Capital billing service looking for company boat

I own a capital billing service company in the medical field and we're looking to get a boat for our company and have been considering a Sea Ray. We're looking for something smaller at this time but we're looking to take about ~8 people out comfortably, from team celebrations to meetings with prospects.

Is a Sea Ray a good boat for our needs? We were thinking about either the Sports Yacht/L class. I'm curious what you guys think?

I think the biggest question is what is the budget? I asssume you'll hire a captian and crew?

There are many factors that will help you select the appropriate boat. If you do buy a SeaRay Sports Yacht or L Class boat you will receive excellent customer service from SeaRay.

I'd recommend you talk to a dealer or plan to attend SeaRay's annual Yacht Expo. If that's too far out, go see a dealer that carries several of these boats. Another option is to attend the Ft. Lauderdale International Boat Shot at the beginning of November. You will be able to step on just about every model and compare SeaRay with other manufacturers.

The 510 Fly may be a good fit if you're only looking to have 8-10 people out. The Fly Bridge can easily accommodate a good size group and that still leave you with the aft deck and salon for more guests.

Are you a boater? Are you going to have a captain?

If you're going to spend the money on an L Class boat you may also want to look at some other brands.
Ocean Alexander 72: http://oceanalexander.com/yachts/72-pilothouse/
Hargrave
Etc

Remember to factor in operating costs. This includes your slip, fuel, maintenance, regular detailing, etc.

It would be a great boat... I would have your tax accountant tell you how best to set up the purchase and maintenance to support your company needs. I would guess that if you set up a separate company as a charter service, it may be a cleaner, financially....

If it floats, fliss or f%^#ks it's cheaper to rent.

rcknecht said:

It would be a great boat... I would have your tax accountant tell you how best to set up the purchase and maintenance to support your company needs. I would guess that if you set up a separate company as a charter service, it may be a cleaner, financially....

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This is true. Also, if you get something with enough range, and it sounds like you're in TX, you may want to consider a foreign flag.

http://www.boatinternational.com/ya...ice/how-to-choose-your-yachts-flag-state--615

Grand Cayman and BVI are a couple of the most common (Red Ensign Group). You should speak with a yacht broker and yacht attorney about the benefits and costs.

I have a couple business friends who own "company" planes, both own them in a seperate LLC and charter them to the business as needed. This is more for liability issues that tax shelters, although you get both benefits.

I also have customer that the business owner owns a Fleming 55 personally and once a year "rents" it to his business for a week to shmooze suppliers, customers and as an employee benefit. For that week he gets a special insurance rider, hires a captain and crew, and includes that and expenses in his rental charge. Again this is a liability play.

If the boat is going to be more used for pleasure, and occasionally used for business a Sea Ray L would be a fine choice if that's what you want personally. If that is the case I would set it up like my customer does with his flemming. If more for business and rarely for personal, I would go with a slightly larger, slightly used boat for same money and put it in a full time charter trade for your business and others and charter it to yourself when you want to use for personal use.

OH.....to add to my OP.... From an IRS standpoint, what you are considering is low hanging fruit.

If this is solely a business to be a business use, i.e. create a venue for business entertaining, then the best course of action is to charter what you want from a truly third party who handles maintenance, cleaning, insurance, crewing, slippage, provisioning and the like. At the end of the season you part company with no winter expenses. This way the transaction becomes just the same as renting out a function room at the local Hyatt for a catered shindig. The downside is that non business use becomes hard to accomplish. But that is kind of point.

Swaterhouse's recommendation can work. But keep in mind that while the costs for the time period the boat is on charter to the business, the business own does get the expenses as personal business expenses, but also gets the charter fee as declarable personal income. Keep in mind both charter fee, and expenses paid by the business, will have to be generally in the same range as an arm's length transaction. So as a mechanism to have the business absorb some of the boat expenses it is sort of a wash. As a result, this is solely a liability mitigation strategy.

I know this is somewhat afield of what the OP was looking for, but it is a consideration in the cost of having a "company" boat.

Henry

Several points posted above are on point to the final outcome even though they may seem far astray from the OP's original question. I've seen what happens when a boat owner tries to deduct expenses for entertainment use of his own boat and it isn't pretty.

