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Another Domicile Question


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We would appreciate some experienced advice and thoughts!

 

Background in a very brief nutshell:

  • Goal is to FT in apx 1 year at the age of 58
  • Currently employed, own a home, and have rental properties in California
  • Will rent out primary residence once we FT
  • Will continue to do some online work from the road
  • Am aware we will need to continue to file CA State IncomeTax returns due to rental properties

 

Domicle Thoughts:

  • Establish a Montana LLC for sales tax savings
  • Change domicile to Montana (transfer as much as possible to MT); Use MT State ACA Healthcare Insurance plans
  • Purchase RV and Toad in MT LLC name (outside of California)
  • Explore the US for about a year (never entering California)
  • Change domicle to Florida (better ACA Health Insurance options than SD)
  • Register RV & Toad in Florida
  • Continue on exploring!

 

Questions:

  1. Is the LLC even necessary if our domicle will also be MT?
  2. It seems that we are using domiciles to our best benefit - but where are the the loopholes we haven't considered?
  3. California and I will be joined at the hip until all rental properties are sold, yes?

 

Thank you!

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Why don't you domicile in FL (or TX) right from the start? Both of those states have decent ACA healthcare coverage, I believe. That way you avoid MT income tax for that one year.. We essentially did the same thing. We bought a MH and a toad into a MT LLC and changed our domicile from MD to SD all in the same month. The MH was in MD for <1 week the entire next year so that wasn't an issue.

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There are people on this forum who set up LLC's in MT. Some times there are issues with financing RVs and insurance.

I would look into those before I made any moves. I did look into the LLC matter and desided not to pursue it because I didn't think that it was right

to setup a LLC to reduce sales taxes. I would think that there will be posters who strongly disagree with my thinking on this matter. I was very happy when I read in the Gipsy Journal that Nick Russell

agreed with my position. Good Luck

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Do you realize the Montana LLC would be a business with all that means in terms of things like financing and insurance, etc.? I would skip that step and go right to Florida if that's where you mean to be anyway a year from now. Setting up an LLC just to avoid taxes after stating you don't plan to be there more than a year feels like tax evasion to me so I would not risk it.

 

Linda Sand

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Not to belabor a point that has been beaten to death here in numerous other threads. Setting up a MT LLC has nothing to do with domicile; if you don't think it is right then don't do it. But don't criticize other people for taking full advantage of all legal means of reducing their taxes. Rich people do it all the time; what's wrong with average people doing it also?

 

Here's a quote from a very well respected legal scholar, Judge Learned Hand:

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"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. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

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Not to belabor a point that has been beaten to death here in numerous other threads. Setting up a MT LLC has nothing to do with domicile; if you don't think it is right then don't do it. But don't criticize other people for taking full advantage of all legal means of reducing their taxes. Rich people do it all the time; what's wrong with average people doing it also?

 

 

Thanks for your comment to a previous poster.

 

We don't have any ethical or moral issues because we would be following state laws to the letter. We would never dream of purchasing a RV through a MT LLC while living in California or any other state that would otherwise charge sales/use tax. THAT Is tax evasion. On the contrary - we want to establish a legal domicile in MT. And then move on to an income tax free state as we being to use retirement funds. Back to a previous question - is setting up a LLC even necessary being domiciled in sales tax free state? Now I'm thing would be a waste of money.

 

We have looked into financing and insurance with a LLC or not Each are non-issues. Just takes some research.

 

I

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Questions:

  1. Is the LLC even necessary if our domicle will also be MT.

Question #1 the answer is no, there is no reason at all to use an LLC if you domicile in Montana, but how will you get an address for your domicile there? I don't believe that they allow the use of a mail service for driver's license or vehicle registration.

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As I asked before, why do you want to be domiciled in MT? You can buy into an LLC without being domiciled there. I do have income into my MT LLC, but I sure don't want to pay taxes on the rest of my income there.

Haven't some folks run into some headaches having MT plates with an out-of-state drivers license's?. Also wanting to not pay use tax registering a new RV in Florida. I believe FL requires 6 months minimum to avoid that. So maybe we re-domicile twice in the same year?

