Transferring a timeshare to an LLC to dispose of

[raygo123]

As soon as you said you wanted to run it as a sole proprietor, I believe that's one thing the government looks at is this just an attempt to avoid the liability of a sole proprietor?

You need a lawyer.

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lets not split moral hairs here, the purpose of the viking ship/fake llc is not to get rid of a timeshare, that can be done by simply stopping payment at any time.

the purpose is to avoid the negative financial ramifications that result in such a default.

I attached this as to where I'm coming from. In this particular LLC, if no true effort is made, he may find that he still may be liable as a proprietor.

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[Saintsfanfl]

I attached this as to where I'm coming from. In this particular LLC, if no true effort is made, he may find that he still may be liable as a proprietor.

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The original statement is a bit of an oxymoron. You either have an LLC or you are a sole proprietor but you cannot do both. A sole proprietor by definition is running a business without creating an LLC (or other type) as a separate legal entity. I know he meant sole owner so it doesn't really matter but who determines that he is liable? To me it has to be a fraud case because there is nothing wrong with creating an LLC and then not ending up doing much or anything with the entity. Sometimes people create an LLC and incur business debt and then run out of capital before the business even opens. Under normal circumstances you cannot penetrate the personal assets unless a personal guarantee was given.

I was going to create Limited Liability Company - LLC (not sure what state is best for this), with myself as the sole proprietor.

 

[ronparise]

This is precisely why many resorts are no longer allowing transfers to LLC's. People can argue the validity of the refusal ad nauseam but the conundrum you describe is enough of a reason for the resort to cry foul before recognizing the transfer. Although if they took deed backs it would be a moot point.

The problem is that in most cases the HOA is not aware of an impending transfer until after it happens. so how can they dis-allow whats already happened

Every condo purchase and sale Ive been involved in as a licensed realestate agent or a buyer or seller, here in SW Florida had the requirement that the HOA had to approve the buyer before the deed was signed. or recorded. Some had financial/credit requirements, some did a criminal check, and some required a personal interview. The point is that these were requirements written into the condo docs filed at the time the condo was created. Absent such requirements in the docs for a timeshare I dont think an HOA can stop a transfer. They can of course not recognize it and continue to send bills to the old owner, but good luck collecting

 

[ronparise]

Income taxes are discharged in a Chapter 7 bankruptcy. The IRS takes a number just like every other creditor. There are a few requirements like was a return filed and is it at least 3 years old but for most honest people it would be discharged.

My experience is quite different.

 

[raygo123]

The original statement is a bit of an oxymoron. You either have an LLC or you are a sole proprietor but you cannot do both. A sole proprietor by definition is running a business without creating an LLC (or other type) as a separate legal entity. I know he meant sole owner so it doesn't really matter but who determines that he is liable? To me it has to be a fraud case because there is nothing wrong with creating an LLC and then not ending up doing much or anything with the entity. Sometimes people create an LLC and incur business debt and then run out of capital before the business even opens. Under normal circumstances you cannot penetrate the personal assets unless a personal guarantee was given.

Your right anyone can form an LLC. What I'm saying is that a court could find that the only reason for the LLC is to avoid liability. Then, it goes back to the owners of the LLC, as their responsibility. That, is when they are TREATED as a proprietorship. The original terms of the TS are binding.

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[uscav8r]

Morality aside, in many states, the Viking ship approach is explicitly illegal and subject to penalties and fines. The burden of proof is much less for civil cases.

Massachusetts has one such law. http://www.gcglaw.com/resources/resort/timeshare-transfer-companies.html

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[ronparise]

lets not split moral hairs here, the purpose of the viking ship/fake llc is not to get rid of a timeshare, that can be done by simply stopping payment at any time.

the purpose is to avoid the negative financial ramifications that result in such a default.

