Executive wrote: Pros --- could save a bundle on taxes if allowable legally in your State.
Cons --- could get REALLY expensive if not allowed or you fail/failed to follow all the rules and you're caught.....Dennis
With States looking for easy avenues of revenue, some are targeting the LLCs..
Do a google search on "States cracking down on LLC"... Maine, Colorado and California come to mind....California even established a "Rat Line" where you can rat out your neighbor who did as you're asking...good luck...D
Dennis, with all due respect there is nothing to "crack down on" or to "get caught" . LLC's are not for everyone but if you speak to a qualified law firm like Bennett and get ALL the facts, it can be a good thing. There is nothing wrong or illegal with LLC's if you follow the law and the rules governing them, as you point out. LLC's are not all about avoiding taxes, there are many other benefits too...
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Sorry guys, I did the search for the OP...only 149 replies...guess the others have been purged...still..it's plenty of reading for the OP.........Dennis
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I would strongly encourage legal counsel in your home state before contacting the Bennett law firm in Montana. An LLC may be just what the doctor ordered after running your reasoning by your personal legal counsel first. There are myriad reasons to go the LLC route. Just know all the facts before spending money out of state first.
If all an RVer wants to do is save money registering their pricey rig initially, there are any number of states that offer cheap registration. Just go online and do some state shopping to determine if anything looks feasable and attractive enough to pursue. In years past I've had SD, NE, IA, TX, and FL plates on my rigs. Really just depends. I chose South Dakota for my last rig's initial licensing. It was either SD, MT, or Oregon. SD was a geographic compromise to do in person for me, considering the high cost of fuel. Be certain you do your homework before embarking on a long road trip in your rig. Have all your ducks in a row. Diesel fuel is 'spensive!
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I think the operative question here is WHY you want to do it. Are you buying a unit to rent it? Do you have property in other states thereby justifying it? Or are you just trying to get a write off? We bought our MH under an LLC but it's purpose is rentals. We couldn't really afford buying the unit for personal use, so we rent it to offset costs. It's out about 50% of the time and we actually make a healthy profit. Enough so that we might buy another unit next year. Anyway, we are legit and have need for the LLC, not only liability but actual costs associated as well. But if you are talking about doing it just to try and cheat the tax man, it's wrong. On a lot of levels. Illegal sure, but what happens is the rest of us tax paying Americans get to pick up your write-offs and for no other reason than so you can save a buck. If you have no need for an LLC, and you want to do it to save money then you have no business (pardon the pun) owning a motor home.
In most states, as I understand tax law, avoidance is usually legal but evasion is not (just ask Al Capone!). Many states are starting to close the kind of loopholes that out of state LLCs represent. A neighbor with a 2-year old 42' HR had Moantana plates on it when they first got it, but switched to WA plates at the end of the first year. I haven't asked him why.
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A couple of points for clarification. First off, an LLC is not necessarily a business. An LLC is a Limited Liability Company. For tax purposes an LLC is considered to be a tax nothing. What that means is the LLC has no recognition for tax purposes, but does limit the liability of the person using the LLC.
Most people utilize a Montana LLC because they are either full timing and have no state of residence, or they actually live in Montana, or they are trying to buy a motorhome and not pay the sales tax. The most common reason is the last one. As has been stated earlier, you need to find out the laws of your state. Any Montana lawyer may know what the laws are of your state but they cannot represent you in a tax case in your state because they may not be licensed in your state. If you find out the laws of your state and you comply with those laws and document your compliance, then you are allowed to use the Montana LLC. The problem arises when you do not comply with the law or you cannot document your compliance.
There is nothing wrong with taking advantage of what the law allows. Most of us do that all the time. There is no law against paying only those taxes that one must pay and using the tax laws to pay no more than you have to. You have to not only comply but document your compliance. The burden of proof is with the tax payer in all tax cases. In other words if you con't prove you did the right thing then you may end up paying the government a pile of dollars even though you were right. Be careful and you should be okay.
What is wrong with paying less tax ? The way I see it, if you are following rules made by "them" you have a right to opt for lower costs...
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I just watched Fox 9 News in MN. They had a story on people registering their motorhomes under a Montana LLC, even though they live in MN. It seems they are going after all of these people, because MN law says you must register it here. They also said that if the tax evasion was over $300, it is a felony. If they are looking into this, I bet other states are as well.
Read the following which is happening in MN and ask yourself, Do I feel lucky?!
Minnesota Goes After RVers Evading Sales Tax
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November 16, 2011 by RV Business Leave a Comment
The state said Wednesday it is investigating 270 cases in which Minnesotans may have set up shell companies to evade paying sales tax on luxury recreational vehicles that can cost more than $1 million.
According to a report in the St. Paul Business Journal, the Minnesota Department of Revenue said in a news release it has closed 22 other cases since Oct. 2010, collecting $230,000 in sales taxes, penalties and fines.
The department said in most of these cases, the Minnesota residents set up shell limited liability corporations in Montana, which does not charge sales tax. The Minnesotans buy the RVs through the Montana corporations and register the vehicles in that state, yet the RVs often are kept in Minnesota.
The state said the high-end RVs cost between $150,000 to more than $1 million.
Minnesota has a 6.5% sales tax, which translates into $9,750 for a $150,000 RV and $65,000 for a $1 million RV.
The state said Minnesota residents convicted of evading the motor vehicle sales tax could face felony criminal charges in addition to having to pay back taxes, penalties and interest
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"Minnesotans buy the RVs through the Montana corporations and register the vehicles in that state, yet the RVs often are kept in Minnesota."
Well, that makes it simple: It would appear that the problem arises when the purchaser takes the coach to Minnesota. No problem, JUST DON'T GO THERE!
NEVER, NOT EVER, take your coach to Minnesota!
Problem solved!
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