Montana LLC Car Title Loophole Explained

Introduction to the Montana LLC Strategy
All right. So, today we’re going to talk about the infamous Montana LLC loophole that lots of people are talking about. This has been going on for almost a decade now where there are people that have title problems with their car or even without a title problem. And they’re going to title it and register in the state of Montana under an LLC to avoid a couple things. They’re going to avoid having the title paperwork done in their state. They’re also going to avoid sales tax and they’re going to avoid things like inspections. So, we’re going to take a look at the process, how it works, what the pros and cons are, and is it something that could get you into trouble.

Understanding the Legal Strategy Behind Montana LLC Formation
So, according to Google AI, the Montana LLC loophole is a legal strategy where individuals, often those in states with high sales taxes, form a Montana-based LLC or corporation to purchase vehicles. This allows them to avoid sales taxes and potentially other fees. So in the first paragraph, it says that the primary reason for doing this is to avoid taxes because if you are registering in Montana, the same process you would have to go through in Montana, you could do in your state. Montana doesn’t make anything easier or cheaper as far as a bill of sale versus a title. You have to have the same paperwork. The only advantage is sales tax and inspection.

Why LLC Formation is Required for Non-Residents
The other question that comes up is why do you have to form an LLC? Why can’t you just put it in your name? Well, the reason why is because the states, all 50 states are not allowed to give titles to people who are not residents. They can only title vehicles to people who have a residency there. So, if you don’t have a residence there, and I don’t just mean your cousin’s address, you have to have something that belongs to you. They can’t give you a title. So, you have to form an LLC, have that expense, you have to wait for the LLC to be issued, then you have to put the title in that LLC name, then you have to get a license plate and registration.

Comparing Montana Process to State-Level Solutions
So, it may seem like a good idea if you think you’re trying to solve paperwork problems. However, if all you’re trying to do is solve a paperwork problem, you could do the exact same process in your state without forming an LLC. You’re going to have to jump through some hoops. The DMV doesn’t give titles when you don’t have the old title. So, if you bought your vehicle and you didn’t get one of these when you bought it, a title from the old seller or a proper title, then you’re going to have to do a bunch of paperwork. Here’s all the paperwork. How we do it, it’s in a folder. Here’s all the paperwork. If you’re going to do the Montana LLC, you still have to do that paperwork. The only advantage is you will not have to pay sales tax because Montana is a state that doesn’t charge tax and they also have very limited or non-existent inspection.

State Tax Requirements and Legal Obligations
So, you might think, hey, I’m going to get away with it. It’s legal, right? Well, it’s legal in Montana. Here’s the problem. Every state has a rule that says if you are a resident of the state and you’re operating the vehicle in that state, you have to pay tax. It doesn’t matter where you bought it, where it’s titled, where it’s registered. Your state has these rules. And here’s a good description of it. This is from our friends at Hagerty. We’ve worked with them quite a bit. They explain this loophole. And Montana plates have gotten popular and notorious. States are cracking down. People with Montana plates are getting in trouble coast to coast.

How State Enforcement Works Against Montana LLC Users
How are you getting in trouble? Well, if you are in a state that has tax, which is every other state except for a few like Oregon and Alaska, if you purchase your vehicle and title it in another state and you’re driving around with Montana plates and you get pulled over, they’re going to look and see who’s driving the vehicle. They’re going to look to see who’s the principal of the LLC. And if they find that you have evaded taxes, they’re going to charge you the back taxes, penalties, interest, and they can seize the vehicle. How are they doing that? Well, they’re doing that because once a vehicle is within the borders of another state for 30 days, it legally needs to register and entitle their fees and all. If you live, buy, and keep a vehicle in the state with tax, then sales tax must be paid. End of story.

