It’s never a good idea to buy an asset, like a boat or plane, in your own name or to have multiple parties on the title. First of all, when your name is on the title, you are personally liable for any damage that the asset may cause. For example, you and Joe own a boat, Joe takes it out and, by accident, gets to see the inside of that neighboring yacht you’ve been wondering about. You (and your personal assets) can expect to be on the hook for any damages.
Instead, you and Joe should own your boat (or other asset) through a limited liability company (“LLC”). Owners of a limited liability company (also known as members) are not personally liable for the actions of the company, hence the name. Of course, this isn’t a magic get out of jail card – to get this protection, certain corporate formalities need to be observed, i.e. separate bank accounts and insurance, corporate documentation, and otherwise that treat the LLC as a truly separate corporate entity. While Joe would still be personally liable for his dangerous actions; you would not because you were not there and had no part in the accident. Essentially, only the LLC itself would be on the hook for damages.
The other benefit of taking title via an LLC is that the chain of title is much cleaner. What if you and four other friends buy a plane, then one of the co-owners needs to sell their interest? You have to revise the title, insurance and other documentation. Or, what if your co-owner suddenly dies while engaging in a dangerous activity? Now you are sharing title with your friend’s estate and must wait for probate administration to play out before you can make any decisions involving the plane. Not so with an LLC. The LLC still owns the plane, you would just be changing the ownership of the LLC, which is not recorded on title and much easier to do.
Looking to purchase a boat, plane, submarine, or other ultra-dangerous asset? PLDO can assist you with all aspects of that transaction, from forming the asset-holding company through negotiating and ultimately closing on the transaction.
