bethany_dale
01.06.2021 3:23:26
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Seriously, if you have a friend who knows the boat and nothing going wrong with the boat will jeopardize your friendship, there is no reason to use a broker.
2615 South Harbor Loop, Suite 1, Bellingham, Washington 98225
T. 360-671-4300 (charter) | T. 360-671-8339 (school) | T. 360-671-0829 (brokerage)
We are often asked to comment on the pros and cons of ownership of a boat by a corporation or LLC, and I will note at the outset that it’s not for everyone. However, before we get into the pros and cons of owning or buying a boat through a business entity — whether a corporation or an LLC — we need to address a logistical issue raised by our reader.
With these logistical issues in mind, let’s take a look at the transaction itself. more
And, when the business entity is sold, there is no change in the title or ownership of the company’s assets. Since the boat is still owned by the LLC, there was no purchase or sale of the boat and nothing to assess sales or use tax against. (Note that sales and use tax are essentially the same thing, except that sales tax is assessed on the retail purchase of a new asset, while use tax is assessed on the purchase of a previously owned asset.) here
The offer described by our reader also suggested that the reader should retain title while the buyer makes payments. This is almost always a bad idea. The boat owner may find himself liable for the negligence of the buyer in the event of an accident, and he may find that his insurance coverage is void if he misrepresented the nature of the transaction to his insurance company. The proper approach to a loan on a vessel is to transfer title to the buyer and record a “preferred ship mortgage” with the Coast Guard.
I should first note that the survey is invariably paid by the buyer, so there is no cost savings to the seller by this proposal. More important, the buyer’s suggestion that the seller provide financing can probably be traced to the buyer’s failure to qualify for conventional bank financing. This should raise a significant red flag.
In the interest of full disclosure, I will note that we have done a lot of legal work with yacht brokers, and as such, I may be a little biased. But we have also represented quite a few buyers and sellers in transactions without brokers that ended up in litigation. In my experience, the risk of litigation is significantly higher for boat sales that proceed without the involvement of a yacht broker, unless the parties both hire attorneys before the deal closes.
With these issues in mind, let’s take a look at the specific proposal described by our reader. In his offer, the buyer suggested that the seller would make money because of the attractive interest rate in the financing arrangement, and that he would save money because there would be no bank to require a survey.
A licensed broker who is a member of one of the various broker trade groups (the California Yacht Brokers Association, for example) will likely use a set of form contracts prepared by experienced maritime lawyers that have been used in thousands of transactions. A deposit tendered by a buyer will be held in a broker’s trust account and subject to audit and regulation by the state. Conversely, a buyer and seller who work without a broker may “cut and paste” a purchase contract from the Internet, which is likely to be ambiguous or inadequate, and one of the parties will hold the deposit subject to his or her own interpretation of the escrow agreement. more
California and Florida both require yacht brokers to be licensed by their respective states. In California, brokers are regulated under a consumer protection statute known as the Yacht and Ship Brokers Act, and the regulatory framework includes testing, periodic inspections and trust account auditing by the California Department of Boating and Waterways. A “private sale,” or a transaction that proceeds without a broker, is not subject to regulation by any state agency, unless a crime has been committed. And, even if one of the parties complains of criminal activity, these types of crimes tend to fall toward the bottom of a prosecutor’s list of priorities.