Automated License Plate Reader Technology for Enforcement
So, it’s legal to do this in Montana. Montana doesn’t care. They’re getting your fees, but your state, it’s not legal. If you use a Montana LLC and drive your car on Montana plates, your state has missed out on tax revenue, and they’re going to come and crack down. How are they going to find you? Well, the way they’re going to find you is they are going to use what’s called ALPR, automated license plate readers. There are little cameras all over the place on street signs, and parking lots, on Ubers, on police cars, and they’re looking at all the plates that go by. And if they see a Montana plate go by the same place two or three times, they’re going to say, “Hey, this vehicle is not just somebody visiting our state from Montana.”

Investigation Process and Red Flag System
Anna on vacation. This must be somebody who used this scam because they know about it. It’s not like it’s a big secret. And they’re going to red flag that vehicle. They’re going to pull you over. They’re going to see it’s an LLC and they’ll turn it in for an investigation. Major crackdowns on owners of Montana plates slapped with major fines back taxes. Attorney author of legal files at sports car market. It’s a mistake to say the risk is getting caught is low. The risk of using the Montana loophole is getting higher.

DMV Conference Calls and Interstate Coordination
How do we know this? It says in the article. First of all, the scheme is well known. The other thing is we attend a conference call with representatives from the DMVs from all 50 states. Every month they have a conference call. We hear what they say. They all know about this. Their revenue departments have a task force that are directing local agencies, dealerships, police departments to look for Montana plates. They can run the Montana plate from their police car. If it comes back to an LLC, they can pull you over, check your ID, ask you questions, and they can turn it in for prosecution.

State Hotlines and Enforcement Examples
In fact, now some states are opening up a hotline that anyone can report out of state plates to the authorities. California, Colorado, Arizona, many other states have it. In fact, in California, there was an owner had a California investigator and two deputies show up their house with a search warrant because they discovered this person had the vehicle. They told him he was violating California law requiring him to register his car in the state and pay tax. Remember, it’s not just a sales tax. It’s a use tax. So, you might say, “Well, I bought it out of state.” Doesn’t matter. If you use it in your state, you have to pay tax. Expect penalties and charges. Many other residents are under investigation for the same thing. There’s a strong interest in combating Montana licensed cars. Enforcement is more common than we realize. People don’t talk about it when they get caught.

Utah Case Study and Legal Clarification
You can do a Google search. Montana LLC. Here’s one from Utah. Utah saves thousands in tax by registering cars in Montana. Is it legal? They interviewed the person who works for the government and Jason Gardner of the Utah DMV says the law is clear. It creates illusion they are domiciled in another state. The law doesn’t. The law specifically says that if a business entity has a vehicle that operates primarily within Utah, the same standard applies. That business is deemed to be domiciled for purpose of registration. So it doesn’t matter where you say, “Oh, my company’s in Montana.” They’re going to say if you’re using it, look, even if FedEx has a vehicle titled in some other state and they use it in your state, they have to pay tax in your state. There’s no get out of jail free card for this.

Legal Reality and Enforcement Consequences
So be aware. It might seem tempting and it might seem like you’re getting away with something, but the law says that if you or your Montana LLC buys a car mostly used and resides in Utah or your state, the tax should be paid and registered there. The law is frequently broken, a lot of money being lost, and it’s something where they’re cracking down. The other side is emissions testing. Montana has no emissions testing. So, states that have strict emissions also sometimes people will do it in Montana because they don’t want to pass smog and the states don’t like that either. It’s not worth the hassle.

Insurance Complications and Coverage Issues
The other part of it is insurance. When you buy insurance for your vehicle, you have to tell your insurance company where the vehicle is domiciled. If you tell your insurance company it’s domiciled in Montana, they’re going to give you a Montana insurance card. Okay. What if you’re driving it in, let’s say, Texas? You’re driving it. You get in an accident. You’re going to file a claim. Your insurance company’s going to ask you why were you in Texas? You can’t tell them you’re on vacation. If you have a Texas license, they’re going to do an investigation. They’re going to deny your claim because they’re going to say, “You lied to us about where the car is.” If you tell them it’s in Texas, they’re going to give you a Texas insurance card. Now, you’re going to have a Texas insurance card on a Montana vehicle. That’s going to get you into trouble with the government because they’re going to see that you’re scamming them.

