How to Start a Water Taxi Service

Start a water taxi service by following these 10 steps:

1. Plan your Water Taxi Service
2. Form your Water Taxi Service into a Legal Entity
3. Register your Water Taxi Service for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Water Taxi Service
6. Get the Necessary Permits & Licenses for your Water Taxi Service
7. Get Water Taxi Service Insurance
8. Define your Water Taxi Service Brand
9. Create your Water Taxi Service Website
10. Set up your Business Phone System

We have put together this simple guide to starting your water taxi service. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Water Taxi Service Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

What are the costs involved in opening a water taxi service?

The primary items required to start up a water taxi business are:

• Passenger boat - You will need at least one boat to get started. Minimum size you’ll want to invest in is 28 feet. Many suggest a vessel 32-38 ft long. Used vessels can cost as low as $15,000-$45,000, while new, larger ones could set you back as much as $250,000.
• Fuel
• Insurance
• Signage for your vessel
• Business cards and marketing materials

It is suggested to set a budget of at least $35,000 to get your business started.

What are the ongoing expenses for a water taxi service?

There are a number of ongoing expenses one should budget for in this industry:

• Vessel maintenance - Average annual maintenance for a 49-passenger boat is reported at $10,000.
• Hull and outfit maintenance - A 49-passenger vessel operating 3,000 hours annually requires approximately $3,100 for hull and outfit maintenance.
• Moorage fees - $2,400 per boat annually
• Insurance - Rates vary depending upon operating hours, size of vessel, location, and type of coverage required.
• Fuel - Successful business owners report burning more than 3,500 gallons of fuel each month.
• Labor - Operators earn between $20-$22/hour, depending upon the size of the vessel and their experience level.

Who is the target market?

Historically, tourists have comprised approximately 85% of a water taxi’s demographic. Consumers are now realizing the benefits of utilizing these services and are turning to them as an economical commuting option. Since each city’s waterways are distinct, owners are urged to research what the area is lacking and devise a business plan that specifically targets those needs.

How does a water taxi service make money?

A water taxi business’ primary source of income is derived from each passenger they transport.

How much can you charge customers?

Fares vary, depending upon location and specific services offered. The national average fare is $2-$5, with weekly and monthly passes offered at a discounted rate for regular customers.

How much profit can a water taxi service make?

Assuming your service runs 3,000 hours per year and your 39-passenger vessel is full during those hours, a fee of $4 per person would generate revenue of $468,000 (pre-expenses). Several business owners have reported a modest profit going into their second year.

How can you make your business more profitable?

Consider implementing these strategies to increase your organizations’s profitability:

• While the initial cost is greater, many are now turning to hybrid-electric powered boats to reduce ongoing expenses.
• Offer special event transportation and group transportation.
• Host dinner or sunset cruises.
• There is a lack of resources for individuals living in a marina. Consider offering transporting services for those in need.
• Offer coastal excursions such as scenic tours and whale or dolphin watching.
• Offer advertising slots on your boats.
• Sell beer and wine to your customers.
• Charters are a very lucrative option for many water taxi owners.
• Approach your City Counsel about partnering to offer your services as an extension of the Public Transit system. Some owners have been successful at obtaining federal grants to invest in this partnership.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your water taxi service is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a water taxi business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

If you love being on the water, and enjoy both boats and people, opening a water taxi service might be the perfect fit. This facet of the transportation industry is engaging and fun, allowing entrepreneurs to utilize their boating skills in a unique and profitable way.

What happens during a typical day at a water taxi service?

The specifics of your day-to-day activities will vary, depending upon the services your organization offers and the needs of your customers.

A typical day will look something like this:

• Before your first group of passengers arrives, start to the boat up and perform a routine check of all fluids, including fuel.
• Travel to your first pick-up location.
• Greet passengers, assist them in stowing away any gear they may be traveling with.
• If your services include sightseeing, you will need to both plan and deliver information to customers along the route.
• Navigate waterways, dropping passengers off at predetermined locations.

Administrative duties include:

• Planning and executing new routes
• Marketing and networking
• Answer emails and phone calls regarding private charters/parties (if you choose to offer this service)
• Oversee workforce
• Plan and enforce budget and pay bills

What are some skills and experiences that will help you build a successful water taxi service?

As with any venture, strong business acumen would prove beneficial. If you lack the experience and knowledge necessary to run a business, consider pursuing classes online or at your local community college.

The administrative tasks only represent one aspect of your business, however. Your water taxi company will require you to be independent, logistical, and possess strong organizational skills. Since your purpose is to transport passengers, strong interpersonal skills will also prove critical to the organization’s success.

Additionally, most states will require you to have a significant amount of boating experience in order to obtain the necessary licenses. This includes navigating waterways under various weather conditions, traffic patterns, and changing tides. Check with your local Coast Guard to determine how many sea service hours you are required to log and fill out the necessary paperwork accordingly. You may be required to complete a physical, which includes a vision exam and drug test. Colorblindness is typically a disqualifying factor.

What is the growth potential for a water taxi service?

With the rise of fuel costs and increasing environmental awareness, consumers are seeking out alternative transportation options. Many are turning to public transportation and carpooling as an economical way to reduce their carbon footprint. The water taxi industry offers a solution to these needs. Entrepreneurs have experienced significant growth over the last few years, with plans to expand their operations over the next decade.