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Question #1 the answer is no, there is no reason at all to use an LLC if you domicile in Montana, but how will you get an address for your domicile there? I don't believe that they allow the use of a mail service for driver's license or vehicle registration.

Kirk - you may be right on MT domicile. I looked and you cannot use a mail service address. Thank you for that info!

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There's no problem having vehicles with plates from one state while having licenses from another. Think about it; rich people do it all the time if they have vehicles titled in different states where they own property. We even have a MH with MT plates and a toad with SD plates and we carry SD drivers licenses and we went back and forth across the Canadian border without anyone asking any questions. We have documentation that shows that we are the "members" of the LLC and that's all we needed. The MT LLC would be useless to most people if they had to be resident there to use it.

 

Some of the people here worry these issues to the point where they afraid to do it. Start with the fact that there is nothing wrong with having vehicles titled in multiple states. The people who get in trouble are those who do it to evade taxes in a state in which they are resident. If you remained as CA residents and had a MH registered in MT you MIGHT be guilty of tax evasion, but only if you kept the vehicle in CA in excess of the number of days allowed by law. Although it would be a bit ridiculous, if you kept the MH garaged in MT and drove or flew there to use it there probably would be nothing wrong, especially if you avoided taking it back into CA. Our MT MH is rarely in SD therefore we don't violate any laws about a vehicle titled in another state.

 

If any of this bothers you then don't do it. But don't make your decision on the basis of other people's fears.

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There's no problem having vehicles with plates from one state while having licenses from another. Think about it; rich people do it all the time if they have vehicles titled in different states where they own property. We even have a MH with MT plates and a toad with SD plates and we carry SD drivers licenses and we went back and forth across the Canadian border without anyone asking any questions. We have documentation that shows that we are the "members" of the LLC and that's all we needed. The MT LLC would be useless to most people if they had to be resident there to use it.

 

Some of the people here worry these issues to the point where they afraid to do it. Start with the fact that there is nothing wrong with having vehicles titled in multiple states. The people who get in trouble are those who do it to evade taxes in a state in which they are resident. If you remained as CA residents and had a MH registered in MT you MIGHT be guilty of tax evasion, but only if you kept the vehicle in CA in excess of the number of days allowed by law. Although it would be a bit ridiculous, if you kept the MH garaged in MT and drove or flew there to use it there probably would be nothing wrong, especially if you avoided taking it back into CA. Our MT MH is rarely in SD therefore we don't violate any laws about a vehicle titled in another state.

 

If any of this bothers you then don't do it. But don't make your decision on the basis of other people's fears.

You don't have to sell me. :) I think it definitely makes sense for us to set up a MT LLC and a domicile in FL.

 

We have no concerns about our intentions or that we will be doing anything illegal. Our integrity is important to us. We will make decisions based upon facts and laws.

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What you must remember is that a LLC is a real entity for legal purposes. You as an individual would be a separate entity from the LLC. You as a individual would own all the shares of the corporation. The LLC would file a SEPERATE tax return. The vehicle would need to be registered in the name of the LLC not you as a person. Financing may be difficult to arrange on a new corporTion with no credit history but you may be able to signature guarantee the loan. The insurance would be in the corporate name as the registered owner of the vehicle. The corporation would pay no sales tax as a MT resident. If you change your domicile to MT there would be no need to have a MT LLC as you could purchase the vehicle in your name an pay no sales tax as a MT resident.

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"The LLC would file a SEPERATE tax return."

 

 

Not necessarily. Single member LLCs can be treated as disregarded entities for tax purposes and their profit/loss, if any, can be included on the member's tax returns. Single member LLC does NOT mean that property of the LLC can't be owned by both husband and wife. I am not a tax professional and any advice I provide is worth what you're paying for it; consult a professional before making any decisions.

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If an MT LLC, do you need a commercial CDL for a rig over a certain weight?

The LLC would be the registered owner of the vehicle. You as the driver would have the drivers liscense. Not sure if MT requires a commercial liscense.

 

A LLC is a legal entity like a corporation and must file a tax return but can be handled like a S Corp and pass thru all profit or loss to a individual return. LLC stands for Limited Liability Corporation. As any corporation you can have more than one shareholder so yes a husband and wife can be the shareholders.