Historical Context and Increasing Severity
So, this is a very, very serious thing. I know it sounds tempting. You know, years ago, there was the whole Vermont loophole, which that had its own issues and the states cracked down on that. But this is something where it’s more serious because they’re tax evasion going on and emissions evasion. And I can tell you right now, states are cracking down on this. They’re using these ALPRs, these license plate readers that are all over the place. There’s big brother cameras everywhere, and they are catching people left and right. Question is, do you want to do it?

Final Recommendations and Alternatives
If it’s a matter of the paperwork, don’t worry. The paperwork you have to do for Montana is the same you would have to do for your state. You can get a title from your own state. Little bit more paperwork than not having a title, but you can do it. If you’re doing it because you don’t want to pay tax, that’s a whole another issue. You have to decide, is it worth saving, you know, $20,000 car, 7% tax, 14, 1,500 bucks, right? Do you want to do you want to save that money and put it at risk? That’s up to you. But they’re not going to just charge you the back taxes. They’re going to charge you interest, penalties. Sometimes it’s a criminal record because it’s a violation. You have to decide if that’s all worth it.

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Why Is It So Hard To Deal With The DMV For A Car Title

The Growing Problem with State Motor Vehicle Agencies
Dealing with state motor vehicle departments or equivalent agencies for vehicle titles, driver’s licenses, or car and truck registrations has become increasingly challenging. Citizens routinely face extended waiting periods, mandatory appointment scheduling, and lengthy queues. The situation has deteriorated to such an extent that frustrated consumers are pursuing legal remedies.

Legal Action in Florida – Negligence Claims
Attorneys in South Florida are now representing clients in lawsuits against the state’s motor vehicle department for negligence. The Sun-Sentinel in Fort Lauderdale has reported on these legal proceedings. The basis for these legal claims stems from dangerous conditions created by excessive wait times.

Overnight Waits Creating Safety Hazards
Citizens are being forced to wait overnight in lines just to obtain their licenses, creating serious safety concerns. People report having to sleep behind government buildings where they encounter unsafe individuals and situations. Legal representatives are actively seeking additional clients who have experienced similar overnight waiting ordeals.

Appointment System Failures and Resource Shortages
Many regions have completely full appointment systems, making it impossible to schedule visits. Whether dealing with driver’s licenses, vehicle titles, or registrations, you will likely discover that motor vehicle departments, being government agencies, lack sufficient resources to provide timely assistance.

Inadequate Staffing and Incorrect Information
These agencies may not even have necessary forms available. Through our daily interactions with motor vehicle departments on hundreds of client files, we understand the frustrating nature of these situations. Many citizens feel they are receiving the runaround, obtaining incorrect information, or being directed to follow improper methods and procedures.

Performing Your Own Due Diligence
Therefore, it is essential that you conduct your own thorough research. You can utilize our website as a complimentary consumer resource to conduct research, obtain documents, and access forms. Motor vehicle departments are overwhelmed and understaffed due to budget reductions, and their available personnel may not possess the answers you require.

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How To Clear A Lien From A Title With A Charge Off Loan

Understanding Charged-Off Vehicle Liens
What happens when you own a vehicle with a loan lien record appearing on the title, but that loan or lien has been charged off by the bank? How do you remove it from the title? This represents a very common scenario. Frequently, a vehicle loan has long since become delinquent. After typically between 3 to 6 months, the lienholder will execute what’s called a charge off.

The Charge-Off Process Explained
A charge off represents an event where the lienholder must by law declare that loan is no longer a performing asset. It’s no longer a viable valuable benefit on their balance statement. Once they complete that process, they no longer can call it a valuable record for their company. And that means that they may not be able to defend having the lien on their title.

