Setting Up For Success: Partnership In A Boat

Boat partnerships are a great way to enjoy the benefits of boat ownership without the major financial and time commitments. With most boats sitting idle in their slips 90% of the time, sharing ownership can significantly reduce costs and increase access to a wider range of vessels. However, successful boat partnerships require careful planning and consideration to avoid conflicts and strained relationships. The key to a successful partnership is open and honest communication, a detailed agreement, and a willingness to compromise and share responsibilities. This includes defining ownership rights, usage guidelines, maintenance and repair costs, insurance policies, dispute resolution methods, and exit strategies. By addressing these issues upfront and putting the agreement in writing, partners can ensure a smooth and enjoyable boating experience while sharing the financial burden.

Define ownership rights and percentages

When it comes to a boat partnership, it is important to outline and agree on important details and issues that may arise. This includes defining ownership rights and percentages, which are determined by several factors.

Firstly, the number of partners in the boat-sharing agreement will impact the ownership percentages. For instance, for two owners, ownership rights can be set at 50 per cent each, for three owners, 33 per cent each, and so on. This will be crucial when determining costs for maintenance, repairs, and taxes, as well as scheduling the boat's use.

Secondly, the initial investment made by each partner should be considered. Ownership percentages are typically influenced by the amount of money contributed to the business relative to the total investment required. However, other factors, such as the amount of work, skills, and expertise each partner brings to the table, also play a role. For example, if one partner has valuable boating skills or management experience, they may be entitled to a larger ownership percentage.

Thirdly, the level of commitment and the roles and responsibilities of each partner should be taken into account. If one partner is willing to put in more hours or take on more critical tasks, they may ask for a higher stake in the partnership. Additionally, the allocation of profit should be considered. Partners are typically allocated profits proportional to their ownership interest, and those who receive a salary may have a lower stake in the business.

Finally, it is essential to think about the future of the business. If a partner is not in it for the long term, they may have a smaller stake to avoid issues when they leave the partnership. It is also important to consider what happens when new partners join or when existing partners leave, die, or want to transfer their ownership.

To summarise, defining ownership rights and percentages in a boat partnership involves considering the number of partners, their initial investments, their level of commitment and roles, the allocation of profits, and the future of the business. A proper partnership agreement should be drawn up, outlining each owner's legal interest, responsibilities, and rights to usage, as well as what happens when a partner wants to sell their share.

Research and test the boat before buying

Before buying a boat, it is important to conduct thorough research and perform a sea trial or test drive. Here are some key considerations and steps to take:

Research

• Determine your needs and budget: Consider factors such as the type of boat, its intended use, the number of passengers, storage options, and your budget.
• Choose between a new or used boat: Buying a new boat offers advantages such as a clean slate, more options, and warranties. On the other hand, used boats are often more affordable, less worrisome in terms of scratches and dents, and come with more resources and buying options.
• Involve all partners: If you are considering a boat-sharing agreement, ensure that all potential owners are involved in the research and decision-making process. Define ownership rights, legal interests, and responsibilities towards the vessel.
• Understand the costs: In addition to the purchase price, factor in maintenance costs, insurance, fuel, taxes, and other incidentals.
• Communicate with partners: Discuss financial obligations, usage rights, and expectations for maintenance and repairs.
• Consider a written agreement: While not always necessary, a signed, written agreement between co-owners can help maintain a workable partnership and provide guidelines for resolving disputes.

Testing the Boat

• Insist on a water test: Don't be afraid to ask for an on-water test, even in windy and choppy conditions. A good salesperson should be willing to prove the boat's performance.
• Check safety: Test the boat's turning capabilities and ensure it has no safety issues.
• Evaluate low-speed control: Understand how the boat handles in reverse, including the direction of the stern swing and the ability to change direction.
• Assess hull integrity: Listen for bulkhead squeaks and check for loose screws after driving over a wave.
• Test tracking ease: Center the wheel at idle speed and observe if the boat can travel straight without constant correction.
• Conduct a systems check: Ensure that all mechanisms, such as the bilge pump, stereo, lights, and fresh and raw water systems, are operational.
• Document any issues: Note any non-operational items and insist that they be fixed before finalising the purchase.

By conducting thorough research and testing the boat before buying, you can make a well-informed decision and ensure a positive boating experience for you and your partners.

