Join Date: Apr 2006
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Cliff, what you are suggesting is in fact legal as long as all transactions are at "arm's length" and you make an honest effort to run the business as a business. If you don't make a profit in 3 years out of 5, the IRS may disallow the business and declare it to be a hobby.
If you don't have an accountant (a CPA, tax accountant, or IRS EA "enrolled agent") you want to talk to one and get the scoop. Don't expect any of them to talk to you until May 1st, it's tax crunch time now and then they all go away for two weeks.
Aircraft owners do the same thing. You are the stockholder in the charter company, and when you want the boat you charter it and pay for it just like any other cash customer. The problem is, someone is going to have to make the active effort to place the boat in charter and keep it booked. "Dealers" don't care about that. Charter companies often have their own fleets and want you to buy into their programs, with their boats. So you'd need a charter management company that would professionally manage, maintain, and book your boat. And of course, commercial insurance and so on.
Whether the after-tax bottom line will or won't be for you is something you need to go over with your accountant, and if your tax situation isn't complicated (or rich) enough to have an accountant, the charter business probably isn't for you. If chartering was always so lucrative--the charter companies would use their own capital for it, instead of asking outsiders to buy boats and lend them to charter use.
Remember, after five years of charter, your boat may need a total refit and show twenty to twentyfive years of "normal" use. You've got to run those expenses, and the time for routine maintenance layups and anticipated damages, repairs, etc. along the way.