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Buying in a LLC or c/s-corp

joshposh

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Does anyone have any current information about protections afforded by purchasing a timeshare in a corporation. I am looking at buying and doing quite a bit of research and specifically am only considering something hotel branded in a high season which is otherwise difficult to rent. However I am aware that anything can change and one of these can become valueless. Do any of you know if purchasing through a corporation has been shown to limit liability in the event something becomes valueless and maintenance fees need to be defaulted on? I won’t be getting any loans so that is not relevant.
 

jabberwocky

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I think you’ve come to the wrong place if you’re looking for help in setting up a potential viking ship. They aren’t looked upon too kindly here.
 

bogey21

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However I am aware that anything can change and one of these can become valueless. Do any of you know if purchasing through a corporation has been shown to limit liability in the event something becomes valueless and maintenance fees need to be defaulted on? I won’t be getting any loans so that is not relevant.

You are overthinking this. After you buy carefully monitor what you own. If/when you see things trending in what you consider the wrong direction, you should have plenty of time to figure out the best way to extricate yourself from it...

George
 

joshposh

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You are overthinking this. After you buy carefully monitor what you own. If/when you see things trending in what you consider the wrong direction, you should have plenty of time to figure out the best way to extricate yourself from it...

George
Thank you. With regard to the first posters comment about the Viking ship. To be clear it is not my intent to do that. It is a backup plan. I see many many messages on here about people who have valueless timeshares who are getting annual bills and often the advice is just stop paying and let them repossess and “hopefully” doesn’t ruin your credit. Using a corporation to protect from liability in itself does not imply malintent. For example say I was buying this as a business to rent out the unit and the maintenance Fees got so high that it was impossible for the business to maintain solvency charging market rent. Is your solution to just keep pumping in your own personal capital indefinitely or just let the business bankrupt as most businesses would do. In this case there is no other way to save costs - the maintenance fees are what they are.

for the second posters point, thank you that makes
sense although if an LLC is protective, I’m not sure why not to use one.
 

jabberwocky

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Thank you. With regard to the first posters comment about the Viking ship. To be clear it is not my intent to do that. It is a backup plan. I see many many messages on here about people who have valueless timeshares who are getting annual bills and often the advice is just stop paying and let them repossess and “hopefully” doesn’t ruin your credit. Using a corporation to protect from liability in itself does not imply malintent. For example say I was buying this as a business to rent out the unit and the maintenance Fees got so high that it was impossible for the business to maintain solvency charging market rent. Is your solution to just keep pumping in your own personal capital indefinitely or just let the business bankrupt as most businesses would do. In this case there is no other way to save costs - the maintenance fees are what they are.

for the second posters point, thank you that makes
sense although if an LLC is protective, I’m not sure why not to use one.

I don’t usually like to pick on someone who is new to TUG but a few points:

1) many resorts will not allow the transfer to a corporation for exactly the reasons you are envisioning.
2) with take-back programs there really isn’t a reason why you should need to default to get out of a timeshare - at least if you are going in with your eyes open about what you are buying. Generally something that has resale value now will probably have some resale value in the future (likely less than what you paid). if you are careful in your selection and buy well you should be able to get out at a low/minimal cost.
3) I completely understand the need for companies to declare bankruptcy due to market factors and don’t fault them for it. But those companies usually are part of the creative destruction that is the marvel of capitalism. What would your company produce and how would it improve the world other than giving you a potential legal shield for a discretionary luxury purchase? when a TS is defaulted on it’s not a nameless big bank or lender that picks up the tab - it’s the remaining timeshare owners who now have to pay additional fees.

oh - and welcome to TUG!:wave:
 

joshposh

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I don’t usually like to pick on someone who is new to TUG but a few points:

1) many resorts will not allow the transfer to a corporation for exactly the reasons you are envisioning.
2) with take-back programs there really isn’t a reason why you should need to default to get out of a timeshare - at least if you are going in with your eyes open about what you are buying. Generally something that has resale value now will probably have some resale value in the future (likely less than what you paid). if you are careful in your selection and buy well you should be able to get out at a low/minimal cost.
3) I completely understand the need for companies to declare bankruptcy due to market factors and don’t fault them for it. But those companies usually are part of the creative destruction that is the marvel of capitalism. What would your company produce and how would it improve the world other than giving you a potential legal shield for a discretionary luxury purchase? when a TS is defaulted on it’s not a nameless big bank or lender that picks up the tab - it’s the remaining timeshare owners who now have to pay additional fees.

oh - and welcome to TUG!:wave:


Thank you for the response.

#1 begins to address my question. Which ones do and don’t? Does Hyatt? That’s the one I’m considering.