Outline insurance policies and procedures

When it comes to insurance policies and procedures for a boat partnership, there are several key considerations to keep in mind. Here are some detailed instructions to outline and navigate these considerations effectively:

Types of Insurance

Firstly, it is important to understand the two basic types of boat insurance: "agreed value" and "actual cash value." The distinguishing factor between these two types lies in how depreciation is handled. "Agreed value" policies cover the boat based on its value when the policy was written, and while they may be more expensive upfront, they do not factor in depreciation for a total loss of the boat. On the other hand, "actual cash value" policies are more affordable upfront but consider depreciation. As your boat ages, your insurer will likely require an actual cash value policy, which can result in substantial savings.

Kinds of Insurance Policies

Marine insurance covers a diverse range of watercraft, and you may be surprised at what can be insured. Here are some common types of marine insurance policies:

• Personal Watercraft (PWC)
• Yacht (generally, vessels 26 feet and smaller are considered "boats," while "yachts" are 27 feet and larger)
• Boat and PWC Rental (although not always required, this insurance covers damage to the vessel, as well as the operator and passengers)
• Boat Clubs (covers all members of the club while operating a boat)
• Professional (Pro Angler, Fishing Guides, and Charters) - these policies are highly customizable and can include coverage for travel to tournaments, equipment, etc.)

What Insurance Policies Cover

The coverage you need depends on how and where you use your boat. An "all-risk" policy offers the most comprehensive protection, but it's important to understand that it doesn't cover every type of loss. Exclusions in an "all-risk" policy typically include wear and tear, marring, denting, animal damage, manufacturer's defects, design defects, and ice and freezing.

You may also have the option to add extra coverage to your policy. Available add-ons may include medical payments, personal effects, uninsured boaters liability, and towing and assistance. Most policies will cover permanently attached equipment, as well as items like anchors, oars, trolling motors, tools, seat cushions, and life jackets.

Types of Boat Insurance Coverage

In addition to the basic coverages mentioned above, there are several common coverage add-ons to consider, including:

• Specialized Coverage: Coverage for specific items on your boat, such as an expensive propeller or navigation equipment.
• Salvage: Coverage for removing your boat due to substantial or minor damage.
• Consequential Damage: Covers losses resulting from wear and tear rather than accidents (e.g., rot, mould, corrosion).
• Towing: Towing your boat to safety can be costly, so this coverage can be valuable.
• Cruising Extension: If you plan to leave the country (typically to Mexico or the Bahamas), you can get temporary additional coverage.

Insurance Cost Factors

When setting the cost of a policy, insurers consider various factors, and these can vary among insurance providers. Here are some items to keep in mind:

• Cruising Area: The location where you will be boating.
• Boating Safety Education: Whether you have received formal training or certification.
• Driving Records: Both boating and driving records can impact your insurance rates.
• Liability Limits: Higher liability limits will result in higher insurance costs.
• Deductible: Choosing a higher deductible will lower your insurance premium.
• Towing Insurance Requirements: For offshore fishing, towing insurance is crucial, as it can be extremely expensive.
• Hurricane Plan: If you boat in a hurricane zone, your insurer may require you to have a hurricane plan in place, which can even lower your rates if followed properly.

Reducing Insurance Costs

There are a few strategies to reduce your boat insurance costs:

• Seasonal Use: If your boating is restricted to certain seasons and your boat is in storage during the off-season, you may be eligible for winter layup discounts.
• Driving Record Discounts: Many insurers offer discounts for good driving records.
• Boater Education Classes: Completing boater education classes can lead to insurance discounts.
• Freshwater vs. Saltwater: Insuring a boat in freshwater is typically less expensive than in saltwater, so discuss your boating locations with your agent.
• Bundling Coverage: You may be able to save money by bundling your boat insurance with the same company that insures your home and/or car.

Additional Considerations

Before purchasing a boat, it is advisable to determine the insurance costs based on your specific needs. Additionally, when shopping for boat insurance, it is beneficial to gather information from fellow boaters about their experiences with different insurance companies and how their claims have been handled. The way an insurer has handled claims in the past can be a good indicator of the quality of service you can expect.

Furthermore, it is essential to have a clear understanding of what your policy covers and what it excludes. "All-risk" policies, for example, typically exclude wear and tear, gradual deterioration, marring, denting, and certain types of damage. Finally, it is worth noting that most policies will allow anyone to operate your boat as long as you have given them permission, although this may result in increased premiums.

