Thinking about a chartering business

[CSY Man]

. Do you speak more than English? Really. A friend ran a successful 6 pack business based on foreign tourists, an untapped market. Most likely easier than finding the odd tourist from Iowa (nothing personal) who wants to go boating. Took many years to build referrals.

Got pretty much the same idea, I speak a few languages and cater to foreign tourist, they are a lot easier to deal with than Americans.

[TrentePieds]

Quote: "The reason why I want to do it is to offset the cost of boat ownership. I just cannot justify 300K + expenses hobby."

And there you have it :-)!

What you propose to do is NOT financially justifiable. It is for YOU to develop a business plan. When YOU've done that, I would, had I still been in Public Practice, be happy to issue an Engagement Letter for a review and evaluation of your business plan.

The reason that people are not doing what you propose is that it is - as you say - not financially justifiable. The loopholes that at one time, half a century ago, made it a viable tax minimization dodge have long since been closed via legislation governing licenses and certifications required to skipper "charter" boats and via "hull regulations" governing the actual construction of hulls and the fit-out of boats in the charter trade that puts the idea WAY into the realm of financial folly.

But have a go at the business plan, then we can talk about it again.

TrentePieds

[Medved]

Originally Posted by TrentePieds

Quote: "The reason why I want to do it is to offset the cost of boat ownership. I just cannot justify 300K + expenses hobby."

And there you have it :-)!

What you propose to do is NOT financially justifiable. It is for YOU to develop a business plan. When YOU've done that, I would, had I still been in Public Practice, be happy to issue an Engagement Letter for a review and evaluation of your business plan.

The reason that people are not doing what you propose is that it is - as you say - not financially justifiable. The loopholes that at one time, half a century ago, made it a viable tax minimization dodge have long since been closed via legislation governing licenses and certifications required to skipper "charter" boats and via "hull regulations" governing the actual construction of hulls and the fit-out of boats in the charter trade that puts the idea WAY into the realm of financial folly.

But have a go at the business plan, then we can talk about it again.

TrentePieds

So the reason for me to even look into this came from an ad for https://www.atlantic-cruising.com/bu...cht-ownership/
It is not my intention to do anything illegal, however, if I can run a small business that I enjoy, that is what I am trying to do. By the way, love the CAPS!!!

[sailingchiro]

I have a Master 50 License. I listed my boat on VRBO.com and Homeaway. I have a full time job but do about 5-6 week charters per year to pay for my boat. Weekly charters are $3300per week. I have met some great people that book every year. They purchase the food online through grocery store and I pick up. It is alot of work but enjoy the boat more than my day job. Insurance tripled in price due to hurricanes but my single endorsement for charter was only $100 more per year.
If you like entertaining people on your boat then it is fun. If you don't like entertaining, don't do it. They break stuff (especially the head). Last year, I was able to install a genset from charter earnings. I would never want to do this full time. This year I purchased a new mainsail. *It is nice to have other people pay for your toys.
Boats depreciate at 10 years. Therefore, alot of tax benefits plus the writeoffs associated with business. My advice, only plan on a few good paying charters a year and keep the good customers and avoid the bad. Most of my charters have never been on a skippered charter before and love it. Repeat business customers now know the systems and how to run the boat. They cook, I cook, etc. just like with my friends. My charter guests have become very good friends of mine. They just pay me.

[fahtcha]

There are a lot of charterers on the Chesapeake, so be careful about moving into a saturated market.

[Medved]

Originally Posted by sailingchiro

I have a Master 50 License. I listed my boat on VRBO.com and Homeaway. I have a full time job but do about 5-6 week charters per year to pay for my boat. Weekly charters are $3300per week. I have met some great people that book every year. They purchase the food online through grocery store and I pick up. It is alot of work but enjoy the boat more than my day job. Insurance tripled in price due to hurricanes but my single endorsement for charter was only $100 more per year.
If you like entertaining people on your boat then it is fun. If you don't like entertaining, don't do it. They break stuff (especially the head). Last year, I was able to install a genset from charter earnings. I would never want to do this full time. This year I purchased a new mainsail. *It is nice to have other people pay for your toys.
Boats depreciate at 10 years. Therefore, alot of tax benefits plus the writeoffs associated with business. My advice, only plan on a few good paying charters a year and keep the good customers and avoid the bad. Most of my charters have never been on a skippered charter before and love it. Repeat business customers now know the systems and how to run the boat. They cook, I cook, etc. just like with my friends. My charter guests have become very good friends of mine. They just pay me.

Thank you. This is precisely the model I had in mind.

[TrentePieds]

Alright Medved :-) You've read between the lines that "in civilian life" I was an accountant in public practice. In Canada, not the US, but the regulations are very, very similar in the two jurisdictions.

When I was young, I was a senior instructor for the proprietary sailing club that pioneered the business model for charter businesses as they are run today, and for "Croose'n'Learn" vacations. Been there. Got the T-shirt. Literally. Sent to me from a satisfied student from the Bahamas I taught to sail in the Salish Sea half a century ago. The T-shirt is still in drawer :-)

Others have told you that being a charter skipper is a mighty demanding job. It is NOT a holiday among friends, and not everyone has the personality to pull it off.

