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Old 10-06-2019, 01:30 PM   #1
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looking for a fair agreement

Hi there, greetings from Buenos Aires!
I am evaluating the possibility of starting a small business with my boat (50 plus Ft trawler). My idea is to offer boat tours for birdwatching, photo safaris, etc. I am finishing all my homework at PNA (Argentinean Coastguard) in order to get my personal license (Master Capt) and the boats documents issued. Due to the size of the boat, PNA requires me to have a licensed mate on board.
As I cannot afford paying him a salary (and the guy I have in sight has a job), my idea is to make him a partner and offer him a percentage of the incomes.
Based on a win | win relationship, what would be a reasonable approach for such an agreement?
All comments are welcome!
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Old 10-06-2019, 01:47 PM   #2
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Sounds like you are developing a fun business in a beautiful area.

What would be an average salary for such a position? Project your potential income and calculate a percentage to equal a salary. Or calculate profit sharing to be commensurate with a salary.
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Old 10-06-2019, 01:50 PM   #3
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I don't think you need a partnership agreement. He won't have any ownership in the asset you use- your boat. In most of these cases, like a deck hand on a head boat, just a verbal agreement to share the income and a handshake is all that is needed, even in the litigious US.

What percentage? I don't really know. You are using your time, your expertise as a licensed captain and your boat. He is supplying his time and expertise- his mate license. 20% makes sense to me. Or think of it this way: two shares for the captain, two shares for the boat and one share for the mate- 20%.


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Old 10-06-2019, 02:23 PM   #4
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Quote:
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Sounds like you are developing a fun business in a beautiful area.

What would be an average salary for such a position? Project your potential income and calculate a percentage to equal a salary. Or calculate profit sharing to be commensurate with a salary.
Hi Darren, my idea is to retire from my current position and continue generating incomes from a quite different (and hopefully fun) new business.
The problem with salaries in local merchant vessels is that they are quite low and would mean an underpayment to the guy I have in mind.
He has a lot of skills and personal qualities, which make him one of a kind. For this reason I would like to offer him the fairest possible agreement.
This includes sharing my incomes with him.
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Old 10-06-2019, 02:28 PM   #5
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I suggest sharing profits by first taking expenses off then a 3 way split, 1 for the boat, 1 for you and 1 for him.
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Old 10-06-2019, 02:39 PM   #6
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Hi David,

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Originally Posted by djmarchand View Post
I don't think you need a partnership agreement.

I don't have many alternatives he is either my employee... or a partner...
In the first case, it implies to pay a monthly salary (quite risky in a starting business), to register him in an official crew book of the boat... etc

The second alternative implies to share my incomes (if) with him, and no other obligations from my part (except covering him with with a work insurance).

He won't have any ownership in the asset you use- your boat. No, just the work.

In most of these cases, like a deck hand on a head boat, just a verbal agreement to share the income and a handshake is all that is needed, even in the litigious US.
HMMMM.... although I am the verbal agreement and handshake type of person... we must face that the world has changed a lot: so it will be a written agreement

What percentage? I don't really know. You are using your time, your expertise as a licensed captain and your boat. He is supplying his time and expertise- his mate license. 20% makes sense to me. Or think of it this way: two shares for the captain, two shares for the boat and one share for the mate- 20%. This percentage sounds quite reasonable to me: I calculated to discount the expenses, and divide the money in one share for the boat, the mate and me.... This is more or less the 20% you proposed.


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Old 10-06-2019, 02:44 PM   #7
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I suggest sharing profits by first taking expenses off then a 3 way split, 1 for the boat, 1 for you and 1 for him.
Are you reading my mind?
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Old 10-06-2019, 03:05 PM   #8
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The simple 20% of charter income approach is easy to figure and you can pay him in cash at the end of the charter- no waiting to figure out expenses which probably varies trip by trip. That is what head boat captains do with their crews.


Little surprised that you insist on a written agreement. Is this to lock him into the deal perhaps.



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Old 10-06-2019, 03:30 PM   #9
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Little surprised that you insist on a written agreement. Is this to lock him into the deal perhaps.

David[/QUOTE]

Hi David, Yes, a written agreement (and a good share of the profit) will lock him into the deal.

On the other hand, I don't know him THAT much to assure we NEVER will have troubles in our work relationship: my youngest son had a good friend working every now and then in his small brewery, one day they had a discussion, the guy resigned, some months later my son was fined by the Ministry of Labor for having had this guy (who also had to be compensated) allegedly working on a full time position...

Finally> if two partners have good intentions, why would they not sign a written agreement?
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Old 10-06-2019, 06:59 PM   #10
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I hate partnerships and will not suggest any such agreement. It's your boat, you should retain all equity.

