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steven cavazzi · 03-06-2008, 01:02 AM

We've heard a lot about LLCs and understand that it is a method of saving on both sales tax and insurance, but there must be much more to it. Does anyone have any insight that you can share?

steven cavazzi · 03-06-2008, 01:02 AM

We've heard a lot about LLCs and understand that it is a method of saving on both sales tax and insurance, but there must be much more to it. Does anyone have any insight that you can share?

Robin_M · 03-06-2008, 02:06 AM

Hi Steven,

Forming an LLC (Limitied Liability Company) for the purpose of operating a recreational vehicle has some advantages for certain individuals, but it's hard to imagine how you could legally save on either sales tax or insurance by doing that. I've owned a small aircraft for many years, and a few years ago I sold half interest in it and formed an LLC with another pilot. Our main purpose was to structure a way to shield ourselves from personal liability from the actions of each other, and the operations of the plane. It also provided an easy way of sharing expenses and a legal structure for establishing ownership of shared assets. The LLC files and pays federal and state income taxes, which is a "downside" of the structure, not an advantage. (Of course we don't make enough profit for that to be an issue.) Under Pennsylvania laws, there have been no advantages for sales tax or insurance.

That said, some insurance companies may have different rate structures for different entities, and sales tax laws vary greatly from state to state. I'm only familiar with the tax laws in PA. There may be some advantages in some states that I'm not aware of. While LLC's usually have more than one member, it is legal for one person to form an LLC. However, from the standpoint of liability protection, where the LLC exists mainly for the purposes of operating a vehicle, a smart attorney may easily bust through that veil if that were to be tested.

Max Hubrich · 03-06-2008, 02:53 AM

Steven,

Click on "find" and type in "Montana LLC"-
There are numerous posts about this subject.

Gary RVRoamer · 03-06-2008, 04:49 AM

AS Max said, much has already been written here and is easily found via the FIND function.

In a nutshell: You can save on sales taxes if you create an LLC in a non-sales tax state (e.g. Montana) and title & register the RV there. You may save on registration fees and also on personal property tax if your current state has that tax. I doubt if there is any savings in insurance, but that would depend on insurance rates for your current state vs the state the LLC is in. Montana does not have cheap insurance and you may well pay commercial rates since the RV is owned by a business rather than a private individual. You will just have to shop insurance rates to see what difference there is, if any.

The LLC grants the LLC owner (you) the right to use the company RV at any time, provided that he maintains it and pays for fuel. That's about all there is to it.

Rick A · 03-06-2008, 08:17 AM

Also make sure to read all the posts about the states that are cracking down on this practice. It has been abused to the extent that states are taking long hard looks at this and are pursuing people who are using this as a means to avoid taxes. If the sole purpose of setting up an LLC is to avoid paying legitimate taxes, then it is probably not legal. Have a well versed attorney in corporate law look over everything to make sure it is legal.

george henry · 03-06-2008, 11:52 AM

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Reply </div></BLOCKQUOTE>
good info

sharbra · 03-06-2008, 08:18 PM

Google Montana LLC's and call the toll free number and speak with some of those who offer resident agent service, etc. I have heard very good things about the Bennett Law Firm.

cb5300 · 03-09-2008, 02:50 PM

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by sharbra:
Google Montana LLC's and call the toll free number and speak with some of those who offer resident agent service, etc. I have heard very good things about the Bennett Law Firm. </div></BLOCKQUOTE>

I use Bennett, and I'm here to tell you that they take good care of you...Setting up the LLC was the smartest thing I've ever done.

MCPO Ret · 03-09-2008, 05:25 PM

Ditto to cb5300 comments to the tune of about 15k

Robin_M · 03-12-2008, 07:33 AM

When I left my original reply to this inquiry, I obvoiusly was not familar with the practice of setting up a Montana LLC for the purpose of tax avoidance. Interesting concept.

As I stated earlier, I own an LLC with one other partner. It would not have occured to me to set one up in another state for the purpose of avoiding sales tax on an asset. I believe that there is a "thin line" between "tax avoidance" and "tax evasion". I'm not willing to test that line. You can't keep an LLC secret. It's a legal business entity which must file state and federal tax reports. If your home state Dept. of Revenue wants to find you and prosecute you, they will. I believe you'd have a hard time winning that contest unless you could show a legitimate business purpose for the LLC (other than tax and liability avoidance).

As for liability protection, the same thing is true. There's a legal phrase called "piercing the corporate veil", which means that a good plaintiff attorney, going after liability awards for his client, should have a relitively easy job of illigitimizing your LLC, again unless it can be shown that there is a legitimate business involved - or at the very least a legitimate reason for setting up the LLC other then purely for the purposes of avoiding taxes and liability.

Just my 2 cents worth...

Robin_M · 03-12-2008, 09:17 AM

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">If one plays by the rules, then a Montana LLC is perfectly legal. </div></BLOCKQUOTE>I didn't say it was illegal. That said, there is an "old saying" that goes, "Everything's legal until you get caught."

I think it's most accurate to say that "legal" is a relative term. Most legal arrangements are subject to challange, and the laws very from state to state, just as opinions vary from judge to judge.

I wouldn't recommend to anyone to follow this Montana LLC route. But everyone is free to follow his own intuition and, of course, seek his own legal advice.

Tom N · 03-12-2008, 09:45 AM

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by Robin_M:
I believe that there is a "thin line" between "tax avoidance" and "tax evasion". I'm not willing to test that line. You can't keep an LLC secret. It's a legal business entity which must file state and federal tax reports. </div></BLOCKQUOTE>

Many large corporations incorporate in a state with the most advantageous tax advantage. Perfectly legal.

I equate a Montana LLC with buying gas or fuel in a low state just before driving into a high tax state. Tax avoidance and legal.

-Tom

Robin_M · 03-12-2008, 10:05 AM

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Many large corporations incorporate in a state with the most advantageous tax advantage. Perfectly legal. </div></BLOCKQUOTE>No question about that. If I were setting up a legitimate business with taxable assets, with the hopes of making taxable earnings, I would do the same thing.

I don't believe anything I've said is innacurate, but I'm not being judgemental here. I'm just stating my own opinion and feelings on the subject. .