The boat 2 slips down from me in the marina is a 44DB and is owned by a small business owner whose business is making very high quality cast vinyl and PVC fishing lures mostly for the Japanese and European market......he doesn't sell to the mass market and one of his "hand painted 8" Yellow Tails" can cost $20+. He attempted to use the 44DB as a test platform for developing the weight and shape of his lures, he also entertained customers periodically. He is a good businessman and kept detailed records. At tax time he prorated the annual cost of maintenance, fuel, repairs, insurance and slip rent and only deducted what he computed to be business use. He was definitely an example of David's low hanging fruit. He first got a letter from the IRS requesting full documentation of the business use of the boat, to which he complied. Next, about 18 months the IRS audited his business and personal tax returns and the boat deductions were disallowed for lack of adequate documentation. The boat is about a 2007 and he stopped trying to deduct any of the boat expenses after the first year, but he has been audited every year since 2009. It isn't worth the hassle or the cost considering the expense of legal and financial professional help with an audit.

You will be very hard pressed to make the claim that a luxury yacht is necessary in the normal course of running a medical billing company. If you really do intend to use a boat for entertaining your customers, then you need to take a good hard look at Henry's suggestion or perhaps buying the boat personally and chartering it for a set per hour fee back to the company as Swaterhouse suggested..........or make room for the IRS auditor in an empty office.

Can't really add anything to this other than putting an accent on the low hanging fruit. I'm in the medical equipment field and the scrutiny related to anything medical is getting more onerous every year for minutia. A similar story to Franks happened to my Uncle years ago. Never did find anything wrong with his returns but they aggravated him for years and years with audits.

Best of luck

As a business owner, no way I would have the company buy a boat for client entertainment. Way too much exposure tax wise. If I wanted to entertain clients on a boat, I would find another structural approach to handling the transaction.

That said, when you figure out your approach, the Sea Ray's are excellent for the purpose.

Not all boats have the same fit and finish. SeaRays are well constructed with a very nice finish out. You would be happy hosting guests on a Sea Ray.

The IRS has turned into a first class collection agency, at the behest of the Executive Branch. The bloated federal government desperately needs money to fund the endless entitlement programs (free college, free health insurance, free cell phones, food stamps...the list grows daily). Now, more than ever, pushing the limits of "questionable" deductions is a very bad idea.

BUT, if it were allowed, a Sea Ray would certainly make a FINE company boat!

fwebster said:

..........or make room for the IRS auditor in an empty office.

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AYUP!!!! My brother used to work for a gent named Manuel "Matty" Moroun. Matty literally had agents with offices in his corporate offices. Matty is also one of the few people in the world who could say, "And if you believe that, I've got a bridge I can sell you..." and literally hold up his end of the bargain.

Be very careful. The IRS is not to be farqued with. You won't win.

Marina's are full of boats that have expired registration and hardly ever leave the dock. People buy the dream without considering the complete expense portfolio, or the skill sets and work that will be required. If you have a business you are probably acquainted with an accountant, or TAX attorney, who can keep you legal. Consider that maintenance on most yachts will run at least 10% of the purchase price per year. Add Crew and Slip expense's, add insurance (I am required, by our Marina, to hold a current 1-Million Dollar Policy on my 2000 380DA). The problem for your Medical Business boils down to the same considerations the rest of us face. Can you afford the expense to properly upkeep the boat? How often will you use the boat? What are the advantages over Chartering a boat for each event? Our boat is comfortable for 8 people. We stay in a slip that rents out at $450/month plus utilities. Our Yearly upkeep hovers around $8K to $10K. Insurance is $2K to 3K per year. We usually budget $120/hour when we are underway. I can Charter a Sea Ray 340DA out of my Marina, with a Captain, for $250/hour plus fuel, or $1500/day plus fuel. If the use of the boat is to entertain clients now and then Chartering may be an easier tax write off and present a more cost effective way to impress your clients. You could also check out "Boat Bound" or speak with your Sea Ray rep about ways to make money with the boat when your business is not using it.

FootballFan said:

As a business owner, no way I would have the company buy a boat for client entertainment. Way too much exposure tax wise. If I wanted to entertain clients on a boat, I would find another structural approach to handling the transaction.

That said, when you figure out your approach, the Sea Ray's are excellent for the purpose.

Not all boats have the same fit and finish. SeaRays are well constructed with a very nice finish out. You would be happy hosting guests on a Sea Ray.

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Exactly what he said! I once asked our CPA about putting a cruiser in our biz and the look on his face was enough

One other thought that keeps the IRS off the back of your business..

Buy the yacht as a personal asset under a foreign flag. This can also let you set up the boat for charter programs. Use it for clients when needed, but put it into a charter program several months a year to help cover the costs. The L650 is a (4) stateroom layout that would do well in the charter world. If your boat does charter regularly you could in theory charter it to your business through a charter broker.

The best answers you'll get are from an attorney who deals with yacht registrations.