So: Impressive advertising, that is. But isn't advertising, and marketing in general, a device for perpetuating the old saw that "a fool and his moeny are soon parted"?

An aphorism I've developed over half a century of practising accountancy, teaching it, and generally having had to deal with naifs of many kinds is this: "Anyone hiring a professional must know as much or more about the problem at hand as does the professional. Otherwise the hirer cannot monitor and supervise the professional, and is open to exploitation."

So my advise to you stands: Develop your businessplan. Once you have done that you will be in a position to evaluate if the bait dangled by Atlantic Cruising Yachts is worth taking, or whether it is, as I suspect, snake oil!

Until you've developed your own business plan, which will cost you only time and thought, but no money, you will - meaning no disrespect - be a naif.

Oh - an afterthought: If it's sailing at moderate cost you want — sailing, not bragging rights — you can pick up a perfectly adequate boat in good condition for ten grand :-)!

All the best

TP

[Medved]

Originally Posted by TrentePieds

Alright Medved :-) You've read between the lines that "in civilian life" I was an accountant in public practice. In Canada, not the US, but the regulations are very, very similar in the two jurisdictions.

When I was young, I was a senior instructor for the proprietary sailing club that pioneered the business model for charter businesses as they are run today, and for "Croose'n'Learn" vacations. Been there. Got the T-shirt. Literally. Sent to me from a satisfied student from the Bahamas I taught to sail in the Salish Sea half a century ago. The T-shirt is still in drawer :-)

Others have told you that being a charter skipper is a mighty demanding job. It is NOT a holiday among friends, and not everyone has the personality to pull it off.

So: Impressive advertising, that is. But isn't advertising, and marketing in general, a device for perpetuating the old saw that "a fool and his moeny are soon parted"?

An aphorism I've developed over half a century of practising accountancy, teaching it, and generally having had to deal with naifs of many kinds is this: "Anyone hiring a professional must know as much or more about the problem at hand as does the professional. Otherwise the hirer cannot monitor and supervise the professional, and is open to exploitation."

So my advise to you stands: Develop your businessplan. Once you have done that you will be in a position to evaluate if the bait dangled by Atlantic Cruising Yachts is worth taking, or whether it is, as I suspect, snake oil!

Until you've developed your own business plan, which will cost you only time and thought, but no money, you will - meaning no disrespect - be a naif.

Oh - an afterthought: If it's sailing at moderate cost you want — sailing, not bragging rights — you can pick up a perfectly adequate boat in good condition for ten grand :-)!

All the best

TP

Appreciate your perspective. This is why I reached out to people on this forum, so to get help from the community. You are correct, I am very uneducated in this space, so instead of signing paperwork with that company I am reaching out. As far as the business plan, while it does not have to cost me money, I am willing to compensate someone who runs this business today to adopt theirs for my use, and to get a real picture of this business to understand if it makes sense in my particular circumstance.

[sailingchiro]

No problem, it is a great break from the day job. My annual expenses are roughly $3000 insurance(was $950 before hurricanes in Caribbean), $4080 dock, $1200 every two years haulout and bottom, and $200 florida and CG registration. The rest is repair and maintenance. Oh, and I purchased a new hypalon dinghy last year with charter money. I don't have a mortgage.

[skipmac]

It has been a several years since I started a small business but at the time not only did you have to show intent to make a profit but actually had to make a profit periodically, minimum one year out of five if I recall. I can check with my accountant to confirm but as far as I know this hasn't changed.

So if part of your plan is to write off expenses, depreciation and the like, again assuming tax rules have not changed, you are not going to qualify for IRS deductions for business expenses unless you do earn a net profit on the business. You might be able to offset some of your out of pocket boat costs with the income but I would discuss the details very carefully with a qualified CPA or tax expert of some variety.

[Medved]

Originally Posted by skipmac

It has been a several years since I started a small business but at the time not only did you have to show intent to make a profit but actually had to make a profit periodically, minimum one year out of five if I recall. I can check with my accountant to confirm but as far as I know this hasn't changed.

So if part of your plan is to write off expenses, depreciation and the like, again assuming tax rules have not changed, you are not going to qualify for IRS deductions for business expenses unless you do earn a net profit on the business. You might be able to offset some of your out of pocket boat costs with the income but I would discuss the details very carefully with a qualified CPA or tax expert of some variety.

I am definitely planning to look for professional help with forming the company, tax planning and filing, etc. I am starting to rethink part-time myself only idea, and starting to think that I may find few capitans to run my boat when I am not available to make sure I can satisfy IRS requirements.

[TrentePieds]

In Canada, income from a sole proprietorship or a partnership is declared on a Personal Tax Return Schedule 2025...202n. A separate Sched 2025...n is required for EACH business operated by the taxpayer, and the Net Incomes from Sched 2025...n.s are aggregated before determining the Taxpayers Taxable Income. Canadians MUST declare WORLDWIDE income on their returns. That would include income from a boat kept in, say, South Carolina. Detected failure to do so can result in REALLY nasty penalties!

