Partnership info you'd be willing to share

[eman1200]

A partnership situation has recently become significantly more realistic for myself plus 1-2 people.  I know people here have offered their partnership agreements, rules, cost breakdowns etc but since I wasn't close to purchasing I never asked to see it.  For those of you who have any of this information and would be willing to share it, it would be a big help.  I'd like to tailor our rules/agreements based on whatever research I can find, plus AOPA resources etc...  Feel free to PM me or share here.

Thanks in advance, and I apologize if you are seeing this post in other forums as well, I'm just trying to gather as much info as possible.

 

[N6758N]

I recently sold a half share of my 68' C to a CFII/former airline pilot. I spent plenty of time with him and people who know him making sure he would be a good fit for me and the airplane. I took the insured hull value of the airplane and divided it by two. He paid me for one half. We have an hourly operating cost of around $90/hr wet. This is based on fuel @ $6/ gallon. It includes a 2,000hr engine overhaul fund of about $23,000 and a 2,000hr prop overhaul fund of about $2,000. I have about a $6/hr fudge factor included for oil and misc. We pay out of pocket about $1,000 a year for insurance and we split the hangar rental each month, so hangar and insurance are not included in the hourly rate. Any upgrades or major parts that need to be purchased are split between the two of us and generally that money does not come from the airplanes bank account. I am an IA so I do all the maintenance and upgrades/avionics work on the airplane, which obviously saves us a ton of cash. My partner helps with the maintenance when he can, and in return I have a free CFII/MEI at my disposal. I am very fortunate because I have a great partner, he has even become a good friend now. Spend lots of time getting to know your perspective partner(s). Ask around and see what other people think about them and their flying skills. My airplane is my baby and I normally do not let anyone else fly it, but I am totally comfortable with knowing I have a solid partner I do not have to worry about. 

[eman1200]

....We have an hourly operating cost of around $90/hr wet. This is based on fuel @ $6/ gallon... 

Thanks for that info. As for fuel, you include that in the fee you collect each month? I'm assuming you top off at your home field after each flight? What if u take a trip and fill up elsewhere? Do I treat it like wet rate for a rental, where the cost to fill up elsewhere is reimbursed?

[N6758N]

We plan for 12 gallons an hour at that price. It is included in the hourly operating cost. Most of the time we get fuel at our home base (KOQN) and they bill us each month. We each have our own check and debit cards that are linked to the airplanes bank account. So if we travel we can use the debit cards for fuel and ramp charges. At the end of a trip, whoever is flying deposits money into the bank account. (Hourly rate X number of hours flown(tach) + any additional expenses inccured(overnights/ramp fees etc.) There is always extra money in the account to make up for the difference until that person has a chance to deposit money from the trip. At the beginning of each month, we will write a check to our home FBO for the fuel balance due, this money comes out of the airplanes bank account which we have been adding to each time we fly. 

[Bob - S50]

Just sent you a message.  We have 4 partners.  We charge $200 - $250/month depending on the bank account and I'm proposing we increase our hourly charge to $30/hour dry.  You can see the rest of the details in the message.

[flyboy0681]

4 hours ago, N6758N said:

 This is based on fuel @ $6/ gallon. It includes a 2,000hr engine overhaul fund of about $23,000 and a 2,000hr prop overhaul fund of about $2,000.

While this sounds good on paper, it hasn't worked out this way for us. Our partnership charges $80/hr wet and what is left remaining after the gas receipts have been deducted from the invoice is placed into the reserve fund. While the reserves have built up over the years, all it takes is an unexpected $4k repair to deplete a lot of it. 

[eman1200]

Very helpful Bob, thanks!

[N6758N]

2 minutes ago, flyboy0681 said:

While this sounds good on paper, it hasn't worked out this way for us. Our partnership charges $80/hr wet and what is left remaining after the gas receipts have been deducted from the invoice is placed into the reserve fund. While the reserves have built up over the years, all it takes is an unexpected $4k repair to deplete a lot of it. 

Not sure how what we are doing is any different than what you are doing...Any money left over after paying our fuel bill stays in the bank account for the reserve fund. Of course no one can ever be 100% prepared for an unexpected repair, but given the fact that my engine had a fresh overhaul on it and the prop is almost new, I do not see anything of a mechanical nature pop up that is going to be ridiculously expensive to fix. Again, my partnership is a little different than most as I am the IA.

[flyboy0681]

2 minutes ago, N6758N said:

Not sure how what we are doing is any different than what you are doing...Any money left over after paying our fuel bill stays in the bank account for the reserve fund. Of course no one can ever be 100% prepared for an unexpected repair, but given the fact that my engine had a fresh overhaul on it and the prop is almost new, I do not see anything of a mechanical nature pop up that is going to be ridiculously expensive to fix. Again, my partnership is a little different than most as I am the IA.

