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Is a Montana LLC Right for You?

A newly retired couple, let’s call them David and Dianne, did their homework before becoming full-time RVers. In a deliberate break with their home state of California, they sold their property and bought an RV. Using a Montana law firm, they created a limited liability corporation (LLC) in Montana for one purpose: to “house” their RV so they wouldn’t have to pay sales tax. 

Setting Up Your Domicile In Texas

The couple read that if you claim Texas as your domicile, you won’t have to pay income tax. So, they headed for Texas, driving the RV and towing their Jeep. After arriving in Livingston, they visited Escapees RV Club national headquarters where they obtained their new Texas address. With that address, proof of vehicle insurance and an inspection of the towed Jeep, they headed to the county tax assessor-collector to register their vehicles. When asked by the office clerk if their Jeep was their only vehicle, they answered, “yes,” because technically the RV belonged to the Montana LLC. They received their Texas license plate for the Jeep.

Next, they visited the local Department of Public Safety (DPS) office. They brought along their Texas vehicle registration, proof of insurance, their unexpired California driver licenses and other proof of required identification. Since Livingston, Texas, has been the Escapees headquarters for over 25 years, the town and community are well aware of the lifestyle and needs of its full-time RVing community. Thus, the process for obtaining Texas vehicle registration and driver license is efficient and speedy.

The local DPS promptly presented David and Dianne with their new Texas driver licenses (paper copies to use until the laminated plastic copies arrive by mail). David and Dianne had completed the process in less than one day. They left Livingston, Texas, in their Montana-licensed RV, towing their Texas-licensed Jeep. They were free to travel whenever they wanted and wherever they wanted, without worry. Or, so they thought!

Managing a Montana LLC

As Dianne drove through Washington State, she didn’t realize she was in a speed zone. The next thing she knew, she was being pulled over by a local DPS trooper. He noticed the Montana license plate on the RV and the Texas plate on the Jeep. He asked to see Dianne’s driver license and noted it was also Texas. The trooper didn’t stop there. He contacted the Texas Secretary of State’s office to check on the discrepancy, and he was told that the couple was most likely guilty of tax fraud and tax evasion. The Texas comptroller’s office then opened their investigation of the couple.

That’s when our law firm received the call from the frantic couple. They were being accused of a felony, potentially punishable with six months to two years in prison. In their defense, the couple had to swear that they had not been in Texas for more than 30 days during the past year. As one Montana lawyer in the LLC-creating business explained (in response to questions about the validity of the Montana plates where the owners are Texas domiciled): “The best approach for a Texas resident operating a vehicle owned by a Montana LLC is to limit his/her time in Texas.”

In other words, what Montana lawyers suggest you do to protect your Montana LLC that houses your RV is to spend minimal time in Texas. However, by not spending time in Texas, the place you are claiming as your home, you will undermine your claim that you are domiciled in Texas. As a lawyer advising people about establishing domicile in Texas, I can guarantee that the best way to disprove your claim of Texas domicile is to spend too little time in the state.

The Ten Commandments of Domicile

As a word of caution about domicile, if you intend to make Texas your home (which is the legal definition of domicile), you should truly “make Texas your home” by going above and beyond the process of selling your home in California and registering your vehicle and obtaining your driver license in Texas. In fact, since you plan to travel extensively throughout the country, to firmly establish Texas as your home, you need to follow what I call the Ten Commandments of Domicile (in this order):

  1. Obtain your Texas address;
  2. Register your vehicles in Texas;
  3. Obtain your Texas driver licenses;
  4. Register to vote;
  5. File an Affidavit o f Domicile with the court;
  6. Establish community relations i n Texas;
  7. Change to local businesses for banking, accountants, doctors and dentists;
  8. Have your estate planning documents (wills, trusts an d powers o f attorney) written i n Texas;
  9. Keep stored belongings in Texas;
  10. If you still have real estate outside o f Texas, rent the real estate o r otherwise sho w that you aren’t using it as your “hub.”

The reason the Washington DPS officer suspected a problem was because of the discrepancy between Texas plates, Texas driver licenses and that Montana plate on the RV. Consistency between these items, license plates and driver license, is the best way to proceed. Realistically speaking, if you intend to claim domicile in Texas, then bite the bullet and pay the Texas sales tax for your RV. Then, all your vehicles will have Texas license plates. Your driver license will be Texas and, if you are pulled over for speeding in Washington State, you won’t face felony charges for tax evasion.

As an aside, it is important to remember that paying Texas sales tax helps to fund the local Livingston, Texas, community, a low-income, rural area, 70 miles northeast of Houston. The taxes also provide funds necessary to keep Texas roads in good repair. After Hurricane Harvey, there’s even a greater need for assistance in this regard.

So, if you truly want to leave your cares behind when you choose the full-time RV lifestyle, I recommend staying informed and remain certain that you are following the proper procedures to avoid future legal problems. Adhering to the advice of legal counsel will provide you with peace of mind and worry-free RV travels.

K. Susie Adams

Author

K. Susie Adams SKP #134068

K. Susie Adams has been a lawyer for over 30 years, spending 15 of those years working as a trial lawyer. She also taught legal writing at the University of Houston Law School. From 2011–2016, she was executive director of Childrenz Haven, the Child Advocacy Center of Polk County, Texas. Susie and her husband, James Frost, reside in Livingston, Texas.

6 Responses to “Is a Montana LLC Right for You?

  • Dick White
    1 week ago

    To add to your article and I feel correct decision…1) when any of the LLC creating law firms are asked for an opinion of its legality they make none and send you a copy of your present state law re who is required to have plates in that state 2) as an insurance agent for many years I also have serious issues of using a “personal Auto Policy” to cover a vehicle that is a commercial enterprise. The personal auto specifically excludes coverage for commercial activities/ventures. If a commercial policy is used it does not provide the broader coverage of a personal policy..

    Enjoyed your article…

  • Phil Somsen
    1 week ago

    We have been full time RV for 2+ years. Domiciled in South Dakota.
    We sold everything in Iowa where we had lived for almost 20 years.
    Our wills were last done in 2017 as I prepared to retire.
    Nothing has changed but reading your blog makes me wonder if it would be best to redo our wills in SD. If so it would be boilerplate with no changes. Seems like unnecessary cost at an attorney.
    We are sure to be in SD at least once a yes or more often-we have family on both sides.
    Have registered to vote etc.
    Since we have no real property anywhere I am not convinced it needs to be done.
    Full time means the end could come for either/both of us anywhere other than SD.
    Your counsel would be appreciated!
    Phil & Evy Somsen
    SKP #131800

    • Georgianne Austin
      19 hours ago

      Hi there!
      With specific questions like yours, we recommend you reach out to legal counsel directly so all factors can be considered in the discussion. Loring & Associates (who Mrs. Adams works with) typically offer a free consultation, which sounds like it would be helpful in your case. http://www.loringlaw.com/

  • I get a kick out of people who want all of the perks their taxes pay for but don’t want to pay any taxes

  • Gregory Smith
    4 days ago

    Great insight and good advice.

  • Andrew Richardson
    21 hours ago

    Great article! We looked at doing a Montana LLC ,but it seemed a bit risky so we opted to ‘bite the bullet’ and pay Colorado sales tax when we purchased our RV. Changing domicile to Florida using Escapees was simple when the time came to become fulltimers.

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