Steps to Remove a Charged-Off Lien
So, what do you do? Well, if you have a vehicle that you borrowed money on, that’s a charge off, or if you’ve purchased a vehicle from somebody and you come to find out that there was a charged off lien on the title, you have to go through a documentation process to get that lien removed from the title record. The DMV will not automatically do this. Matter of fact, they don’t even know that it was charged off. So, you have to present some documents. First of all, you have to contact a lienholder in writing to verify that it’s a charge off. Then what you do is you file those documents.

Filing Documentation for Lien Removal
Either with the DMV or the magistrate in your county to have the lien removed from the title record. It’s called lien mitigation or court order title depending upon the jurisdiction. Our website cartitles.com will give you instructions on how to do this. It’ll show you exactly how we do it. It’s a matter of preparing some forms and documents to be filed with the proper agencies.

Required Documentation Process
You usually have to send out three different packages to three different places. One to the lienholder and they don’t have to respond. You just have to show that you sent it to them. Second, you have to send it to the DMV for a request and then third, you have to usually send it to the magistrate or clerk of court in your county.

Legal Consequences for Improper Lien Filing
What happens if the lienholder does something improper? What you can see on the screen, there are many instances where government agencies have prosecuted lienholders for improper filing. This is from the attorney general’s office in Pennsylvania that sued one title loan company for almost three-quarters of a million dollars. There’s many other cases for millions and millions of dollars in all 50 states where they’re filing these documents improperly.

Final Recommendations
So, stand your ground, do your paperwork properly, get that lien removed from the title so you can either become the legal owner or be able to sell the vehicle to somebody and get your money back.

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Can You Get A Deal On A Car With No Title?

Understanding the Risks of Title-less Vehicle Purchases
Generally, we do not recommend purchasing a vehicle without a title. In fact, you may want to check your state laws to make sure you’re even allowed to do that. There are many risks that can come up if you buy a vehicle without a title. If there’s something about the vehicle history, you can be stuck with the car without a title in the long run.

Current Market Conditions Creating New Opportunities
Nevertheless, we’re seeing some things in the used car market that might indicate that if you could find a vehicle that’s affordable that you can get a great deal on without a title, but you want to be sure you can actually get a title. You want to make sure that it’s not a problem that cannot be solved. You may be able to avoid dealing with a used car market with no deals.

The Vanishing Affordable Car Market
According to this article from Autoblog, inexpensive used cars are vanishing. The used car market is skyrocketing. It’s very difficult to find any used vehicle for any kind of reasonable price and sometimes the only way to do it is to make an exception to some of the normal due diligence.

Strategic Approach to Title-less Vehicle Deals
If you find a vehicle that the seller doesn’t have a title, but the reason they don’t is a solvable problem, you may be able to kind of hack the market and get something that’s a great deal on a nice car. Kind of like if you bought a car that’s a fixer upper, you need to maybe put new tires on it or fix a transmission.

The Fixer-Upper Title Strategy
That’s some method you can use to get a cheap car. You could do the same thing by buying a fixer upper with the title. If you can get that title problem solved, then you can take advantage of the reduced market value that the seller would have to offer because they don’t have a legal title certificate.

Essential Precautions and Documentation
Again, make sure you’re allowed to do that in your state. Make sure that you get good documentation and make sure there’s nothing about that vehicle that could come up later that could prevent you from getting a title. And those are things that are crucial because if you buy a car with no title and then it turns out the car is not eligible for a title, now all your money’s gone. You’re stuck with a piece of metal in your front yard.

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How NOT To Claim An Abandoned Vehicle

Understanding the Abandoned Vehicle Misconception
Frequently in our discussions with clients, the topic or phrase abandoned vehicle comes up during consultation. Often it represents an attempt to discover a method to secure a title for a vehicle that has become challenging. Legally speaking, an abandoned vehicle is one that appears somewhere that nobody knows where it originated from. It just materialized unexpectedly. Whether it’s on private property, public property, on a road, on a highway, in a field, and nobody knows where it originated from. It simply appeared and it wasn’t known where the origin of the vehicle came from.