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A LLC is a legal entity like a corporation and must file a tax return but can be handled like a S Corp and pass thru all profit or loss to a individual return. LLC stands for Limited Liability Corporation. As any corporation you can have more than one shareholder so yes a husband and wife can be the shareholders.

 

As I previously posted, it is not necessary for an LLC to file a separate tax return if it is classed as a single member LLC which qualifies it to be a "disregarded entity" for tax purposes. Our LLC has a EIN (employer identification number) which is also its Taxpayer Identification Number, but it hasn't filed a tax return in four years. All profit and loss from it is included on our Schedule C and not on a Form K-1. We have had both kinds of LLC and we do know the difference.

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What you must remember is that a LLC is a real entity for legal purposes. You as an individual would be a separate entity from the LLC. You as a individual would own all the shares of the corporation. The LLC would file a SEPERATE tax return. The vehicle would need to be registered in the name of the LLC not you as a person. Financing may be difficult to arrange on a new corporTion with no credit history but you may be able to signature guarantee the loan. The insurance would be in the corporate name as the registered owner of the vehicle. The corporation would pay no sales tax as a MT resident. If you change your domicile to MT there would be no need to have a MT LLC as you could purchase the vehicle in your name an pay no sales tax as a MT resident.

A Montana LLC is a "pass'through entity - or a "disregarded" entity

Like S corporations, standard MT LLCs are pass-through entities and are not required to pay income tax to either the federal government or the State of Montana. Instead, income from the business is passed through to individual LLC members, who then pay federal and state taxes on the amount distributed to them.

A disregarded entity is a business entity that is disregarded as a separate entity from its business owner for tax purposes. If an entity is disregarded as a separate entity for federal income tax purposes, it is also disregarded as a separate entity for Montana income tax purposes. Examples of disregarded entities include a domestic single member limited liability company (SMLLC) that does not elect to be classified as a corporation for federal tax purposes, a corporation that is a qualifi ed REIT subsidiary, and a corporation that is a qualifi ed subchapter S subsidiary.

source: http://www.nolo.com/legal-encyclopedia/montana-state-business-income-tax.html

 

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My integrity would not allow me to set up an LL Corporation just to not pay sales tax. Does the LLC have any other purpose

other then to avoid paying sales tax?

This is an ignorant statement - made without understanding. Please - do a little research before deciding that what you don't understand must be a scam or scheme.

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3.California and I will be joined at the hip until all rental properties are sold, yes?

 

 

YES. You will file a California FTB Form 540NR for your California source rental income. NR stands for Nonresident. At the top of the form are several questions about residency. You might want to take a look at them now. One of them asks how many days your were physically in California during the tax year. Once you sell your rentals and no longer have any California source income, California will probably not know anything about you.

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I think there could be some problems with using a mail forwarding service for your health insurance. They also will not accept a P

I've followed this blog: http://www.technomadia.com/2013/02/setting-up-domicile-in-florida-as-a-full-time-rver/

 

They had no troubles because their mail forwarding services provides a physical street address in Florida.

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I've followed this blog: http://www.technomadia.com/2013/02/setting-up-domicile-in-florida-as-a-full-time-rver/

 

They had no troubles because their mail forwarding services provides a physical street address in Florida.

 

Quite a few mail services provide physical street addresses but you're naive if you don't realize that virtually every one of those shows up as PMB locations on databases used by banks and other financial institutions. I even get mail from some of them to our address with PMB clearly marked on it. The health insurance company that didn't want to cover us for our Medicap policy immediately asked us for proof of residency once it received the address info from our applications.

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Quite a few mail services provide physical street addresses but you're naive if you don't realize that virtually every one of those shows up as PMB locations on databases used by banks and other financial institutions. I even get mail from some of them to our address with PMB clearly marked on it. The health insurance company that didn't want to cover us for our Medicap policy immediately asked us for proof of residency once it received the address info from our applications.

Thank you for that info! Much appreciated. Something to definitely investigate further. And in the end, if we retain California as our domicile, it doesn't really matter as we will be filing CA tax returns anyways due to our rental properties. I'm just thankful to be able to get health insurance with a pre-existing condition. I have a fun disease - Rheumatoid Arthritis. Humira keeps it most in remission, but the retail price is $2,000/month or something crazy like that.

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