Yacht News

Top Ten Reasons to Sell Your Boat with a CPYB Certified Professional Yacht Broker

March 15, 2020 by Mike Wales

Selling a boat is similar to a real estate transaction—it’s usually too complex and involves too much value to risk doing it on your own. Good yacht brokers work hard to facilitate the sale of their listings and to protect the interests of their clients, just as a real estate agent would do when you sell your house. Here are the top 10 reasons why you should strongly consider using a yacht broker to sell your boat.

Yacht Brokers have a network of clients and may have a number of buyers in mind right from the start.
Yacht Brokers know the market well, especially in their specialized segment, and they have a solid understanding of how to properly price a boat.
A yacht broker gets your boat listed on the pages of a specialized multiple listing service (“MLS”). These services are not available to individual owners/sellers.
A yacht broker can help establish fair-market value for the boat through access to actual sold boat data in the specialized MLS services. These sold boat data services are not available to the public.
A yacht broker will devise a marketing plan and determine how a boat is to be advertised in the most appropriate media. For example, the strategy to market a 34′ Carver powerboat is much different than the strategy to market a 64′ Jeanneau sailboat. Employing a yacht broker provides the best chance of reaching the most interested and qualified audience for your boat.
A yacht broker will prepare the listing for distribution in various electronic and print media, for print and email distribution to clients and other brokers, and for distribution to prospects at boat shows, open houses, and walk-in inquiries. Sellers will see their listing advertised on various websites and the MLS selected by the broker.
A yacht broker will help you stage your boat and advise you of any improvements that should be made to make your boat competitive in the market, identify possible problems and solutions, and help organize upgrades and repairs.
A yacht broker understands the principals of the brokerage profession—things like certificates of ownership, security agreements, bills of sale, and other documents needed to register and transfer titles to boats. A yacht broker understands maritime and admiralty, as well as mortgaging and transferring title to documented vessels. A broker understands listing agreements, closing statements, deposit requirements, and escrow accounts to safeguard funds.
A yacht broker can assist with the sea trial and survey – The buyer will usually request a sea trial and the services of a marine surveyor. Buyers pay for the surveys and for hauling the boat out of the water for inspection. Your yacht broker will usually attend the sea trial and marine survey and help you determine how any discovered deficiencies should be addressed in the purchase negotiations.
A yacht broker will employ the art of negotiation. A broker can use his or her position as a middleman to keep the negotiating between buyer and seller moving toward a successful conclusion.Yacht Brokers have a network of clients and may have a number of buyers in mind right from the start.

Certified professional yacht brokers bring a lot to the sales process, which is why you should strongly consider using one to sell your boat.

Mike Wales is a California-licensed maritime and business transaction attorney and co-owner of AGL Yacht Sales, Inc., along with his wife Leilani Wales, CPYB, a licensed, certified, and bonded professional Yacht Broker. You may contact Mike at mike@aglyachtsales.com or at 480.250.5651.

The Tax & Financial Benefits of Placing Your Yacht in a Local Charter Program

February 22, 2020 by Mike Wales

A small boat in a body of water

Description automatically generated — Enjoy the boating lifestyle and the many benefits of placing your yacht in a local charter program

When most people think about buying a yacht and placing it in a charter program, they think their boat will be in the BVIs, Caribbean, or even in the Bahamas, and they won’t be able to use their boat very often. However, if you place your boat in a local charter program, for example, here in San Diego, Newport Beach, or Marina del Rey, you can have the tax benefits that go along with owning a boat placed into a charter program, the ability to use your boat whenever you wish, and a nice charter income to offset the costs of owning your boat.

There are many charter programs here in Southern California. By placing your yacht into one of these local charter programs you can enjoy the charter income, the tax benefits, and have your boat available to you anytime you wish. As an example, if you lived in San Diego, or even in Scottsdale, Arizona, and you wished to use your boat, you could simply view the charter program operator’s scheduling app and block out your time with your boat.

The key to understanding how a yacht placed in charter can generate tax benefits and income to offset the cost of owning, berthing and maintaining the boat, is the realization that your boat becomes a business, and the charter company is your business partner. Here are the 4 main reasons people choose to place there are yacht in a charter program:

TAX BENEFITS. By setting your yacht up as a business, you can take advantage of the many tax saving strategies that all other businesses take. You are putting business equipment into operation. Therefore, you can use the IRS Code Section 179 Deduction, which allows a business to deduct the full purchase price of business equipment up to $1,200,000. This substantial tax deduction is an attractive tax planning opportunity if you are a highly compensated individual or are receiving a large bonus or other large payment of ordinary income from active employment or the active conduct of a trade or business. Additionally, all expenses of ownership, berthing, maintenance, insurance, property tax, and more, are now business expenses and are deductible. You can also depreciate the boat over a 10 year period using the MACRS accelerated depreciation schedule, if you so choose.

