Registering the car at Montana LLC | FerrariChat

Registering the car at Montana LLC

Discussion in '360/430' started by Spydermak, May 29, 2012.

This site may earn a commission from merchant affiliate links, including eBay, Amazon, Skimlinks, and others.

  1. Spydermak

    Spydermak Rookie

    Joined:
    May 12, 2012
    Messages:
    33
    Have anyone purchase and register the car under Montana LLC, under a law firm Heggen Law Office? Any pros and cons? Anything need to be aware of? Thanks!
     
  2. Trent

    Trent Formula 3

    Joined:
    Dec 10, 2003
    Messages:
    2,013
    Location:
    Indialantic, FL
    Full Name:
    Trent
    Cant help; but purchasing and registering a Ferrari as a business deduction would make me nervous of an audit (no facts or stats to back up my concern). I would more likely lease it in this case.

    *I have never leased a car.
    **I am too chicken to do anything that might land me in an audit.
    ***For personal use I do not like the lease math, buying is better of you have the cash flow.
     
  3. Chiaroman

    Chiaroman Formula 3 Rossa Subscribed

    Joined:
    Apr 21, 2004
    Messages:
    1,687
    Location:
    New Jersey
    The more of these "shady" things that show up on your return the more likely you are to be audited.
     
  4. greyboxer

    greyboxer F1 World Champ

    Joined:
    Dec 8, 2004
    Messages:
    12,664
    Location:
    South East
    Full Name:
    Jimmie
    This comes up every few months - try a search on 'montana registration'
     
  5. Jedi

    Jedi Moderator Moderator Lifetime Rossa Owner

    Joined:
    Mar 18, 2008
    Messages:
    32,270
    Location:
    Seattle Area
    Full Name:
    Dave
    +328

    There must be at LEAST a dozen threads on this shady subject - 2 or 3 of them
    in just the last 30 days or so.

    Jedi
     
  6. Zinger

    Zinger Formula 3

    Joined:
    Apr 11, 2009
    Messages:
    1,894
    Location:
    Leesburg, Va
    Full Name:
    Ryan M
    Many have used the "Montana" "skip sales/property tax" in my area but is it worth it?

    Many threads on this but I dont think its worth it. Is it worth saving on taxes to get an audit. Once you get an audit the Montana scheme will get blown wide open.

    You have to pay to play, I do things myself by the book, painful at times to pay taxes but I enjoy sleeping at night
     
  7. djastral69

    djastral69 Formula 3 Silver Subscribed

    Joined:
    Aug 6, 2007
    Messages:
    1,896
    Location:
    Fl
    Full Name:
    David
    Long and the short of it: $15-$1800 to set it up and save the sales tax, that's it and yes it's completely legal.
     
  8. thoang

    thoang Formula 3 Owner

    Joined:
    Apr 12, 2004
    Messages:
    1,990
    Location:
    SF Bay Area
    Full Name:
    Tuan Hoang
    IMHO, I don't think the savings of a few thousand outweigh the risk and cost of a full blown audit.
     
  9. mikeyr

    mikeyr Formula 3

    Joined:
    Jun 17, 2004
    Messages:
    2,154
    Location:
    Santa Barbara, CA.
    Full Name:
    Mike Rambour
    More details please ? how can it be legal ? Technically as I understand it, you have 20 days to register the car in your state when you buy a car and I have heard of some cops keeping track of cars they see regularly with out of state plates and after some time pulling them over. I don't understand how this could be legal but maybe I don't have all the information yet.

    For the record, I paid $4041 + lic/reg when I got my 360 a month ago, so I did not avoid the CA tax issue :) But I will admit I was tempted to try that Montana thing when I could not get passed smog, that was the only reason I was tempted. I sleep very well at night knowing that a audit would be a major pain in the derrière and there would be no issues.
     
  10. Chio

    Chio Karting

    Joined:
    Nov 1, 2005
    Messages:
    139
    Location:
    STL
    I also sleep good at night knowing i help pay my police to protect my house!! In my area not Montana!!! it was kinda like when i did not pay taxes on my boat and said in the time of war the Govt can come get my boat and use it!!
     