I guess it boils down to what the partners are willing to pay out of pocket for unexpected repairs versus dipping into the till. Last year we needed to have the magnetos rebuilt and all told, that cost a few grand. Then there was the autopilot repair. A few grand here and a few grand there adds up to real money.

Your partners are very fortunate to have an in-house IA.

[eman1200]

I'm having a hard time including fuel in anything that gets 'collected' as part of the partnership. I kind of envisioned you pay for your own fuel. Fill it up when done. I don't want to be handling anyone else's fuel expense.

[flyboy0681]

2 minutes ago, eman1200 said:

I'm having a hard time including fuel in anything that gets 'collected' as part of the partnership. I kind of envisioned you pay for your own fuel. Fill it up when done. I don't want to be handling anyone else's fuel expense.

I was skeptical about this when I joined the partnership six years ago but it actually works out quite well. As a courtesy we try to fill the tanks upon return, but sometimes it doesn't work out that way for a number of reasons. 

We place the receipts in a pocket in the back of the logbook and the person who does the billing deducts the fuel receipts from the tach-time * $80/hr. Whatever remains gets deposited into the reserve account and it's to everyone's advantage to find the cheapest fuel.

[N6758N]

14 minutes ago, eman1200 said:

I'm having a hard time including fuel in anything that gets 'collected' as part of the partnership. I kind of envisioned you pay for your own fuel. Fill it up when done. I don't want to be handling anyone else's fuel expense.

The fuel doesn't really get 'collected' as part of the partnership. We have a flight logbook to keep track of each flight, its the users responsibility to deposit money into the account afterwards. While it is courteous to fuel up after each flight, it doesn't matter and this way no one has to worry about paying for fuel for each time they use the plane separately. As flyboy0681 says, the cheaper the fuel is, the better off the airplanes bank account is. 

[TTaylor]

When we set up our partnership we made sure we had a fuel flow system.  Each person is responsible to log actual fuel used.  This encourages flying efficiently and allows each person to determine their flying style.  Also means the plane does not have to be fueled after every flight.  If you are traveling you are given a credit for the fuel purchased away and fuel locally is charged at the local FBO rate.

Our fixed monthly dues are designed to cover the cost of insurance, hangar and annual.  Flight time is charged $30 dry to put funds in the reserve account for engine and prop.  It is better to set the monthly dues slightly high to build extra funds than to under charge and have to ask for extra money all the time.

Critical is selecting partners that have similar philosophy on what the plane should be like and what instrumentation they want in the long run.
 

 

[Jerry 5TJ]

My last partnership worked great 4 years.  Only ended because I moved away.  

We split fixed costs evenly--hangar, insurance, data subscriptions, mandatory recurrent training (turbine).  We split maintenance equally but agreed if one of us flew a lot more we'd pro rate that. Never happened.  

Fuel we paid with dedicated credit cards. At end of year we divided fuel costs by % of hours flown:  If fuel total was say $27,000 (turbine...) and I flew 176 of our total 320 hours that year I paid 55% of the fuel bill.  Some fuel uplifts were cheap, some expensive  but we just averaged it out.  That eliminated any squabbling over who paid how much and was it as full when you left it, etc. 

FBO fees like overnight hangers & de-ice we paid individually.  

Most important-- mutual respect & trust.  

 

 

[Vance Harral]

10 hours ago, eman1200 said:

I'm having a hard time including fuel in anything that gets 'collected' as part of the partnership. I kind of envisioned you pay for your own fuel. Fill it up when done. I don't want to be handling anyone else's fuel expense.

I'll add to the chorus of those who say a wet rate works better than you might initially expect.

While it's true different partners might fly the airplane in such a way one uses less fuel than another, those differences tend to be on the order of a few dollars and hour, and lost in the noise of other airplane expenses.  If you try to "fix" this by renting dry and having everyone pay for their own fuel, the "fill it up" rule turns out to be a pain from time-to-time.

Fuel pump at the home drome temporarily out of service?  Long line at the pump?  Tough luck, you have to hang out until it's ready, or return to the airport later and taxi back to the pump before anyone else flies the airplane.  Want to take off with less than the standard fuel level to accommodate more passengers/baggage?  You can't ask your buddy to skip his refuel unless you write him a check.  If you fly together and split the time, you either have to run the pump twice or one of you has to write the other a check.  Get an emergency message in flight?  In a wet-rate partnership, you could skip the fuel-up, put the airplane away with 30+ gallons in the tanks, and no big deal.

