Owning a Boat with Friends
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Another frequent hazard to smooth sailing partnerships is financial inequality and the resulting differences of opinion among the owners as to what is essential to your yachting operations. Is it OK for one person to install (and remove) “their” chartplotter or Porta Potti? Do we really need a new stereo? We worked up a “budget” with a small-ish reserve fund for repairs and unforeseen costs for our current co-op (organized as a LLC). A written budget helps keep tightwads and free spenders on the same wavelength. It’s easy to lose track of costs if each person acts independently, buying hardware or goodies for the boat.
It also helps to keep track of when a part or piece of gear was purchased or replaced for that maintenance log you should be keeping. And with more than one person working on the boat, you definitely do need a written maintenance log. You also better figure out a way to assign costs if someone drops an important piece of the boat overboard, hits the dock really hard or does something else dumb. Hey, it happens.
Who's the Boss?
Many co-ops struggle to divide up maintenance chores in an equitable manner. If one owner is handier or has more time than another, perhaps he or she can do more of the maintenance while the other partner pays more of the costs. (In theory, that’s what is supposed to happen with our current co-op, where we assign labor a $15 an hour value). However you assign the chores, communication and written records are essential. And do keep each other informed of any operating problems, funny noises from the engine room or other anomalies. Ideally, your ship’s log will note engine hours, pump outs, equipment additions, and minor repairs and incidents during use.
Several other boat co-owners I’ve talked to mentioned the difficulty of having two captains aboard. What starts out as a minor annoyance can grow to become a major source of irritation. Perhaps one solution to avoid sailing with two “skippers” when using the other owners as crew is to agree ahead of time that command falls to the person whose calendar “day” it is.
Our first boat co-op was short lived, and its dissolution was casual. However, I have heard of other partnerships where dissolution was not so amiable. Something to consider well before the initial purchase is how can we exit from this deal? One uncommonly sensible article on the Internet even suggests you find the partners before you find the boat. But as my spouse would say, that takes all the challenge out of it!
Our second effort included forming a LLC with the boat as its asset. Like a corporation, it is a legal entity that owns the asset. The people are members, and there is a considerable amount of paperwork involved in organizing it and in record keeping. In some states, there are also annual fees and or tax returns (even if there’s no income). Requirements for forming them in the U.S vary from state to state, and the Internet claims at least in some states you can easily fill out the forms yourself. There may be filing fees and some costs to advertise the LLC formation and with maintaining the checking account. Some of the high-end “fractional ownership” deals that involve new boats and way more money than anything we’ll ever be affiliated with use the LLC structure.
Because of the record keeping required, in theory, when it comes time to sell the boat, each member should get a simple percentage of the proceeds based on membership share. Then, we dissolve the LLC. We shall see. We haven’t done it yet.
Our current co-op requires a minimum financial stake and a training process before members are “qualified” to take the boat out. We usually work on the boat together in the spring and take on various smaller projects independently. Several articles on the Internet about shared ownership mention the difficulty of finding other interested potential partners. We, too, have found that it’s not easy to find responsible energetic boat caregivers. But a core membership of four to five has so far been pitching in to keep our old woodie going.
Co-ops are not simple. I wouldn’t attempt the management or accounting skills involved in the LLC. Yet, creating a little community united in the quest to keep the boat afloat and enjoy using her has been interesting. It can work for the right mix of personalities.
Editor's note: This article was adapted from the author's budget boating ebook. Visit www.chimneybluff.com for info or to purchase this or other titles on sailing and maritime heritage.