AM   #5
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Quote:
Originally Posted by Musikboy View Post
I am trying to research the possibility of forming an LLC in Montana and purchasing and insuring my new motorhome through a Montana LLC. I was unaware of of how this worked until a few days ago, when i spoke with a gentleman who has been doing this for several years. My questions around this are:
  1. Is it legal? (I live in MA)
  2. What happens if I never visit Montana?
  3. Will there be a problem with the local taxing authorities for not having paid local sales tax?
  4. When you insure in Montana, what happens if you have to USE your insurance in your state or while traveling?

I am new to this whole topic and I would love to take advantage of how that works if I don't get in trouble or create a risk for myself and family.

Thanks for your help!
If you do a search on this site for the topic of Montana LLC's you will find a wealth of information. The bottom line is that you must be in compliance with your own state's DMV laws as well as the sales tax laws. If you are a resident of Mass. and you purchase an RV through a Montana LLC you have to be sure that you are in complete compliance with your MA laws and be able to document that compliance. One of my clients tried the Montana LLC route and got caught and it cost him a chunk in tax, penalty and interest.

Know your states laws and comply with them and document that compliance. If you can't comply to the letter of the law for your state then don't use the Montana LLC.
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Old 04-09-2014, 08:53 AM   #6
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I do not remember the thread but you should be able to find it. There was some issue with buying fuel for a rig that was owned by a corporation. If the rig is owned by a corporation it is treated like a commercial truck and you have to buy fuel permits. I do not remember the thread that well since it does not apply to me but I believe that was the topic of it. You might want to search for that thread and read up on it.
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Old 04-09-2014, 08:55 AM   #7
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Quote:
Originally Posted by osok View Post
I am not a lawyer so take what a I say carefully. I purchased a new coach two weeks ago and looked at doing the same. No problem getting insurance in LLC name and if I had wanted to finance that would not have been a problem either. Bank and insurance company need to know that the LLC owns the coach.

I have heard of many people successfully avoiding taxes with LLC, but have also heard less stories of people who got caught. Some states have started watching for this.

I choose not to do it because I believe it to be tax fraud, but may be a legal tax loop hole in most states. For me I choose to pay thousands and not worry about getting caught because the penalty can and will be severe. You have to weigh the chance of getting caught vs. savings.

Just be aware that the Montanna lawyer will tell you no problem, but he does not have to pay the penalty. IMHO

Good luck.
Make sure the lawyer you are talking to has malpractice insurance. If he does then there is a good chance you could make a claim against his insurance. If he told you there is no problem and you have to pay penalties based on his advice that would be malpractice and he would be liable for the penalties and interest. I at least would interpret it that way.
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Old 04-09-2014, 09:00 AM   #8
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I looked into the LLC at one time and it sounded good. However the difference in the cost of insurance made my choice for me. in 5 years or so it was a break even. Plus it was is tax evation and you may o r may not get caught. And as another point I would like to thank those that do this illegally, so I can pay more tax for THEIR gain.

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Old 04-09-2014, 09:04 AM   #9
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Montana LLCs almost always only work for full-timers who don't spend much time in their domicile state. Almost all states require registration of vehicles in that state if the vehicle is "garaged" in that state.


Quote:
Iowa is not alone in cracking down on RV fee avoidance. The National Conference of State Legislatures reports California and Massachusetts have passed legislation to prevent citizens from taking advantage of Montana’s vehicle registration laws.

Read more: Iowa getting tough on recreational vehicle fees | TheGazette
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Old 04-09-2014, 09:09 AM   #10
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Here's the other article I remembered reading:

Massachusetts Goes After RV Tax Evaders | RV Business
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Old 04-09-2014, 09:34 AM   #11
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I do not remember the thread but you should be able to find it. There was some issue with buying fuel for a rig that was owned by a corporation. If the rig is owned by a corporation it is treated like a commercial truck and you have to buy fuel permits. I do not remember the thread that well since it does not apply to me but I believe that was the topic of it. You might want to search for that thread and read up on it.

An LLC is not a corporation nor is it a business. An LLC is an asset protection entity that has no tax standing. For tax purposes an LLC is called a disregarded entity. Forming an LLC does not create a business nor does it create a corporation.

The downsides to a Montana LLC are few if you are a full timer. If you have a full time residence that is not your RV, then the downsides are many and complex.
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Old 04-09-2014, 09:48 AM   #12
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Excellent summation.

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An LLC is not a corporation nor is it a business. An LLC is an asset protection entity that has no tax standing. For tax purposes an LLC is called a disregarded entity. Forming an LLC does not create a business nor does it create a corporation.

The downsides to a Montana LLC are few if you are a full timer. If you have a full time residence that is not your RV, then the downsides are many and complex.
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Old 04-09-2014, 11:56 AM   #13
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Thank you to everyone who responded. Tax evasion is not my goal, saving money is. If I would be in violation of the law, I would not choose that route. Or the solution might possibly be to move to a state where there is no sales tax like NH, but the "registration" fees there are very high. Since I am not trying to create MORE conflict in my life, I think I will let this idea of a Montana LLC be nothing more than an interesting thought and an interesting thread.
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Old 04-09-2014, 12:11 PM   #14
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In considering "upsides and downsides"...

Having a rig financed in the name of the LLC was mentioned. Has anyone heard of someone being able to actually do that?

When we finance in our own name, we remain liable for the balance of the loan regardless of how far under water the loan may be. If we "walk away" from an under water loan, they WILL come after us for the balance as well as their expenses for liquidating the coach.

If an LLC was the liable party, it seems to me that one could then just walk away from the debt and not be personally liable?

Rick
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