  11. MikeR397

    MikeR397 Formula 3

    Joined:
    May 9, 2010
    Messages:
    1,469
    Location:
    SE Michigan
    I did research and documented my findings on Montana LLC for this purpose. I even contacted the law office mentioned and the other main one for doing this. They will send you the rules applicable to your home state, free of charge, and you can decide if it is right for you after that. You can read my findings in my thread: http://www.ferrarichat.com/forum/showthread.php?t=341845 . The rules of your home state regulate what steps need to be taken to do this legally and correctly (ie appropriate nexus to Montana), as opposed to a shell LLC which rarely passes muster, then it becomes a financial/burden choice if it is worth it. To be clear, this can 100% be done legally, such as having the Montana LLC own real property or conduct other business in Montana, but then the practicalities of it may not make sense, as they did not for me for my humble 360's cost (especially as Ohio only taxes 6.75% upfront, and there is no annual use tax here, and I do not like selling my cars and upgrading freqently).

    As I also mentioned in this related thread, http://www.ferrarichat.com/forum/showthread.php?t=367963, I've not done this strategy personally and have no plans to do so. I know people in other states that have decided otherwise (just shell LLC to own car) and have yet to have a problem with this strategy (not that they won't eventually, be it at a speeding ticket or other trigger point).

    Finally, realize the difference between sales and use tax and income taxes when you are talking about audit fears. The point here is not income tax savings with LLC deductions and writeoffs (which would be foolishly risky IMHO audit wise), but to save on sales tax and in some states, annual use tax, which could easily be $15k+ cost over a couple years on a F430 spider in CA or another high tax state with high annual use tax. Please also do not make this a moral decision, it is a business one whether it makes financial sense to pay the applicable taxes in Montana (assuming you have the appropriate and needed nexus to make this legal) or your home state. If you just love your home state so much and want to pay whatever taxes they assess in all circumstances, then by all means do so and don't forget to write your state's treasury dept a nice fat Christmas check as well. For those who flip expensive exotics, I'd talk with an attorney and at least evaluate your options (and please share your findings back here as well).
     
    Last edited: May 29, 2012
  12. o31982

    o31982 Formula Junior

    Joined:
    Mar 18, 2012
    Messages:
    281
    Location:
    Southern California
    Full Name:
    nes
    i've heard people claim it as a "gift" or $500 as a value. whats your thought on that?
     
  13. Jedi

    Jedi Moderator Moderator Lifetime Rossa Owner

    Joined:
    Mar 18, 2008
    Messages:
    32,270
    Location:
    Seattle Area
    Full Name:
    Dave
    If it isn't actually a "gift" it's called TAX EVASION. If it's REALLY a "gift" it's legal tax AVOIDANCE

    :)

    Jedi
     
  14. MikeR397

    MikeR397 Formula 3

    Joined:
    May 9, 2010
    Messages:
    1,469
    Location:
    SE Michigan
    Well, as Jedi said, if you lie and mischaracterize it, that is tax evasion and illegal. Further, I'd think you might be liable for gift tax for value above $13k, which would be at your marginal income tax rate for that year. (not sure about this, I'm not an accountant)

    Also, how then are you going to escape paying capital gains tax when you sell it, if your basis is $500 and you sell for $140k, you have a $139.5k capital gain. If short term capital gain, then it's taxed at your income bracket, and if long term (1 year +), it's taxed at 15%, both of which are worse than paying sales tax and/or use tax.

    There are legal ways to avoid sales tax on cars. The main ones are (1) become a licensed car dealer or (2) establish an out of state entity with appropriate nexus to that state (real property, other business purpose, ect) in a low tax state (montana, alaska, ect) to own the car. It's a bit of a PITA to actually do this right, however, and carries it's own expenses and burdens. I wish there was an easier way, but there is not that I'm aware of.
     
    Last edited: May 30, 2012
  15. MikeR397

    MikeR397 Formula 3

    Joined:
    May 9, 2010
    Messages:
    1,469
    Location:
    SE Michigan
    Another thing to remember is how will your insurance situation be affected? With respect to car dealers, I believe insurance on exotics will be insanely expensive. If your LLC owns the car, then the LLC needs to be named as an additional insured on your personal policy (just as you would name a lienholder on the car as an additional insured) becuase otherwise, if you are in an at fault accident, the injured person may try to sue your LLC to collect (which would not then have insurance), and as you own the LLC, you would then become personally liable as if you did not have insurance. If your LLC is a shell, then bankruptcy to discharge would not work as the corporate veil could likely be pierced. I could be mistaken about the exposure of the LLC here as insurance is supposed to follow the car, but that would definately need to be verified and I would not want to keep your insurer uninformed about the fact that a LLC actually owns the car, not you personally, for fear that the policy itself could be void and refuse payout for misrepresentation.

