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Why form a Delaware corporation for boat ownership purposes?

1. LIABILITY:

Any corporation will offer an individual the benefit of limited liability. In effect, the individual's liability is limited to that of a stockholder in the corporation. Additionally, Delaware law permits directors to avoid personal liability to the corporation for negligent acts if this protection is provided for in the corporation's Certificate of Incorporation. Yacht Registry, Ltd.'s model Certificate of Incorporation contains such a provision.

2. FLEXIBILITY:

In many cases, a group of people may decide to purchase a vessel. Title may be taken in the name of a corporation due to the ease of designating ownership through stock ownership in the corporation.

Additionally, the corporations set up by Yacht Registry, Ltd. under the General Corporation Law of the State of Delaware are not restricted to use solely for boat ownership purposes. Our corporations are constructed to have full and complete corporate power to engage in any activity permitted under law. They are general purpose corporations.

3. CORPORATE FEES:

Initial fees to form the corporation and annual fees to maintain the corporation compare favorably with most states (See our Fees and Costs page for a detailed fee schedule).

4. BOOKS AND RECORDS:

Corporate books and records may be kept outside of Delaware. Additionally, one person may be the incorporator, sole director, and may be the sole stockholder of the corporation, or these capacities may be spread among as many persons as desired.

5. TAX SHELTERS:

Delaware is recognized as having a favorable tax climate. Delaware has no sales tax, personal property tax, intangible property tax or stock transfer tax. Additionally, no Delaware corporate income tax is assessed for income derived outside of the State of Delaware.

It is important to note that sales tax shelters are situational. Many states have "user taxes" and the like. One should consult with a legal or tax advisor to determine if a tax on a yacht will be due in the State in question.

Many of our corporate boat owners recognize that a sales/use tax will be due in the state they are actually keeping or using the vessel. They also understand, that under ordinary circumstances, when they opt to sell the vessel, the new owner will have to pay a sales tax on the purchase of the vessel. With this in mind from the outset, they choose to put the vessel into a Delaware corporation, and pay the tax in the corporate name (deriving other benefits incorporation has to offer such as limited liability). When the vessel is subsequently put up for sale, the owner has the flexibility of selling the vessel as an asset of the corporation or selling the entire corporation of which the vessel is an asset. The latter circumstance is accomplished by simply transferring the shares of stock in the corporation over to the new owners. This arrangement can be very attractive to the prospective purchaser because title to the vessel has not changed hands - it is still registered to the corporation. Therefore, no sales tax may be assessable on the transfer, and, no re-registration costs are incurred.

Delaware Corporation vs Delaware LLC

Delaware Corporation
  • Separates personal assets from business
  • Owned by shareholders
  • Ownership described in shares
  • Managed through Board of Directors: Daily operations overseen by officers
  • Governing Document is ByLaws
  • Structure is recognized in US and Internationally
  • Annual Report Filing Requirement with State of Delaware
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Delaware LLC
  • Separates personal assets from business
  • Owned by Members
  • Ownership described in units or percentages
  • Controlled by Members and/or Managers
  • Governing Document is Operating Agreement
  • Structure recognized mostly in US
  • More Private- no annual report filing requirement
  • Allows for Operational Flexibility
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