Do all the major brands have buyback programs? From what I’m reading it’s completely up to them. and some people get screwed. I would like to think I’m an intelligent buyer although clearly otherwise intelligent people have gotten screwed. the advice I see on here given to people that have worthless timeshares is to try selling or giving away and if unsuccessful just stop paying the maintenance fees. so if that’s the solution, why not protect your credit worthiness.

Anyways I feel like this discussion is going to go in circles.

With any property I guess it’s possible to be trapped unable to sell with increasingly high taxes although it seems more common with timeshares. So I guess we will agree to disagree. If I decide a timeshare is the right thing for me I am clearly going to buy it using whatever protections I can. The intent is not to default otherwise I wouldn’t be buying it in the first place. But if my maintenance fees become higher than the rental value and there’s no legitimate buyback process then I’m not sure what else the solution is. The same would apply for any “investment” that had no potential for capital appreciation or income.
 
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vacationtime1

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LLC's and S-corps are not free.
You have to pay to incorporate one.
There is an annual fee to maintain one.
They often need separate tax returns.
 

joshposh

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LLC's and S-corps are not free.
You have to pay to incorporate one.
There is an annual fee to maintain one.
They often need separate tax returns.
I know. All of this. But do you know which brands allow it if any?
 

bogey21

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I know. All of this. But do you know which brands allow it if any?
What they do (or don't do) when you purchase doesn't really matter. Companies change their mind on this all the time so what really matters is what are they doing when you want out....

IMHO you are way overthinking this. Just for the record because of age and health I no longer own any TimeShares. But over the years I probably owned at 20-30 Resorts one time or another including 4 Marriott Weeks. I was able to get rid of all 20-30 Weeks without defaulting. Some I sold; some I gave away; and some I deeded back to the Resort. I made money on a couple; and broke even or lost money on the rest...

George
 

joshposh

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What they do (or don't do) when you purchase doesn't really matter. Companies change their mind on this all the time so what really matters is what are they doing when you want out....

IMHO you are way overthinking this. Just for the record because of age and health I no longer own any TimeShares. But over the years I probably owned at 20-30 Resorts one time or another including 4 Marriott Weeks. I was able to get rid of all 20-30 Weeks without defaulting. Some I sold; some I gave away; and some I deeded back to the Resort. I made money on a couple; and broke even or lost money on the rest...

George
So in your opinion what’s the secret to not getting screwed? Resale, hotel brand, platinum fixed week and more than 1br? That’s kind of my idea right now.
 

TUGBrian

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TUGBrian

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not sure what you mean? this particular forum is for buying selling and renting timeshare topics?
 

sue1947

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Two comments:
1. I suspect you have heard all those so-called 'experts' stating what a bad deal timeshares are so you are cautious. However, you also recognize that you can vacation cheaper and better via timeshares so are looking for a way to balance those two. The truth is, those 'experts' don't know what they are talking about. Timeshares are not all alike with lots of variations. Some are difficult to get rid of, some aren't. You are looking for the latter. Buy something that still has value and that others will want, use the heck out of it and, if and when if goes south, sell or give away. If you want a hotel branded, which means higher end, in high season, you won't have a problem getting rid of it. You will pay a premium and have to deal with the intricacies of the specific season to get that high season week.
2. Buy what you will use. That is more determined by location and what amenities/quality you want. That will also lead to the ease of getting rid of it. Fill out the questionnaire in the newbie section and we can help point you in the right direction. Based on your comments so far, I think there is a lot you don't know. Have you thought about points, for example? Fixed weeks vs points systems both have their pros and cons. Fill out the questionnaire and start fresh.
 

joshposh

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not sure what you mean? this particular forum is for buying selling and renting timeshare topics?
That’s exactly my point. If this is about buying and selling and I’m asking questions about it then why would you answer “rent.” Unless you truly think the best value is just renting in which case this whole site could have one page that says never buy a timeshare and just rent.
 

joshposh

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Two comments:
1. I suspect you have heard all those so-called 'experts' stating what a bad deal timeshares are so you are cautious. However, you also recognize that you can vacation cheaper and better via timeshares so are looking for a way to balance those two. The truth is, those 'experts' don't know what they are talking about. Timeshares are not all alike with lots of variations. Some are difficult to get rid of, some aren't. You are looking for the latter. Buy something that still has value and that others will want, use the heck out of it and, if and when if goes south, sell or give away. If you want a hotel branded, which means higher end, in high season, you won't have a problem getting rid of it. You will pay a premium and have to deal with the intricacies of the specific season to get that high season week.
2. Buy what you will use. That is more determined by location and what amenities/quality you want. That will also lead to the ease of getting rid of it. Fill out the questionnaire in the newbie section and we can help point you in the right direction. Based on your comments so far, I think there is a lot you don't know. Have you thought about points, for example? Fixed weeks vs points systems both have their pros and cons. Fill out the questionnaire and start fresh.
I have not got any idea from any “experts” but as you know it’s not out of line to be cautious before buying a timeshare. And I appreciate your constructive suggestion in point A.

