by ssmorgan98 » Tue Feb 05, 2013 08:13 pm
I am investing $50K in a vehicle (a mercedes sprinter van) in a fully established transportation company in SC. Fully insured, have seen the books, and financials. Essentially I am the bank and this allows him to show no debt to be able to purchase more vehicles. He will guarantee me $1300 a month for 5 years and at the end of 5 years I won half the vehicle and he will either buy me out or sell it. My name will be listed as the lien holder on the title. Legally, am I putting myself at any risk if say the driver gauwd forbid killed someone and was at fault. Would it be better to have myself listed on the title as a LLC versus my personal name?
Posted: Wed Feb 06, 2013 02:39 am Post Subject:
You could be held liable. As far as making up an LLC... that is not insurance. I'd recommend consulting an attorney on that issue.
Posted: Wed Feb 06, 2013 03:01 am Post Subject:
An LLC is always a good option, you get the benefit of pass through taxation as you would with a sole proprietor and get the benefit of limited liability protection as you would with a corporation. Just remember, in order to maintain limited liability protection you must not blend your personal assets with those of the company, otherwise, the veil of protection could be pierced and your personal assets jeopardized. You should also include in your agreement some contingency if the secured asset (i.e. the sprinter) gets destroyed or devalued before your five year mark is achieved
Posted: Wed Feb 06, 2013 02:45 pm Post Subject:
As the lienholder, your liability should be nil, same as that of any bank that loans money to the same person. You have a larger responsibility to make sure the vehicle is properly insured to protect your financial interest -- collision and comprehensive (other-than-collision) coverage at a minimum. You should make sure that you are listed as an additional insured and that you receive copies of all insurance company correspondence (including a copy of the policy) and billing/lapse notices, so that the insurance remains intact. In the event the policy were about to lapse, you could step in, pay the premium, and demand to be reimbursed by the registered owner/lessee/debtor.
This is more than a simple handshake transaction. You need to consult an attorney to have a proper written agreement prepared that covers the loan/lease payments, the residual value, the payoff, etc, same as any vehicle lease, which is what you are really entering into here.
Failure to do this properly could leave you holding the title to a nonexistent vehicle with no recourse (inability to repossess, collect on an outstanding debt, etc.).
If you're just tossing about $50,000 for folks who want Sprinters, I could use one.
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