Of course, it's not a big deal in a dry rate partnership either, if everyone is reasonable, it's just more of a pain.  The paramount issue isn't how you pay for gas, but rather respect, reasonableness, and an eye toward the big picture.  I don't need to make every penny come out in my favor, and I wouldn't want to partner with someone who's going to gripe about a hundred dollars of differential fuel expenses over the course of a multi-thousand dollar year of aircraft ownership.

[Brian_tii]

Only been in 9 months, but have learned a lot and invested in a factory reman And new prop. We're doing the following with 4 people total. The key is the right people.

Fixed expenses paid monthly - including parachute fund (cirrus), hanger, insurance, taxes, data subscription, and a "nothing wrong" annual

We then bill ourselves quarterly for the dry rental rate which includes only engine replacement fund and oil changes

All other expenses are split 1/4.

 

Other items:

- No business use, personal pleasure use only

- After use, returned to hanger with full fuel, bugs removed, and cleaned out of any trash

- Buyout clause to give partners a discount if forced to buy out another owner

- Scheduling is done via shared Google calendar on a first come, first served basis - This actually works REALLY well, and I like it better than the alternating weeks schedule. The key is that everyone respects each other and encourages each other to use the aircraft.

[eman1200]

hate to be a pain, but let me try to understand what y'all are talking about around fuel.  so, for the most part:

• people fly the plane
• people fill up, don't fill up, or fill up to x gallons
• your plane, or your LLC, or your hangar, or "you's guys", whatever, have an account with your home field.  you call for fuel when you need, the bill gets sent to your account.
• at the end of the month, quarter, whatever your time period is, you take the total fuel bill, tally up everyone's hours and bill accordingly?

and if that's correct, sounds like most of you are saying that's a better method than everyone just paying for their own fuel.  interesting.

 

[flyboy0681]

9 hours ago, Vance Harral said:

I'll add to the chorus of those who say a wet rate works better than you might initially expect.

While it's true different partners might fly the airplane in such a way one uses less fuel than another, those differences tend to be on the order of a few dollars and hour, and lost in the noise of other airplane expenses.  If you try to "fix" this by renting dry and having everyone pay for their own fuel, the "fill it up" rule turns out to be a pain from time-to-time.

Fuel pump at the home drome temporarily out of service?  Long line at the pump?  Tough luck, you have to hang out until it's ready, or return to the airport later and taxi back to the pump before anyone else flies the airplane.  Want to take off with less than the standard fuel level to accommodate more passengers/baggage?  You can't ask your buddy to skip his refuel unless you write him a check.  If you fly together and split the time, you either have to run the pump twice or one of you has to write the other a check.  Get an emergency message in flight?  In a wet-rate partnership, you could skip the fuel-up, put the airplane away with 30+ gallons in the tanks, and no big deal.

Of course, it's not a big deal in a dry rate partnership either, if everyone is reasonable, it's just more of a pain.  The paramount issue isn't how you pay for gas, but rather respect, reasonableness, and an eye toward the big picture.  I don't need to make every penny come out in my favor, and I wouldn't want to partner with someone who's going to gripe about a hundred dollars of differential fuel expenses over the course of a multi-thousand dollar year of aircraft ownership.

All are excellent points which I have actually experienced over the past several years.

[PMcClure]

The way we ran our F was as follows:

4 partners - 2 regular fliers and 2 part timers. 1 partner was responsible for keeping all the records and communication the status of accounts. One partner was responsible for maintenance on the bird. The other two flew less than 1 hour per month and helped with annuals, washing, etc...

Everyone paid a monthly overhead fee - about $150-$200 per month. That paid all overhead costs (Taxes, hangar, insurance, etc...). This was adjusted each year. 

Everyone bought their own fuel and left the plane as the found it. Usually we left it at 50% full. If something was wrong with the fuel truck, etc... we just took care of it the next day. 

We paid a major maintenance and overhaul fee of $20/hour. That was kept in reserve for... major maintenance and overhaul! At the time I got out, we had over $20,000 in reserve. I heard they just replaced the engine last year and the fund paid for almost all of it. 2 partners had access to the account. Any out of pocket expenses were reimbursed by the accounting partner. 

From time to time, we would agree on additional assessments for planned upgrades, etc... This was a little tricky to handle with the part time fliers. But generally we worked it out. For example, we put in a $12k A/P and the two active partners paid for it and reduced the equity of the other two by some. 

If someone wanted to take the plane overnight, they just let the partners know. Special requests for holidays were written on a white board in advance for others to consider. 

No written agreement, no hard schedule. No LLC. Just 4 good ole boys trying to make it work. Never had an argument or a problem. 

I got a lot out of this partnership. Friendship, experience owning an aircraft, cheap flying ($60/hour all in), easy access to a plane, etc... Eventually one of the part timers moved away and the other regular partner picked up his share. I sold my share to a new pilot and move on. The F model value and partnership arrangement limited upgrades that I wanted. 