As far as your other point, I will go ahead and fill out that questionnaire if you think it would be helpful but I’ve already decided Hyatt Residence High Sierra in Tahoe is the one I want for now as it’s where I actually want to vacation every summer and near where I live. It has the added benefit of being able to theoretically trade for the one in Maui which I’ve also stayed at and is super nice and I would imagine among the top options in Maui.

i have thought about points and Hyatt seems to offer a good mix of both worlds. I’m not interested infloating dates as my work schedule needs to be planned well in advance. Also I really don’t travel in the US too much except San Francisco and NYC and locally. SF I go to way too often for a time share to make a difference and it’s mostly last minute weekends as I live nearby (I don’t know is there something that would fit that scenario?). Most of my travel is exploring in Asia, Europe etc and we are the type that never stays anywhere more than a few days and then moves on. So this is really for the yearlyor twice a year one week family vacation and it seems ideal for that. If I could afford it and it was financially viable I would Just buy a place in Tahoe and SF (although both are not in the cards.)

As far as Hyatt in Tahoe goes an option is to get one week in gold season (June) for cheap and then get a week in July which is the one I would benefit from the most. Then I could potentially mix and match those and still have enough points left over for a week in Hawaii. Maybe two platinum would be better although I’m not clear on the price really. I see them listed for 20k but then I saw one sold on here recently for 10k. If the going rate is more like 10k then I would just buy two platinums. Do you know anything about that?
 

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That’s exactly my point. If this is about buying and selling and I’m asking questions about it then why would you answer “rent.” Unless you truly think the best value is just renting in which case this whole site could have one page that says never buy a timeshare and just rent.

the forum is about buying, selling and renting, thus its name =)

generally when folks come on TUG for advice, they get what you need to hear...not what they want or expect to hear.

there are plenty of valid reasons to buy, however given your stipulations....the only way to ensure you arent left holding the bag and "stuck/screwed/etc" with a timeshare as you mentioned...is to rent.
 

joshposh

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the forum is about buying, selling and renting, thus its name =)

generally when you come on TUG for advice, you get what you need to hear...not what you want or expect to hear.
Ok thanks. So to be clear your advice is to not buy a timeshare? Is that advice for me and my scenario or for everyone?
 

TUGBrian

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if you want to avoid being stuck with a timeshare or in a situation where you will be unable to sell, then yes renting is the best answer for you. is it the only answer? absolutely not...you appear to have already made up your mind on the situation, and that is just fine! Noone here is going to make any decision for you, vs merely provide you with help and advice to your questions.

there is no reason to twist my words or attempt to mock the site or insinuate anything other than what is being offered to you specifically as advice. The goal here is to help you make an educated and informed decision.

Its no skin off anyone elses back what you choose to do with the information/advice provided as it is your decision and your decision alone to make.
 

Eric B

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Does anyone have any current information about protections afforded by purchasing a timeshare in a corporation. I am looking at buying and doing quite a bit of research and specifically am only considering something hotel branded in a high season which is otherwise difficult to rent. However I am aware that anything can change and one of these can become valueless. Do any of you know if purchasing through a corporation has been shown to limit liability in the event something becomes valueless and maintenance fees need to be defaulted on? I won’t be getting any loans so that is not relevant.

Personal opinion that is not intended as legal advice - having expressed the intent in durable form on social media to use a corporate entity in order to avoid personal liability when you decide in the future to have the entity default on its debts would greatly bolster the creditors potential arguments for piercing the corporate veil and holding the sole shareholder in the corporation personally liable for them. There's a fairly decent explanation of how that could occur and be justified at:


You're probably best off doing your own due diligence on the economics of owning and using TS as opposed to just renting a week from an owner and proceeding on the basis of deciding whether it's worth it to you personally. If you can afford the total cost of ownership and are not to put off by the risk of rising costs it might be worth it. I own and use a number of them myself. Your best bet is to look at the intrinsic value of the TS as a sunk cost that you will be unlikely to recover later and amortize that over the time you think you will use it. That's why you'll see a lot of recommendations on TUG to buy resale; purchase costs are much lower than buying retail and there's less to amortize.

Don't take the responses you got too personally, of course. What you asked, without realizing it, was essentially "How can I get out of shouldering the shared burden of maintaining the property I am thinking of buying a portion of if I decide it's not valuable to me in the future?" That's not a real popular question to ask of the folks on the other side of the transaction that would be left bearing that burden. On the other hand, it's a valid concern and the reason why you see discussion of exit strategies in the forums here, too.
 

sue1947

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As far as your other point, I will go ahead and fill out that questionnaire if you think it would be helpful but I’ve already decided Hyatt Residence High Sierra in Tahoe is the one I want for now as it’s where I actually want to vacation every summer and near where I live. It has the added benefit of being able to theoretically trade for the one in Maui which I’ve also stayed at and is super nice and I would imagine among the top options in Maui.

