3 men in a boat...

Discussion in 'Sailboats' started by Lew Morris, Apr 18, 2003.

  1. Lew Morris
    Joined: Jun 2001
    Posts: 124
    Likes: 4, Points: 18, Legacy Rep: 92
    Location: Pismo Beach, Ca

    Lew Morris Industrial Designer

    All Hands,

    This is not exactly a "design" issue but it is one that I am facing for the first time. At fifty-two I don't want to wait much longer for that cruiser I've been dreaming of.

    A recent trip down to Oxnard uncovered a beautiful '91 Beneteau First 38. Two previous owners... but only 71 hours on the clock. Sound vessel, great sail inventory, full instrumentation, radar, loran, auto, and GPS plotter. $99.5K asking... can probably get it for less.

    My regular sailing mate and I are convinced that we can swing it, and there is the possibility of a third party. We are like-minded as to sailing experience and goals, are in agreement as to how a boat should be maintained, are mechanically-inclined towards boats, and have the support of our spouses.

    But there are significant issues to be addressed that WE can think of and many more, I am sure, that we can not.

    To name but a few:

    Details of ownership: tennants in common. Individually financed share of ownership vs. co-signing a loan. Purchase it as a "business" venture (we both work in the FRP industry).

    Escape plans: if a partner is unable to continue at some point, what SHOULD his obligation to the remaining partners be with regard to the sale of the vessel. Should they be able to expect that he will help them prepare it for sale?

    Maintenance funding: is a bank account in the name of the vessel a good idea?

    Insurance:

    Equipment purchases: Joint agreement on the purchase of new equipment (hardware, electronics, sails, etc.)?

    I am hoping that besides the hundreds of years of combined technical experience floating around this site that there may be some experience along these lines as well.

    Any and all input would be greatly appreciated.

    Lew
     
  2. Eric Sponberg
    Joined: Dec 2001
    Posts: 2,005
    Likes: 209, Points: 73, Legacy Rep: 2917
    Location: On board Corroboree

    Eric Sponberg Senior Member

    Lew,

    Interesting that you should ask these questions, because we face the very same issues in airplane ownership.

    My wife and I are partners in a Cessna 172 with two other owners. We face all the same issues that you asked about. We formed a partnership for owning and renting the plane. It is much more complicated with an airplane because there are many federal regulations that we have to deal with besides the maintenance and running of the plane itself.

    If you go to the website for the Airplane Owners and Pilots Association, www.aopa.org, you can contact them for a free copy of their pro-forma partnership agreement. Use the same format for a boat. Just reading through the paragraphs will show you what it takes to set up a partnership for owning an airplane, or in your case, a boat.

    We formed a limited liability partnership (LLP) whose primary asset is the plane. In fact, we should have formed a limited liability corporation (LLC), and we are going to change it soon. An LLP protects the partners from each other whereas an LLC protects us from the outside, like people who rent our plane and have an accident into a house or a school.

    We share the costs of the plane, including its original purchase, and its maintenance, which is federally regulated and gets pretty expensive sometimes. We three partners put a little bit of money up and financed the rest in the name of the partnership in order to buy the plane. We insure the plane in the name of the partnership. We have a checking account in the name of the partnership. And we file a tax return in the name of the partnership, which requires an 1120 S tax form, with schedule K-1 returns to each partner. The partnership never has to pay federal tax, but we do have to pay state tax. The net profit (or loss) is divided equally among the partners as income or (loss) and is recorded on your own 1040 form.

    It may sound a little complicated, but it all works just fine. Try the AOPA website, and call them if you have to, to get a copy of their partnership agreement.

    By the way, we are moving out of the area, so we are going to sell out of our share in the plane partnership. We hope to find someone else who will buy in at the capitalization that we and the other three partners have put in, and then that new partner's proceeds will come direct to my wife and me as payback on our capitalization.

    Hope that helps.

    Eric Sponberg
     
  3. philwhittaker
    Joined: Mar 2003
    Posts: 14
    Likes: 0, Points: 0, Legacy Rep: 10
    Location: Boston

    philwhittaker Junior Member

    The Idea of a LLP is good, I know a lot of people who own boats do it in this way as a tax break. An idea would be to :-
    1. Set up an LLP with the boat as a primary property,all three partners being equal partners in the company.
    2. Charter the boat from the company every time it is used (this fee could be minimal.
    3. Of course the compny would run at a loss and require aditional investment form all three to maintain the boat... Tax write off.


    This could work too as one partner may use the boat more often, the charter fee would then pay for the basic wear and tear on the boat...
    phil
     

  4. Lew Morris
    Joined: Jun 2001
    Posts: 124
    Likes: 4, Points: 18, Legacy Rep: 92
    Location: Pismo Beach, Ca

    Lew Morris Industrial Designer

    thanks for great input gentlemen! and just in time too.

    we have one more boat to look at this week before we get serious ... a 1971 Swan 43.... . .. . .

    Beneteau, Swan, Beneteau, Swan, Beneteau, Swan..... decisions, decisions...
     
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