If you are thinking about having an out-of-state L.L.C. formed, in order to reduce taxes and registration fees on your RV, please be careful and check your local state laws to be sure you will not be violating them. We had an out-of-state L.L.C. formed in order to reduce our taxes and fees on our RV and now we are facing felony charges. Gratefully, these charges are being reduced to a misdemeanor, deferred  conviction, if we pay these taxes, interest, dissolve the L.L.C. and perform community service. Needless to say, the emotional anf financial toll has been tremendous and not worth it to us. So check your state laws very carefully and think twice  before having an out-of-state L.L.C. formed. The Leonards - Colorado

I am sorry this happened to you.

Your experience is often reported so oft-handed and thus is always discounted as hearsay when the subject comes up. To help us understand what happened and accurately spread the word, would you be willing to share a little more detail? I assume Montana LLC? How did CO discover it? What else was said by CO regarding the LLC? I realize it is an extremely difficult situation but this information really could be useful to many folks considering an LLC.

I never did it because of the "it really could happen to you" factor. Howard, our "resident" lawyer on this forum has waxed poetically on LLC and the "fine line" but we've never had the first hand experience, until now.

I thank you for coming forth and sharing you difficult plight.


-- Edited by RVDude at 20:07, 2008-03-24

There is a big difference between being a full-timer domiciled in Texas or South Dakota and about anyone else when dealing with Montana LLC's.  It is a bad idea for part-timers in any state and full-timers domiciled in many other states, includng my domicile state of Washington, can get themselves in trouble. 

If you can I also would like to hear more.
  We have Taken offshore delivery of our last two Yachts.
 Saving us Nearly 85K in taxes, we looked into the rules and followed them to the T. We live California and they will tell you how to do this legally.
How dose this differ from an "LLC"? Can someone please shed some light on this.

   Thank You,

What I would be most curious about is what specific CO law was violated and was this law always on the books or more recent. There is clearly nothing illeagal in MT by forming the LLC, but many states feel differently. For the most part if you do not bring the vehicle into a state you avoid risk of that state catching you which is why many people think this is an OK stratagy for fulltimers. On the other hand a RV parked in a storage lot with MT tags is likely to get attention if noticed. So the question becomes what law did you violate and how did they catch you. Like many others I hope you will share some more. Just to add some light on this, I can tell you what NJ does for boats registered in low tax jurisdictions (delaware mainly). Basically a use tax is due, that is equivalent to the sales tax, and they regularly patrol marinas looking for docked boats with DE state registration stickers.

Washington state also has use tax.  The way it was explained to me is Boeing is an Illinois corporation, but the vehicles they own in Washington are licensed in the state of Washington not Illinois, because the user is from Washington.  If big corporations have to follow these rules why would a little LLC be any different? Remember the "C" in "LLC" is for Corporation.

In 2006, we bought a new RV in our resident state, Colorado. We had been told about L.L.C.'s in in several rally's and my husband wanted to try it out. The advertising ads on the internet were saying it was legal and safe, and new friends we meant gave us the name of a Montana Law firm. So we did it. Last year an investigative  TV reporter did a show about L.L.C.'s and how it was costing Colorado a lot of lost revenue. The Dept of Revenue went to all the dealerships and got their records. Then we had a criminal investigator from the Depart of revenue knocking on our front door collecting info. He called about 1-2 months later left a message saying the AG had accepted our case and so it began. We were served a summons for failure to pay  39-21-118  (3) and second degree forgery 18-5-104. Our attorney has been dealing with the AG to reduce the charges but never-the-less this has  been an eye opener. I have never broken the law before except one speeding ticket last year.  cont nx pg

I do not know if these laws are new or old. We thought we were legal because we  had the RV out-of-state 6 months and more but that was not all of the picture. You also had to not have your RV in state more than 1 month at a time and we spent 4 months at a time in state. We did not have a strong enough case to fight it and even if we had we wouldn't have because the bottom line for us, is it illegal. So we are paying the price for this mistaken error in judgment.