Since you've already made up your mind, there's no sense in asking any further questions.
 

T_R_Oglodyte

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LLC's and S-corps are not free.
You have to pay to incorporate one.
There is an annual fee to maintain one.
They often need separate tax returns.
LLCs and S Corps do not generate tax returns. In most cases they will generate a Schedule K, and each owner then includes the Schedule K information in that owner's tax return. (I was a partner in an S Corp for ten years and that was how it was done.)

One exception is if an LLC has a single owner. Then the activity of the LLC is reported on Schedule C of the owners tax return and a Schedule K is not prepared. (Been doing it this way for 18 years and passed an IRS audit - one of the few audit findings I had was that charitable contributions I was making from my LLC needed to be moved into our personal contributions.). I haven't a had experience with a sole owner S Corp, so I don't know if a sole owner S Corp would prepare a schedule K or would be handled in Schedule C the same a LLC.
 

joshposh

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LLCs and S Corps do not generate tax returns. In most cases they will generate a Schedule K, and each owner then includes the Schedule K information in that owner's tax return. (I was a partner in an S Corp for ten years and that was how it was done.)

One exception is if an LLC has a single owner. Then the activity of the LLC is reported on Schedule C of the owners tax return and a Schedule K is not prepared. (Been doing it this way for 18 years and passed an IRS audit - one of the few audit findings I had was that charitable contributions I was making from my LLC needed to be moved into our personal contributions.). I haven't a had experience with a sole owner S Corp, so I don't know if a sole owner S Corp would prepare a schedule K or would be handled in Schedule C the same a LLC.
I think the easiest is to have an llc in a state with low filing fees and lax record keeping requirements which would be Wyoming or New Mexico. LLC are just treated as pass through for tax purposes and c corp are by default taxed as corporations but can be elected to be pass through like an llc. The tax doesn’t matter as even if the Corp were to generate a net income I could just pay myself a small salary for managing it. This is not the first business I have owned so i didn’t need to be told by the other poster that LLCs and s corps are not free:)
 

T_R_Oglodyte

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I think the easiest is to have an llc in a state with low filing fees and lax record keeping requirements which would be Wyoming or New Mexico. LLC are just treated as pass through for tax purposes and c corp are by default taxed as corporations but can be elected to be pass through like an llc. The tax doesn’t matter as even if the Corp were to generate a net income I could just pay myself a small salary for managing it. This is not the first business I have owned so i didn’t need to be told by the other poster that LLCs and s corps are not free
Good.

Based on your questions and your sophistication, I think that your bigger issue is how strong the corporate veil is between business activity and personal activity under the various options. That's a legal question, that you should ask of an attorney who is savvy and skilled in that area of law. Personally, I would expect to pay a minimum of $500/hour for that type of advice. So, getting even minimal decent guidance on that question would be a minimum of $1000.

When I was setting up my LLC, I was advised that under any scenario I needed to be scrupulous about avoiding any appearance that the corp is simply a personal alter ego. That specifically meant not engaging in personal transactions with the company, such as personal use of company assets or routing personal expenses through the company (e.g., using a company credit card for personal expenses even though I might be reimbursing the company in full for those charges). Corporate structure was a minor component afterwards, because if you didn't hew to those concerns, the veil would be vulnerable under any structure.

To the extent that corporate structure was a factor, C Corp offered the highest protection, followed in order by S Corp and LLC. But he hastened to add that corporate structure was almost irrelevant if there was a dirty relationship between business and personal activities. Even with a C Corp, if separation wasn't maintained, the corporate veil could be pierced with roughly equal effort.

At the same time, the administrative requirements were greatest for a C corp and easiest for a LLC. In the end I opted for LLC due to simplicity.

**************

With all of that said, the liabilities in my LLC are about two orders of magnitude larger than what might accrue in your situation. In my LLC, if I have a project go south, the liabilities could easily be in the millions of dollars. So, I'm insured up to $10 million. My LLC has only minimal assets, so my concern is making sure my personal assets are protected beyond $10 million. I am very scrupulous about keeping a firewall between the business activity and my personal activity.

Your risk assessment will likely be different. Specifically, what is the downside risk if your corporate veil gets pierced? Given what you've stated, I think you should assume that an opponent would be able to demonstrate that your company was set up to facilitate a personal interest while outplacing the associated liabilities. But those liabilities are probably not any greater than what you would have faced had you not used a corporate structure. And would the amount at stake be large enough for the other party to expend the legal fees associated with attempting to pierce the veil?
 
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