Establish a schedule for boat usage

Establishing a schedule for boat usage is a critical aspect of a boat partnership. Here are some detailed steps and considerations to help you set up an effective schedule:

Define Ownership Rights and Usage Rights:

Start by defining the ownership rights of each partner involved in the agreement. If there are two owners, set the rights at 50% for each owner. For three owners, set the rights at 33% for each, and so on. Equal ownership rights are essential for determining costs and will also alleviate conflicts when scheduling boat usage.

Consider Boat Usage Patterns:

Take into account the boat usage patterns of each owner. Some partners may want to use the boat more frequently than others. Discuss and agree on a reasonable usage arrangement, including accommodating longer vacations or specific events. Consider each owner's preferences and try to balance the schedule accordingly.

Create a Scheduling System:

Develop a practical and fair scheduling system that works for all partners. You can assign specific days, weekends, or blocks of time to each owner. For example, you could alternate weekends or designate certain weeks for each owner. Consider using a shared calendar or scheduling app to make the process easier and ensure everyone has access to the schedule.

Handle Special Occasions and Holidays:

Special occasions and holidays can be peak times for boat usage. Discuss how these times will be handled in advance to avoid conflicts. You could rotate the usage during these periods or come up with a system that ensures fairness, such as a lottery system for popular dates.

Allow for Flexibility:

While a schedule is important, it's also good to allow for some flexibility. For example, if an owner cannot use their allocated time, they could swap with another partner or make arrangements to use the boat at a different time. This ensures that no one misses out on their fair share of boat usage.

Regularly Review the Schedule:

Set up regular intervals to review and adjust the schedule as needed. This could be done monthly, quarterly, or at least once a year. During these reviews, discuss any issues or concerns and make changes to accommodate everyone's needs and preferences.

Consider a Scheduling Tool:

Utilize a scheduling tool or app to manage the boat usage schedule. There are tools specifically designed for boat partnerships, such as Nautical Monkey, which can help you track expenses and scheduling, making it easier for all partners to enjoy the boat fairly.

Remember, good communication is key to a successful boat partnership. Keep the lines of communication open, and be willing to adapt the schedule as needed to ensure everyone's satisfaction.

Plan for the end of the partnership

Planning for the end of a boat partnership is a crucial step in the process of setting up a boat-sharing agreement. While it may be an uncomfortable topic to discuss at the beginning of a partnership, it is essential to have a clear plan in place to avoid potential conflicts in the future. Here are some key considerations to include in your plan:

Buyout or Sale of the Boat

It is important to decide whether one partner will have the option to buy out the others or if the boat will be sold and the proceeds divided among all partners. This decision should be made upfront and included in the partnership agreement. In the case of a buyout, establish a fair method to assess the real sales value of the boat and give the remaining partners the first option to purchase the departing partner's share. If no partner wishes to buy the share, it can be offered on the open market, with the remaining partners having the right of veto over any prospective purchaser. Alternatively, the entire boat may be put up for sale.

Handling of Insurance and Taxes

Insurance policies and tax payments should be addressed in the event of a partnership dissolution. Ensure that insurance policies are in the name of all partners and outline how insurance payouts, liabilities, and recovery-upon-loss will be handled. Additionally, decide how taxes will be handled, including who will be responsible for paying them and what happens if one partner cannot or will not pay their share.

Communication and Mediation

Even with a detailed plan, conflicts may arise during the end of a partnership. Establish clear communication channels and, if necessary, involve a neutral third party to mediate and resolve disputes. This can include mediation, arbitration, or another agreed-upon method of dispute resolution.

Return of Personal Items

It is important to consider the removal of personal items from the boat when a partnership ends. Partners should agree on a reasonable timeframe for removing personal belongings and returning them to their respective owners. This process should be completed promptly to avoid any delays in the buyout or sale of the boat.

Documentation and Record-Keeping

Maintain proper documentation and records throughout the partnership, including financial contributions, maintenance logs, and usage schedules. These records will be crucial in determining ownership percentages, resolving disputes, and finalising the partnership agreement.

By incorporating these considerations into your plan for the end of the partnership, you can help ensure a smooth and amicable conclusion to the boat-sharing agreement while protecting the interests of all involved parties.

Frequently asked questions