Forming LLC in Montanna

[ctammyh]

We just bought our first RV. Friends told us to start an LLC in Montanna. Has anyone who lives in TX done that?  Is it legal in the eyes of TX?  Thanks.  Tammy

[Al F]

If you live in Texas or have a Texas Domicile and plan on using or keeping the RV in Texas, then you appear to be using to LLC to keep from paying the sales tax in Texas.  If believe Texas would frown on that practice. 

If you keep the RV out of Texas then you shouldn't have a problem.

You say you already bought the RV.  When you bought it you already paid the sales tax in the state you bought it in. So one of the biggest reasons for the LLC is already negated, i.e. paying the 6.25% Texas sales tax on a $300,000 RV for example.  That would be close to $20,000 in sales tax.

[Al F]

OOPS, it looks like you got a double posting.  the other one has more replies so the conversation should continue there.

[TheLongWayHome]

If nothing other than the information stated above, avoiding paying TX taxes, then probably No on the LLC. Not sure how aggressive TX Revenue (or whomever collects taxes in TX) is in collecting what they believe they are owed, they will come after you. Some states (i.e. CA, NY, ...) are VERY aggressive.

Talk with a competent attorney about you specific situation. The shade-tree lawyers on the forum will not ask the right questions - intended LLC use, own a business, assets in what state(s), current domicile state, planned domicile state, etc. or you may not want to share personal details on a forum if you want a legally viable answer (forum opinions do not count in court or if you get stopped on a highway!). 

Here is a competent Montana lawyer. The call is free and they are highly likely to say no, if you circumstance is about tax avoidance (different from tax evasion).

http://www.bennettlawofficepc.com/contact-us.html

 

[Big5er]

17 minutes ago, Al F said:

You say you already bought the RV.  When you bought it you already paid the sales tax in the state you bought it in.

Not necessarily. I am a Texas resident and I am in the process of buying a 5th wheel from a dealer in Oklahoma.....tax free. Then I have to bring it home to Texas where I will register it and pay the sales tax at that time. 

[Kirk W]

6 hours ago, ctammyh said:

Has anyone who lives in TX done that?

The answer to that is yes, there are Texans who have done this and some of them still do. The state of Texas only objects if you bring the RV to Texas and keep it here for more than 180 days in one year. I have known several members of Escapees who have done this, but it is usually best done at the time of purchase. If you have not yet registered it anywhere, I suggest that you contact the Bennette Law Office and speak with them about this possibility. I considered doing so and they recommended that I not do so, but it just depends on each person's situation. 

[whj469]

I too considered the LLC in MT until someone asked me if it sounded right to form a company for the sole purpose of avoiding sales tax? There are many who say that yes it is legal and they do it.

[docj]

10 hours ago, whj469 said:

I too considered the LLC in MT until someone asked me if it sounded right to form a company for the sole purpose of avoiding sales tax? 

The famous jurist Learned Hand once said: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. public duty to pay more than the law demands."

There is nothing wrong with using all legal means to reduce your taxes.  Rich people do it all the time.  The only issue is making sure what you do is legal.

Kirk said that it is only legal to keep an out of state RV in TX for 180 days of a year.  However, if the owner of the RV is an out-of-state resident I don't believe this limit applies.  I believe that the TX DPS website says that an out of state vehicle can be kept in the state as long as its registration is valid.  I don't know if the OP is a long-term TX resident or is establishing residency as part of becoming a full-timer.  If it is the latter situation, why not establish your domicile in SD instead and register the RV in MT?

[Kirk W]

10 hours ago, docj said:

Kirk said that it is only legal to keep an out of state RV in TX for 180 days of a year.

I believe that if you check you will find that like most states, they do require a vehicle be registered in the state "where garaged." If you spend too long in the state they will require you to register your vehicles there even if not employed. If employed in TX the requirement is within 30 days. Right now I can't find the visitor limit, but am sure that there is one. Bennette Law Office can tell you about that as well. 

[oldbutspry]

I think an LLC also offers a benefit later when you sell the RV.  You can sell the LLC to the buyer so they don't have to pay taxes or re-register the vehicle. 

On another note, how much would it cost to have an LLC created?  And is there any limit to how many LLC's a person can own (I assume not but don't really know)?

[ctammyh]

22 hours ago, Kirk Wood said:

I believe that if you check you will find that like most states, they do require a vehicle be registered in the state "where garaged." If you spend too long in the state they will require you to register your vehicles there even if not employed. If employed in TX the requirement is within 30 days. Right now I can't find the visitor limit, but am sure that there is one. Bennette Law Office can tell you about that as well. 

How does a state even know if you have an RV stored there?

[Big Greg]

How does a state even know if you have an RV stored there?

A neighbor who sees an out of state plate on your RV who doesn't like the idea you didn't pay state tax like he/she did.      Greg 

[DuffMan]

22 hours ago, oldbutspry said:

I think an LLC also offers a benefit later when you sell the RV.  You can sell the LLC to the buyer so they don't have to pay taxes or re-register the vehicle. 

On another note, how much would it cost to have an LLC created?  And is there any limit to how many LLC's a person can own (I assume not but don't really know)?

Careful - I don't believe you can transfer an LLC.  It has to be dissolved and a new one formed.

[Kirk W]

1 hour ago, ctammyh said:

How does a state even know if you have an RV stored there?

Most common is for the code enforcement officers of the county noticing and reporting it. I'm not aware of any cases here in Texas, but it has been in the news for such activities in CO and several other states. 

[docj]

On 9/9/2017 at 0:00 PM, DuffMan said:

Careful - I don't believe you can transfer an LLC.  It has to be dissolved and a new one formed.