No splitting required. its moral, immoral or amoral depending on your personal brand of morality.. But morality is not what we are talking about here,

We are talking about what might or not be legal

The purpose of doing business in a LLC or Corporation is to separate personal assets from business assets. I own my home and most everything else, with my wife as joint tenants with rights of survivorship. (thats legal) If I go first she becomes the sole owner, and vice versa. We chose this form of ownership so that when one of us dies our children cant get to the house or any other of our assets. (this is a second marrage for both of us and the kid are from out first marriages. The downside of this arragement is that if I die first my kids get nothing. and if my wife dies first my kids get nothing. I dont see that as a big deal because all the kids are doing well financially and dont need the little bit my wife and I have. I formed an LLC to hold my timeshares. because I want them to be handled differently at my death. and I want these assets/liabilities to be handled differently that the house and bank accounts, when I die. Since there is no money to pay the mf if no one is managing the LLC, I suppose you could say I formed the LLC so if I stopped paying mf they couldnt come after my house..

So that brings me to my question. Brian, what the heck is a fake LLC? and do you think I formed my LLC with the intent to defraud? I suppose you could make an argument that I did, but do you really think Wyndham will come after my family for the mf when I die. I dont think so even though my intent was clearly to come to a time when I would stop paying mf

Bottom line i think its possible to put a timeshare in an LLC for the simple purpose of isolating liabilities. I used to own my slum property in separate corporations so that if one got sued, the plaintiff couldnt get to the others. perfectly legal and I think amoral.

 

[TUGBrian]

comparing the legal intention of a legitimate LLC, to one created for the explicit purpose of escaping a financial debt is ludicrous.

noone at this point is even arguing right vs wrong, people are simply "e-lawyering" their opinions on if the law can actually penalize anyone caught doing it.

 

[ronparise]

comparing the legal intention of a legitimate LLC, to one created for the explicit purpose of escaping a financial debt is ludicrous.

noone at this point is even arguing right vs wrong, people are simply "e-lawyering" their opinions on if the law can actually penalize anyone caught doing it.

The op asked two questions. the first one "is it valid?" was answered right away when Denise called it fraud. and as you say no one argued that point, I think we all agree its wrong,

but the second question, "will it work" or as you have rephrased it "can the law actually penalize anyone caught doing it" is more difficult. I think a better way to ask the question is.. "will the law penalize the person doing it"

and I think "intention" is the key... Given the ops stated intention, it is ludicrous idea.

I think comparing legitimate LLCs to LLCs set up to defraud will help the op see just how ludicrous

 

[Saintsfanfl]

My experience is quite different.

Your situation probably did not meet the requirements but incomes taxes can definitely be discharged. The main rule is as follows:

THE 3 YEARS, 2 YEARS, AND 240 DAY RULES

The Bankruptcy Code sets out specific time periods that determine if you can discharge your taxes, commonly called the 3-year, 2-year, and 240-day rules (the “3-2-240 rules”). Under these rules, you can discharge income taxes that came due three years before you file for bankruptcy, as long as it has been at least two years since you filed the tax forms and 240 days since the taxes were assessed. There are some exceptions, and these rules do not apply to other types of taxes, such as property taxes.

To discharge back income taxes, be aware that you must meet the requirements of all three rules.

The tax return not only must be filed but it also must be complete and accurate. If the IRS comes back and assesses a higher amount then that probably cannot be discharged because the amount is not tied to a return that was filed more than two years ago.

 

[dominidude]

Morality aside, in many states, the Viking ship approach is explicitly illegal and subject to penalties and fines. The burden of proof is much less for civil cases.

Massachusetts has one such law. http://www.gcglaw.com/resources/resort/timeshare-transfer-companies.html

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Read that article.

It seems that this Mass law simply requires transfer companies to keep records for 3 years, or be liable for helping a viking ship.

In other words, it seems to me that the law is geared to people that defraud others into putting others people timeshares into their viking ship, and that otherwise the law just doesnt seem to apply to individuals putting their own timeshares into an LLC which subsequently goes under.

Nothing ground breaking

 

[Saintsfanfl]

In other words, it seems to me that the law is geared to people that defraud others into putting others people timeshares into their viking ship, and that otherwise the law just doesnt seem to apply to individuals putting their own timeshares into an LLC which subsequently goes under.

