Buying a Boat or Yacht?

Advantages of Buying a Boat through a Delaware (DE) Limited Liability Company (LLC)

For some business owners and entrepreneurs, having a vessel serves as an extravagant accessory, which is reserved solely for their leisure and enjoyment. However, whether the

boat is meant for personal use, corporate vacations, or for business, acquiring a vessel through a Delaware LLC offers benefits. This strategy enables business owners and investors to save money on taxes, limit their liabilities, and make the ownership of a boat more financially and legally savvy. The key advantages along with the procedure and essential features that need to be noted when acquiring boats through a Delaware LLC are discussed in this article.

How to buy a Boat with an LLC?

Using LLCs to buy expensive assets like boats ensure that a business owner is protected on multiple aspects. Purchasing a vessel through a business or LLC offer an asset protection benefit particularly for valuable assets like boats. One of the primary reasons business owners opt for this structure is protection from liability claims. Furthermore, ownership of commercial vessels comes with risk hash as accidents, pollutant liabilities, and legal challenge risks. If a boat is registered to an individual, his or her personal assets are vulnerable to attack in lawsuits so long the boat is concerned. Instead, purchasing the vessel through an LLC caps the liability claims to the assets of the company. Alongside liability protection, Delaware offers a favorable tax jurisdiction for boat owners. One of the primary benefits is the lack of sales taxes which is very different from many other states. Additionally, personal property tax on boats is also absent, contributing to lower cost of ownership. Delaware LLCs have the benefit of pass-through taxation, which means that the company does not owe federal income tax. Instead, profits and lossesare passed to the owner where they are reported on the individual’s tax return which can lessen tax burdens. Most noteworthy of Delaware’s benefits is privacy. Owners of LLCs are not publicly listed allowing many who want to keep ownership details undisclosed to have extra privacy.

Registration Fees

Buying a Boat Through a Delaware LLC

Step 1: Setting Up a Delaware LLC

The first step in buying a boat is forming an LLC, which has starting formation costs based around a unique chosen name that needs to be within Delaware’s naming guidelines. After a name is picked, the LLC must submit a formation certificate to the Delaware State

Corporation Division along with the payment for filing costs. Delaware requires all LLCs to obtain a registered agent that acts as the communication liaison for the company. Delaware law does not mandate an operating agreement; however, it is highly recommended for multi-member LLCs. This document clarifies ownership structure,defines each member’s roles and responsibilities, and establishes administrative procedures. By outlining these key aspects, an operating agreement ensures that all parties have a clear understanding of their rights, obligations, and expectations, helping to prevent disputes and streamline the management of the LLC.

Step 2: Securing Boat Financing and Registration

With the LLC formed, the next step is to create a purchase agreement for the boat, listing the LLC—not an individual—as the buyer. If financing is needed, the LLC can apply, though personal guarantees are often required. After purchase, register the boat with the Delaware DNREC, even if it’s not located in Delaware. You’ll need to submit the application, bill of sale or shafting certificate, and proof of LLC formation. Registration fees vary by vessel size.

Renewals for Delaware boat registrations, valid for one or three years, can be done online

or through mail. Moreover, it is necessary to protect the LLC from damage coverage, liability claims, and other dangers by purchasing marine insurance under the LLC’s name.

Step 3: Administering and Using the Vessel

To maintain the benefits of a Delaware LLC, proper business practices are key. Keep a separate bank account, track expenses and usage, and ensure all contracts are in the LLC’s name. Delaware also requires an annual LLC tax report.

Buying a vessel through a Delaware LLC offers tax advantages, liability protection, and privacy—but compliance is crucial. At Spiegel & Utrera, P.A., we guide you through the entire process to ensure full legal protection.