LLC's can be sold just like any other business entity.

https://www.legalzoom.com/articles/how-to-transfer-ownership-of-an-llc

[DuffMan]

4 hours ago, docj said:

LLC's can be sold just like any other business entity.

https://www.legalzoom.com/articles/how-to-transfer-ownership-of-an-llc

I stand corrected - Thanks - Handy to know.

[whj469]

All I ever stated was that I wouldn't feel that it was right to form a business that is not going to do anything except let me pay no sales tax on an RV purchase. I was happy when I read Nick Russell state the same thing. There are lawyers that say it is legal and they will do it for about $1,000 when I checked a few years ago.

[docj]

2 hours ago, whj469 said:

All I ever stated was that I wouldn't feel that it was right to form a business that is not going to do anything except let me pay no sales tax on an RV purchase. I was happy when I read Nick Russell state the same thing. There are lawyers that say it is legal and they will do it for about $1,000 when I checked a few years ago.

I provided the quote from Learned Hand several posts ago to demonstrate that the government doesn't consider it "wrong" to use all legal means to reduce the amount of tax you have to pay. If you want to pay the government more than is required that is your right, but I'm going to work hard every year to make my tax bill  as low as possible.

[TheLongWayHome]

Tax avoidance (generally a good thing) is not the same as tax evasion (getting caught has consequences).

If you as not sure which one you are potentially headed into, talk with a competent tax lawyer, in the case of an LLC an LLC lawyer or a tax accountant. Getting your personal tax guidance from a forum is a sure recipe for future tax problems. 

[Big5er]

3 hours ago, docj said:

I provided the quote from Learned Hand several posts ago to demonstrate that the government doesn't consider it "wrong" to use all legal means to reduce the amount of tax you have to pay. If you want to pay the government more than is required that is your right, but I'm going to work hard every year to make my tax bill  as low as possible.

But if your state requires you to pay X% in sales tax isn't that what you are "required", by your states law, to pay? To go to another state and form a corporation that does nothing other than keep you from paying what you are supposed to pay just seems morally wrong to me.

[TheLongWayHome]

12 minutes ago, Big5er said:

But if your state requires you to pay X% in sales tax isn't that what you are "required", by your states law, to pay? To go to another state and form a corporation that does nothing other than keep you from paying what you are supposed to pay just seems morally wrong to me.

Phil,

Are you suggesting that all the FT RVers that declare Texas, Florida and S. Dakota as their domicile state should stay home (current State) and pay income tax to their current state? Just a different example of tax avoidance, that is perfectly legal and even encouraged by those states.

[Big5er]

That is not what I said. I don't care what state you domicile in, but you should pay the taxes that your domicile state sets. You chose that state for its benefits so live up to your obligation. If Montana sales tax is so great, domicile there. Using an LLC to avoid paying what taxes that the state you chose sets is wrong. Maybe not legally but, as I said, morally if nothing else. And there are a lot of people that are not fulltimers avoiding the sales tax of their chosen state by hiding behind an LLC.

[TheLongWayHome]

6 hours ago, Big5er said:

That is not what I said. I don't care what state you domicile in, but you should pay the taxes that your domicile state sets. You chose that state for its benefits so live up to your obligation. If Montana sales tax is so great, domicile there. Using an LLC to avoid paying what taxes that the state you chose sets is wrong. Maybe not legally but, as I said, morally if nothing else. And there are a lot of people that are not fulltimers avoiding the sales tax of their chosen state by hiding behind an LLC.

Phil,

My argument was not about LLCs, it is about people decisions to pick a domicile location because of taxes as a primary decider. People do it all the time. It's why we have State laws versus Federals laws and people have the right to choose to where they domicile, when they may never actually live in the state or minimally. There is not requirement to spend 7x24 in a State!! Other than the obligation to show up to renew their DL, and some states even do that my mail now. It that legally or morally wrong? I would suggest probably, but I will not judge! 

Likewise, corporations choose states to register in one state (e.g. Delaware) and actually have their main office elsewhere?  Why? Is that wrong?

People (1%ers) with money may have residence, assets, property, etc. in many states and choose a different state to declare domicile for taxes or other legal reasons. May use LLCs to protect those assets. While they pay property taxes to those individual states, they are not obligated to pay income taxes to them. Legal OK, morally wrong?

All I'm suggesting is that people should not judge or declare a legal instrument (e.g. an LLC) or the person using them morally wrong. I would suggest that there are lots of legal reasons to use a legal tool to optimize your financial standing, if used correctly. You may not chose those same routes, but it does not make it legally or morally wrong. A full understanding of the facts are always the best evidence! May of those facts are personal and would suggest they are not shared on forums.

As always talk with a competent lawyer before making legally/financial impacting decisions. Web forums should not be the source of legal advice. Or judgement.

Gerry

 

[docj]

19 hours ago, Big5er said:

But if your state requires you to pay X% in sales tax isn't that what you are "required", by your states law, to pay? To go to another state and form a corporation that does nothing other than keep you from paying what you are supposed to pay just seems morally wrong to me.

Again, I repeat that if there exists a legal means to reduce one's taxes then why wouldn't one want to use it?  I sure would.  I agree that it's morally wrong to evade taxes, but taking advantage of "loopholes" isn't tax evasion, just smart management of one's money IMO.

[bigjim]

On one level I agree with Big5er but end up agreeing more with Phil. Like the example of Delaware some individuals and many business's even go offshore to beat the tax man.  To me seriously not right but it is happening so I can hardly find ultimate fault with an individual who is smart enough to avoid taxes as long as it is legal.  Let me start a real fire in saying there are far too much in the way of tax exemptions for churches IMO>