The Reality of Most Client Situations
In most cases, when clients or customers are speaking to us, that’s not really the case. It’s something where they bought the vehicle and the person never gave him paperwork or somebody gave him the vehicle, never gave him paperwork. The reason why that distinction is very important, if you declare a vehicle to be abandoned, in almost every jurisdiction, you have to surrender the vehicle to the government.

The Harsh Reality: Finders Keepers Doesn’t Apply
The short answer is Finders Keepers does not apply to vehicles. A vehicle that is abandoned has to be processed through a very specific government legal process. And I’m going to show you a couple examples from a couple states of what that is. Now, that’s the bad news. The good news is there are almost certainly much better methods of getting a title.

Critical Advice: Avoid the Abandoned Vehicle Label
If your intention is to get a title for this vehicle, do not call it abandoned. If you call it abandoned, it’s going to make your process either impossible or much, much, much harder. You can’t just make up imaginary storage fees or claim a lean against the vehicle. None of that works. So, forget about abandon. Look at other methods. Even if the rare instance your jurisdiction, your county or state does allow abandoned vehicles, that process is going to be very highly scrutinized and you’re probably going to lose.

Tennessee’s Abandoned Vehicle Regulations
So, let’s look at a couple examples first of what you don’t want to do and then we’ll talk about what you do want to do afterwards. Here’s some state of Tennessee talk about abandoned vehicles. It tells you what the different codes are. You can look up all these codes. It says what the public may or may not do. The public may report vehicles left abandoned, immovable, or unattended to law enforcement. Private property owners, apartment buildings, or you know, if you have a piece of property you own, may call a towing firm and have vehicle removed. That’s it.

What the Public Cannot Do in Tennessee
The public may not, key words, may not have the vehicle towed, sell the vehicle, register the vehicle, obtain ownership of the vehicle. So, if you are the general public, not a property owner, you cannot obtain ownership of the vehicle. That’s key. So, you don’t want to call it abandoned in Tennessee.

Texas Abandoned Vehicle Requirements
What about Texas? Texas says abandoned property, including vehicles. What you have to do is you have to remove it to a storage facility. Basically, you have to call a towing company and they will go through a government process of notifications, of official reporting, of inquiries to the DMV. In many cases, it doesn’t even work for them.

Even Licensed Facilities Struggle
Many of the conversations we have are for towing companies or storage companies that have obtained a vehicle that they towed for somebody that was truly abandoned and they come to find out they can’t get a title either because if you don’t follow every last step in the right order in the right amount of time, you lose. In some cases, you have to start the process within 30 days, but you can’t do too soon. You can’t charge certain fees. You have to do notifications, but first you have to notify the government that you have the vehicle. If you miss one step, the whole process is void.

The Complexity Even for Professionals
So, even for licensed repair and towing facilities, if you fail to follow the exact steps, you’re going to lose on your abandoned vehicle title anyways.

The Better Solution: Title Recovery
So, what can you do? The good news is your situation probably legally defined is not an actual abandoned vehicle. It’s probably what’s called a title recovery, meaning that somehow you obtained the vehicle. The vehicle was given to you or transferred to you or left with you somehow. You know where it came from, which is good. And you just didn’t get a title. You didn’t get the proper documents. You may have a bill of sale, but you’ll probably find out or if you didn’t already, that’s not going to get you a title.

Title Recovery Process Advantages
So, you can go through a title recovery process to have the vehicle be declared you as the owner and then you can get a title, register, sell it, whatever you want to do. But as soon as you start calling it abandoned, now it’s a free-for-all and the government has to step in and say, “We will decide who gets to have the vehicle.”

Your Rights in Title RecoveryIf you are in possession of the vehicle, you have the keys to the vehicle, you have the VIN number, and the vehicle was given to you or left with you, you have the right to do a title recovery attempt. And that title recovery varies from state to state. Our website. You can click the link below. We’ll have a whole section on instructions on exactly how to do a title recovery to get the ownership recognized as you being the owner and get a new title with your name on it.

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