Nothing ground breaking

I do not think believe is the case. The paragraph covering the issue is underneath a subsection that states:

(iii) to the consumer time-share reseller:

This appears to be geared towards anyone selling or transferring a timeshare, including the owner. There is a reason it states "consumer time-share reseller" rather than the previous "time-share transfer services".

The paragraph in question then states:

No person shall participate in a plan or scheme to transfer a consumer resale time-share to a transferee that the person knows or reasonably should have known does not have the ability, means or intent to pay all time-share expenses and taxes associated with the consumer resale time-share.

The term "No person" is intended to cover anyone who is selling or transferring the timeshare without exclusions.

 

[DazedandConfused]

How about this.....what if someone really wants to put their valuable real estate interest in Branson, MO (i.e. dog of a timeshare) into a LLC for whatever reason (asset protection, rental business, etc) and then mismanages it because they are not organized and miss the annual dues payments and let it go into foreclosure. In this case, it is not a viking ship as they had good intentions, but simply had bad business skills and needed to foreclose or shut the company down as a failure.

I am not a lawyer, but i did stay at a Holiday Inn recently, and think there are no penalties in the US for being stupid and causing a company to fail as compared to planing on engaging in fraud.

Imagine the same scenario but instead of a dog timeshare, you form a LLC to own a Malibu beachfront condo that has zero mortgage and you do not pay the taxes or HOA fees. In this case the asset will be far greater than the amount of money owed, so they will take you to court to liquidate the property to get the tax or HOA fees. No fraud or violations of the law here

Why would someone think it is such a fraud and violation of the law if someone created an LLC to hold an asset and then let it crash. We are focused on crap worthless timeshares that put a noose around peoples neck for annual dues for something worthless and think that is a crime to let it go via a LLC. What if the timeshare was a Villa Grand Floridian DVC timeshare that is paid off and you put it in a LLC and stop paying dues. I am sure DIsney will be happy to take it back for cheap.

 

[raygo123]

How about this.....what if someone really wants to put their valuable real estate interest in Branson, MO (i.e. dog of a timeshare) into a LLC for whatever reason (asset protection, rental business, etc) and then mismanages it because they are not organized and miss the annual dues payments and let it go into foreclosure. In this case, it is not a viking ship as they had good intentions, but simply had bad business skills and needed to foreclose or shut the company down as a failure.

I am not a lawyer, but i did stay at a Holiday Inn recently, and think there are no penalties in the US for being stupid and causing a company to fail as compared to planing on engaging in fraud.

Imagine the same scenario but instead of a dog timeshare, you form a LLC to own a Malibu beachfront condo that has zero mortgage and you do not pay the taxes or HOA fees. In this case the asset will be far greater than the amount of money owed, so they will take you to court to liquidate the property to get the tax or HOA fees. No fraud or violations of the law here

Why would someone think it is such a fraud and violation of the law if someone created an LLC to hold an asset and then let it crash. We are focused on crap worthless timeshares that put a noose around peoples neck for annual dues for something worthless and think that is a crime to let it go via a LLC. What if the timeshare was a Villa Grand Floridian DVC timeshare that is paid off and you put it in a LLC and stop paying dues. I am sure DIsney will be happy to take it back for cheap.

That is what has been stated several times. It has to do with intent. The more blatant, the higher the probability it will come in question. The OP versus someone who has the original intention to actually attempt to run a business.

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[WVBaker]

I am not a lawyer but with one exception have done all my legal work myself for about 50 years now. It has always worked out well. And yes, I would set up an LLC myself. Let me hasten to add that I would not set one up for OP's purpose though.

George

Okay George, here's a twist on an old idea. How about setting up an LLC to purchase a timeshare with all intents and purposes to keep it? The LLC would need to formed in a different state from the individuals occupancy state.

This would be the case when a SELLER refuses to sell to any resident of certain state. Apparently, this is perfectly legal to do.

 

[bogey21]

Understand that I wasn't agreeing that setting up an LLC was a good idea. My comment was essentially that if I wanted an LLC, I would do it myself rather than hire a lawyer as one of the early posters was suggesting...

George

 

[chapjim]

My experience is quite different.

The IRS takes a number but it is always #1.