More than the money or documentation, I think the most important thing is to know who you are getting into a partnership. If one guy is a jerk or deadbeat, a contract will help handle him. But ideally, the partnership should work naturally. If I were to do it today, I would be a little more concerned about liability than I was then. However, an LLC or corporation doesn't give you as much coverage as you thing. Having insurance and making sure you are covered to limits allowed takes care of most things. 

 

[Bob - S50]

I already sent Eric our LLC and operating agreements, but for the rest of you, here is how we work fuel for our dry rate.

Justification.  I run LOP.  I think one of my partners runs ROP.  That can make a difference of 1.5 gallons/hour.  Why should I pay for his gas?  Also, when I fly an Angel Flight and buy fuel at a Phillips 66 FBO, I may only have to pay a net price of $2.99/gallon (currently $3.99 at BDN minus $1 rebate).  Why should I be charged at the home drone rate of $4.45 or worse, at an assumed rate of $5 or $6/gallon?  A dry rate encourages each owner to fly efficiently and consider buying gas where it is cheapest.  Let each owner save/waste their own money, not that of their partners.

How we do it.

1.  Our policy is to park the plane with 30 - 35 gallons.  That's enough to fly 300+ miles and leaves an extra 165 - 195 pounds of payload capacity if the next user needs it.

2.  We use a calibrated stick to record our out and in fuel levels.  If they are not the same, you are charged or credited the difference based on the cash price at the home drone.

3.  By not leaving the plane full each time, if I'm out flying around and I can find cheaper gas along my route, I can stop and buy enough to get me home with the required 30-35 gallons.  I save money and don't have to stop at the pumps when I get home.

[flyboy0681]

8 minutes ago, Bob - S50 said:

I already sent Eric our LLC and operating agreements, but for the rest of you, here is how we work fuel for our dry rate.

Justification.  I run LOP.  I think one of my partners runs ROP.  That can make a difference of 1.5 gallons/hour.  Why should I pay for his gas?  Also, when I fly an Angel Flight and buy fuel at a Phillips 66 FBO, I may only have to pay a net price of $2.99/gallon (currently $3.99 at BDN minus $1 rebate).  Why should I be charged at the home drone rate of $4.45 or worse, at an assumed rate of $5 or $6/gallon?  A dry rate encourages each owner to fly efficiently and consider buying gas where it is cheapest.  Let each owner save/waste their own money, not that of their partners.

How we do it.

1.  Our policy is to park the plane with 30 - 35 gallons.  That's enough to fly 300+ miles and leaves an extra 165 - 195 pounds of payload capacity if the next user needs it.

2.  We use a calibrated stick to record our out and in fuel levels.  If they are not the same, you are charged or credited the difference based on the cash price at the home drone.

3.  By not leaving the plane full each time, if I'm out flying around and I can find cheaper gas along my route, I can stop and buy enough to get me home with the required 30-35 gallons.  I save money and don't have to stop at the pumps when I get home.

Way too complicated.

[Bob - S50]

1 minute ago, flyboy0681 said:

Way too complicated.

Ya, you're right.  Probably adds an extra 2 minutes of my time to each flight as I check the fuel load when I park.  And probably takes our treasurer an extra 2 minutes when he is dong the billing each month.  But, since we don't mind math, we think it is worth it to give the next guy the flexibility of not having the tanks full.

[flyboy0681]

1 minute ago, Bob - S50 said:

Ya, you're right.  Probably adds an extra 2 minutes of my time to each flight as I check the fuel load when I park.  And probably takes our treasurer an extra 2 minutes when he is dong the billing each month.  But, since we don't mind math, we think it is worth it to give the next guy the flexibility of not having the tanks full.

Like Jerry said in an earlier post, it all averages out. As owners we deal with thousands of dollars of expenses, one partner paying 75¢ a gallon more doesn't amount to much in the long run.

[ArtVandelay]

The simplest is to own the plane outright, but if you don't fly enough to justify buying a plane...
I think if all the partners fly 200 hours a year, the partners would have too much scheduling conflicts and you would be racking up the hours.

[N6758N]

6 minutes ago, flyboy0681 said:

Like Jerry said in an earlier post, it all averages out. As owners we deal with thousands of dollars of expenses, one partner paying 75¢ a gallon more doesn't amount to much in the long run.

The other good thing about a wet rate as previously mentioned is that it benefits the airplane when cheap fuel is purchased. Any fuel that we buy that is less than $6/gallon means the airplane makes money, which means the rainy day fun is always growing. I would rather have the airplane have a larger bank account for when it is needed than to fly around trying to save myself money on gas. I guess the more partners, the more complicated. I like just having the one, keeps things simple.