Now, what I might suggest is you make him a non-equity owner as such. He has no ownership of the business but he gets a percentage of the profits or the revenue. Profits is difficult because it's not his asset so I'd suggest a significant percentage of all revenues but not as a partner, as a contractor with you. That also leaves him free to work for others when you don't have work.
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Old 10-06-2019, 07:15 PM   #11
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I would own the business and have your mate sign an employment contract. But I donít know your employment laws...
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Old 10-06-2019, 07:16 PM   #12
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Are you reading my mind?
My wofe does say that I am psychotic...
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Old 10-07-2019, 05:26 AM   #13
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I hate partnerships and will not suggest any such agreement. It's your boat, you should retain all equity.

Now, what I might suggest is you make him a non-equity owner as such. He has no ownership of the business but he gets a percentage of the profits or the revenue. Profits is difficult because it's not his asset so I'd suggest a significant percentage of all revenues but not as a partner, as a contractor with you. That also leaves him free to work for others when you don't have work.
Hi BandB, thanks for your input! I agree with your opinion. When evaluating a partnership with the mate, my idea was to split incomes with him, but (of course) not the ownership of the business.
The problem with local labor laws is that if you repeatedly hire a #contractor # for XX hours a month, law considers this person as an employee.

So, one one hand I do not want to take advantages of my future mate.... and on the other I don't want to be exposed to loose all I have if something goes wrong.
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Old 10-07-2019, 06:09 AM   #14
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You could look at how fishing boats operate, not that you need to replicate it exactly, but it will give you an idea. There are surely people here who know much better than me, but I think I have heard things along the lines of:


- 50% goes to the boat owner
- Of the remaining 50%, 2 shares to the captain, and one share to each crew.


All this is after operating expenses. The above would give your mate 1/6th of the profits. If you end up needed a deck hand, it would further dilute each person's share.
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Old 10-07-2019, 11:04 AM   #15
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If u make him a partner in the boat, they will share in liabilities. Get it in writing
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Old 10-07-2019, 12:58 PM   #16
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Hi BandB, thanks for your input! I agree with your opinion. When evaluating a partnership with the mate, my idea was to split incomes with him, but (of course) not the ownership of the business.
The problem with local labor laws is that if you repeatedly hire a #contractor # for XX hours a month, law considers this person as an employee.

So, one one hand I do not want to take advantages of my future mate.... and on the other I don't want to be exposed to loose all I have if something goes wrong.
Then if they work that much, make them an employee. If you run a business, it's natural to have employees.
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Old 10-07-2019, 03:03 PM   #17
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Sorry, but from your perspective first mate's objective, I don't see much incentive for the guy you want to hire, as you note "The problem with salaries in local merchant vessels is that they are quite low and would mean an underpayment to the guy I have in mind"

You note that you are thinking that you want to pay him a percentage of the income. I think it needs to be clear what you mean by income? Are we defining income as remaining revenues after paying all expenses? If this is true, then his part of the income may be $0. On the other hand, if business is great maybe he would make more than his salary in his current job.

I think a potential difference between yourself and the fishing (and/or maybe crabbing) examples that I am familiar with is the captains of those boats have some type of track record in the industry.

I think you need to try and get a feeling how much risk your potential employee is willing to take. Maybe he is willing to work without a guarantee of payment, or maybe not. I think it only an answer that he can give you.

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Old 10-07-2019, 03:20 PM   #18
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Hire someone appropriate for the job. Hiring someone grossly over-qualified, then attempting to do a profit share with that individual in an attempt to match their current income makes no sense. That is a business model destined to fail.

Hire a person with the requisite skills to match the job, and is willing to work for the wage the job calls for.
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Old 10-07-2019, 03:27 PM   #19
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Whether contracting or employee, hire the right person and pay them appropriately. If you can't afford to pay them then you don't need to be in business. You talk about income, well, that is after paying employees.

Now, the pay can be a percentage of revenues, as long as it's adequate to meet wage laws in your location. For example, in Florida, you could agree you're paying 30% of the revenues. Then you collect $5000 for the one week charter and he gets $1500. But if you collect $1000 and he worked 70 hours that week then you'd be required to pay at least $8.46 per hour times 40 plus $12.69 per hour times 30, so $719.10.

In the US, all wage and hour laws do apply. In other countries the laws vary. Also, for these purposes a US flagged boat is considered in the US wherever it is and subject to US laws.
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Old 10-07-2019, 06:25 PM   #20
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If u make him a partner in the boat, they will share in liabilities. Get it in writing
You are absolutely right... but (if), he will only be a partner in the profit this cruising project generates. The boat will remain 100% mine
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