    The good news though, is that it should not be too hard to get your insurer to add the LLC as a named insured on the auto policy. I've not actually done it, but told it should be nearly as easy as naming a lienholder as a named insured.
     
  16. Jedi

    Jedi Moderator Moderator Lifetime Rossa Owner

    Joined:
    Mar 18, 2008
    Messages:
    32,270
    Location:
    Seattle Area
    Full Name:
    Dave
    Just as a footnote, this forum section is "Public Google Searchable" unlike the subscribed sections...

    Just sayin'...

    Jedi
     
  17. euro_king

    euro_king Formula Junior

    Joined:
    Mar 18, 2009
    Messages:
    759
    Location:
    San Jose, Jakarta
    Full Name:
    Jastien Weiss
    good topic, since i bought couple cars a years and change them all the time. this is a good option to avoid tax in cali. or just screw it and just paid for it.
     
  18. Periokid

    Periokid Karting

    Joined:
    Oct 19, 2004
    Messages:
    235
    Location:
    LI, NY
    Full Name:
    David
    I'd be more interested in registering in a state that does not require a front license plate.
     
    Viper830tt likes this.
  19. mikeyr

    mikeyr Formula 3

    Joined:
    Jun 17, 2004
    Messages:
    2,154
    Location:
    Santa Barbara, CA.
    Full Name:
    Mike Rambour
    so in other words you create a LLC in Montana and then the LLC owns the car.

    Way too much work for me, creating a LLC was a pain in the ass for Calif. I can't even begin to imagine what it might be like to create one out of state and the costs associated with that. I am glad my car passed smog and I did not have to go that route. That was the only reason I was curious about this, I was more than willing to pay my Calif. taxes/registration (I already had before I found my smog issues anyway), just was worried i would not pass at all and I was told I could get it reg'd in Montana and not worry... I would have worried :)
     
  20. euro_king

    euro_king Formula Junior

    Joined:
    Mar 18, 2009
    Messages:
    759
    Location:
    San Jose, Jakarta
    Full Name:
    Jastien Weiss
    oh yes me too. try San Francisco, they give you ticket even when you parking !!!!!!
     
  21. MikeR397

    MikeR397 Formula 3

    Joined:
    May 9, 2010
    Messages:
    1,469
    Location:
    SE Michigan
    My guess is they can only give you a ticket for no front plate while you are parked, as it's not a reason to be able to pull you over if you are otherwise following the law. If you get hit for speeding, then they can add the no front plate on as well I think. That is how it works in Ohio, and yes I hate this damn law. None of my cars have a front plate, I absolutely refuse, so it has to sit under the seat or somewhere and I have to put it on the dash everytime I park on public streets (which is really not too often). They cannot give you a ticket for no plate parked while on private property (driveway, private parking lot or garage, ect).
     
  22. Periokid

    Periokid Karting

    Joined:
    Oct 19, 2004
    Messages:
    235
    Location:
    LI, NY
    Full Name:
    David
    In NY you can get pulled over for no front plate. :(
     
  23. TZL

    TZL Formula Junior

    Joined:
    Dec 15, 2003
    Messages:
    289
    Location:
    Atherton, CA
    I do the Montana LLC for my non-daily drivers...no problems at all

    $1500-2k setup

    $150 a year

    I think my 360 reg was $200 PERMANENT...no annual fees...

    Saves me a ton on sales tax....however I wouldn't recommend it for cars where you are going to get pulled over alot in CA (Ariel Atom)

    But for the cars i drive once every week or two, works fine for me
     
  24. Skidkid

    Skidkid F1 Veteran Owner Rossa Subscribed

    Joined:
    Aug 25, 2005
    Messages:
    9,518
    Location:
    Campbell, CA
    Full Name:
    John Zornes
    In CA a gifted auto is taxed at market value. If you list the sales price as something ridiculous like $500 they will adjust the price to market price. Ignoring the legal issue, you may have a little wiggle room but not much.
     
  25. KatMan

    KatMan Formula Junior Silver Subscribed

    Joined:
    Apr 2, 2006
    Messages:
    498
    Location:
    Silicon Valley
    Full Name:
    Stan K
    Newest issue of Sports Car Market has an article about Montana registration.
     

Share This Page