Capital Cost Allowance on a cruising boat (Capital Asset, Class 7) is 15% of the declining Undepreciated Capital Cost. CCA can only be taken for the same number of days (proportion of the Taxation Year) that the boat was actually earning charter income. "Own Use" of the vessel must be declared as "notional income" (at the market rate) in order to claim Operating Costs and CCA for those days.

Yacht owners aspiring to reduce the cost of their hobby by running a "charter business" need to understand that Canada Revenue Agency (CRA or "The Taxman") has seen it all before, and that the collective wisdom and deviousness of CRA is far greater than that of the dilettante "businessman", particularly since "putting the boat in charter" seems so obvious a tax dodge. The appearance that it is so is entirely fallacious.

The wisdom of the hoi polloi that "I can write it off for tax purposes" is fallacious more often than it is correct.

When I counselled Medved to develop a business plan, I did so in full anticipation that such a plan would include the tax implications for the sole proprietor. Or the partners in case of a partnership. If a naïve yacht owner tries to do it through a corporation, he'll find himself in REALLY deep water!

Never forget that an outfit such as Atlantic Yacht Charters is ONLY a rental agent. Such have their uses, but be aware that their "charter contracts" will have been structured by expensive lawyers so as to hold them harmless in ALL circumstances while laying off ALL the business risk and operational risk on the yacht owner. If there really WERE an after tax income to be earned by owning charter yachts, rental agents such as AYC would be doing the owning!!

TP

[Medved]

Originally Posted by TrentePieds

In Canada, income from a sole proprietorship or a partnership is declared on a Personal Tax Return Schedule 2025...202n. A separate Sched 2025...n is required for EACH business operated by the taxpayer, and the Net Incomes from Sched 2025...n.s are aggregated before determining the Taxpayers Taxable Income. Canadians MUST declare WORLDWIDE income on their returns. That would include income from a boat kept in, say, South Carolina. Detected failure to do so can result in REALLY nasty penalties!

Capital Cost Allowance on a cruising boat (Capital Asset, Class 7) is 15% of the declining Undepreciated Capital Cost. CCA can only be taken for the same number of days (proportion of the Taxation Year) that the boat was actually earning charter income. "Own Use" of the vessel must be declared as "notional income" (at the market rate) in order to claim Operating Costs and CCA for those days.

Yacht owners aspiring to reduce the cost of their hobby by running a "charter business" need to understand that Canada Revenue Agency (CRA or "The Taxman") has seen it all before, and that the collective wisdom and deviousness of CRA is far greater than that of the dilettante "businessman", particularly since "putting the boat in charter" seems so obvious a tax dodge. The appearance that it is so is entirely fallacious.

The wisdom of the hoi polloi that "I can write it off for tax purposes" is fallacious more often than it is correct.

When I counselled Medved to develop a business plan, I did so in full anticipation that such a plan would include the tax implications for the sole proprietor. Or the partners in case of a partnership. If a naïve yacht owner tries to do it through a corporation, he'll find himself in REALLY deep water!

Never forget that an outfit such as Atlantic Yacht Charters is ONLY a rental agent. Such have their uses, but be aware that their "charter contracts" will have been structured by expensive lawyers so as to hold them harmless in ALL circumstances while laying off ALL the business risk and operational risk on the yacht owner. If there really WERE an after tax income to be earned by owning charter yachts, rental agents such as AYC would be doing the owning!!

TP

Let's start with praises to God that I live in US and continue with, I am planning to have an actual business that I enjoy. My comment about a hobby was simply that I cannot afford such expense for my own pleasure alone. This happens, in the greatest country on earth USA, every day when people start small business out of passion and not because they are looking for the "big bucks". This is why tax law is written in such a way that encourages formation of the small business, which is the backbone of our economy, and this is coming from someone who grew up in a nanny state USSR.

[TrentePieds]

Ye pays yer money and makes yer choices. There are a great many Canadians who see it the other way about. I'm one. And that from someone who grew up in the nanny state, Denmark :-)

You tax laws are in many ways different from ours. I'm merely counselling you to know JUST WHAT THEY ARE. Our economy is not significantly different from yours whether in structure or in operation. There are good economic reasons for that. If you'd like to engage in a quick study of why that is so, you might like to begin by reviewing Hans Morgenthau's six principles of economic and political realism :-)

If you have three hundred boatbux burning a whole in your pocket, sinking it all into a boat is just about the worst thing you can do, fiscally speaking. Since you are gonna hire a professional, let him teach you how to generate a 8 1/2 - 10 percent annual ROI on that, while protecting it from the erosion that is the inexorable consequence of your Fed's "fiscal easing". The 30 grand a year a SOUND investment of 300 big'uns would generate would keep you sailing forever in the sort of boat you can pick up for chump change any day of the week along the mid-Atlantic shores. You'd get to eat your cake and eat it too. Isn't THAT the essence of the American Dream :-)?

TP

[jmschmidt]

Like someone asked, do you have a license? Because the lowest level of credential is a Six-Pack license which requires 360 documented sea days to even apply. A sea-day is generally four continuous hours per day underway. Sail for two hours, anchor for lunch, sail for two more hours, equals zero, doesn't count.