I believe that this is the relevant Colorado law. The number is the section of the Colorado Revised Statutes (CRS). I don’t know how long these laws have been on the books and I didn’t spend the time to find out. I do know that they are been this way for over a year and probably a lot longer.

42-1-102. Definitions
(66) "Owner" means a person who holds the legal title of a vehicle; or, if a vehicle is the subject of an agreement for the conditional sale or lease thereof with the right of purchase upon performance of the conditions stated in the agreement and with an immediate right of possession vested in the conditional vendee or lessee or if a mortgagor of a vehicle is entitled to possession, then such conditional vendee or lessee or mortgagor shall be deemed the owner for the purpose of articles 1 to 4 of this title. The term also includes parties otherwise having lawful use or control or the right to use or control a vehicle for a period of thirty days or more.

To me, this last sentence says that if you are a Colorado resident and you have the mere right to use a vehicle for more than 30 days (I presume this means in any year) you are considered the owner for the purpose of vehicle registration. Notice that there is no requirement that you actually do use it. I think even if the vehicle is registered in another state but you have the right to use it, you must register it in Colorado.

I won’t bore you with the rest of the code but there is a code section that says an owner must register a vehicle within 60 days of purchase. You must also register any vehicle owned when you become a resident. There is a code section that says to register a newly acquired vehicle, you must first pay the sales or use tax. You must also pay an annual registration fee that is quite expensive.

All of that being said, it seems a little unusual that the OP mentioned be charged with a felony. Failure to register a vehicle is a traffic misdemeanor. While tax evasion can be a felony, it is very unusual for felony charges to be brought in these cases.

In any case, after reading the CRS it was enough to dissuade us in setting up a Montana LLC to own our RV as we are residnts of Colorado.

-- Edited by Retired Guy at 17:04, 2008-03-26

   47zipper,

  Thank you for the info, I wish you the best of luck in your out come!

With our Yachts it was 180 days out of country then you were able to come back if you wanted to.

We were going to look into it some more but from what you had to say it is not a good fit for us.
 
Best wishes,
(This my second reply the first one went away, I don't know were to? so if it showes up can someone please remove it. I was not done with it.. puffff gone)

brucedelta, Not to belabor the point but even a Colorado resident buying from a non-Colorado dealer is required to register the RV in Colorado if the use or control for 30 days is met. They way Colorado caught a lot of folks was to get the records from the Colorado dealers. Some of the ways they could get anyone buying from non-Colorado dealers would be to just drive around and observe license plates on RVs or to catch someone who is stopped for something like a traffic stop. I do know that in some areas, the police drive through apartment parking lots. If they observe out of state license plates, they make a record. If they see the vehicle there for too long, they go after the owner for moving to the state and not registering the vehicle in-state. BTW, I think the 30 day requirement means that any days that add up to 30 meaning if the right exists for 3 days at a time for 10 different times throughout the year, that's 30 days. In any case, I strongly advise everyone to follow the law even if the chance of being caught is slim.

When we bought our present coach I considered the LLC route for registration. After doing a lot, and I mean a lot, of research, I chose not to take the chance. We domicile in Texas and the Texas penalties for tax evasion can be stiff. One of the things I found in my research was that, unless you do run a legit business and register the vehicle as owned by the business, via LLC, then they consider the use of an LLC as for only one purpose and that is evasion of taxes. If the above mentioned circumstances about a business aren't met it is pretty hard to argue any other reason for the LLC. Tax evasion is a pretty serious issue and not one I cared to defend. Consequently I bit the bullet and paid the taxes.

This whole story is a sad state of affairs. Tax avoidance is not illegal and here are people who attempted to avoid taxes legally. Now their state is charging them with a felony when I feel they should be going after those who are illegally setting up L.L.C.'s. This is a scam - those attorneys involved know the law. They know what is a legal LLC and what is an illegal LLC. They know the difference between tax avoidance and tax evasion. I know, it is our responsibility as well, but that's why they paid the attorney fees in the first place - to ensure that they were doing things correctly. Thank you guys for posting your story and we are praying that things will be set right for you without having to face felony charges.

Thanks everybody for being so supportive and nice. If I can save even one person from going down the same path that we took, all this will be worth it.