TURN-KEY USE. When you place your boat into a charter program, the program will inspect, maintain, repair, provision and fuel your boat so it is constantly ready for use. The benefit to you is that when you are ready to take your boat out for a sail, your boat is ready for you. Just step aboard and go.

YOUR YACHT MAKES MONEY WHEN YOU ARE NOT USING IT. By placing your yacht in charter you can achieve the dream of private ownership and also have the benefit of having your boat make you money when you are not able to use it. The charter income and the tax savings give you a substantial offset to ownership costs, covering your expenses and making ownership much more affordable. Additionally, as discussed above, your boat is available to you whenever you wish.

YOUR CHARTER PROGRAM OPERATOR MAINTAINS YOUR YACHT. your charter program operator will ensure that your boat receives regular maintenance pursuant to the manufacturer’s recommendations. The charter program operator , as your business partner, wants to keep the boat and all of its onboard equipment ready to go and looking good. By doing so, your charter program operator will help preserve the boat’s resale value.

At AGL Yacht Sales we have helped many people successfully purchase their dream yacht, place it with one of our vetted local charter programs, and enjoy the boating lifestyle of their dreams. Give us a call for more information.

A person standing in front of a boat

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Mike Wales is a California-licensed maritime and business law attorney and co-owner of AGL Yacht Sales, Inc., along with his wife Leilani Wales, a licensed California Yacht Broker. You may contact Mike at mike@aglyachtsales.com or at 480.250.5651.

Purchasing a Boat Owned By an LLC

February 9, 2020 by Mike Wales

As you stroll through the docks looking for your dream yacht, you may have noticed many boats listed as “LLC Owned”. What’s the deal with that?

The answer is that by purchasing the LLC that owns the boat rather than making a purchase of the boat itself you can save a significant amount of money by avoiding California’s sales or use tax.

The State of California imposes a sales tax on purchases of personal property, including boats, collected by and through County Tax Assessors. California imposes a sales tax on the purchase of a new boat and a “use” tax on the purchase of a used boat.

A purchase of all or part of a business entity, however, is exempt from such taxation in California and in all other states. The purpose for such an exemption is to encourage economic growth. Wall Street would shut down if sales tax was imposed every time a stock, bond, or LLC membership interest was purchased.

California sales and use tax in San Diego County, effective April 1, 2019, is 7.75%. On a $500,000 boat that equates to a significant tax of $38,750. Thus, buying the membership interest of an LLC with its sole asset of a $500,000 boat saves $38,750 in taxes.

When the business entity is the owner of the boat there is no change in the title or ownership of the company’s asset, in this case, the boat. The only change in ownership is that of the LLC. Since the boat is still owned by the LLC there is no purchase or sale of the boat itself, and as such, no assessment of sales or use tax on the boat.

Keeping the boat in an LLC makes sense for a variety of reasons including liability protection if you put the boat out to charter, use it as an Airbnb, your office, or for commercial endeavors or for other tax deductions depending on its use, not to mention maintaining resale value.

A California LLC pays a minimum $800 payment to the Franchise Tax Board whether or not the LLC makes any profit.

The County of San Diego also assess a boat owner (in this case the LLC) a property tax of approximately 1.1%. Ownership is determined by whoever owns the boat on January 1 of each year.

As with the purchase of any business entity, you should have your attorney prepare a non-binding letter of intent with your proposed terms. You should also conduct a thorough due diligence to ensure the LLC has no liabilities or liens; understand any contracts the LLC has entered into, such as a slip lease, insurance, etc.; and review the LLC’s Operating Agreement and financial account records prior to the purchase.

Once you are have conducted your due diligence and you have agreed upon terms, your attorney should draft a Purchase Agreement for the LLC. Of course, the agreement should be contingent upon purchaser’s acceptance after a sea trial, haul-out, marine and engine survey, and report. Once the LLC is purchased you will need to notify the California Secretary of State of the change in ownership of the LLC and of the any new domestic Statutory Agent for Service of Process. You will also want to open a financial account in the name of the LLC and purchase insurance in the name of the LLC. It is also likely you will need to have the LLC’s Operating Agreement re-written. You may change the name of the LLC as well by filing the name change with the California Secretary of State.

In sum, balance the tax savings against the administrative responsibilities when deciding whether to purchase a boat that is “LLC Owned.” If you are inclined to purchase an LLC which owns a boat as its sole asset, you should consult an attorney familiar with the intricacies involved early in the process.