Partnership structuring

[bnicolette]

Guys, I really need some input here.  I am toying with the idea again of working out some sort of partnership.  I just can justify keeping the airplane as I just don't have the time to fly it like it should be flown.  And although I know an airplane almost never makes financial sense it would be a whole lot better to swallow if I were splittling expenses and the airplane would fly more.  I guess there are a number of ways that I could go with a partnership but the two I am most interested in are:

1) Selling 1/2 of the plane and share everything right down the middle which means giving up 100% control of how things are handled.

2) Not so much a partnership as much as just permission to use the plane whenever and whereever and having the individual share expenses but still retaining ownership.  I don't know if this is feasible but I would like to know if anybody has ever went down a road like this and how it was structured and more importantly how it worked out.

Looking forward to hearing ideas from the group.  I really need some input on this one.

Thank you,

Brett

[KSMooniac]

An airplane partnership is a lot like a marriage, so you need to choose very wisely if you go down that road.

Option 2 can be a non-equity partnership where you partner with someone to share expenses but they pay less and don't take an ownership stake in the plane.  This is the way I would choose if in the situation, but you may or may not find someone local that will be willing to fly the plane enough to make it worth the effort.  You would of course need to make sure he/she meet your open pilot warranty on your insurance, or add them as a named pilot.  As far as the rate they pay back to you, I would generate an hourly rate based on XXX hours per year (say 150?) and your hangar, insurance, taxes, etc. along with operating expenses and reserves.  Compare it as best you can to the rental market, although you are not likely to find anything comparable.  

You do have an advantage, though, of offering a unique and capable plane to the right individual that could use it for family or business travel in addition to general proficiency flying or training.  You can go to any local aviation meetings (like FAAST presentations), fly-ins, etc. and post on FBO bulletin boards to find that person.  I'm not a legal type, but you could probably get some help with an agreement for such use, and maybe even guarantee a minimum yearly usage to make the exercise worth your effort.

This method might not help you finance a total panel-ectomy, but it certainly could take the sting out of all of the big fixed expenses and make you feel better about the plane getting regular exercise.

[pjsny78]

Does this mean we are not going to be seeing you in our fly-Ins anymore?

[bnicolette]

No No Patrick.  I don't want to get rid of the plane and if it just has to sit there then that's what it'll do.  I am just toying with the idea of taking on a partner.  I put an ad a while ago on AOPA for a partner and I have a guy that has been interested for a couple months now.  I've either got to accomodate him somehow or just tell him Im not interested so I thought I would look at an avenue that I could live with and that would be me maintaining control of the airplane but sharing expenses and having the airplane flown more.

[pjsny78]

Ok good. im glad. i hope you will be able to work something out. i did the same thing by placing an ad on aopa and nver got 1 e-mail from anyone. i dont think many people know about it. at the same time i dont think it would have worked out in my case anyway. well i hope to see you soon..

[John Pleisse]

I know a guy... total scammer.... he solicits his CFI base, trolling for partners he knows won't make medical and pilots who generally don't fly and gets them to buy in. He has a 1/4th interest in a Turbo Arrow. He is the only guy who flies it.

Seriously speaking..... do everything in writing, annuals, expenses, scheduling......right down to who will wash it and when.  Also, putting in writing "anticipatory" costs is a good idea. You think you know a guy until the day he wants to cheap out and have engine work done by someone you frankly, would not.

AOPA provides great boiler plate doc's on-line for free.

[bnicolette]

Thanks guys.  I have used an aviation attorney in Fort Lauderdale in the past and I suppose he would be the guy to use for coming up with such an agreement?  I certainly don't want to "spitball" it and would like to have something iron clad that protects everybody.  I could really use some ideas or things that maybe wouldn't be so obvious that should be included in an agreement.

[Cris]

Start with the AOPA agreement and then Google "Aviation Partnership Agreements". You'll soon have all the salient points you need. However agreements are just to remind one of their respective obligations. American law gives one an absolute right to violate any agreement. Ones only recourse is to sue & presumably be made whole with money. Thus the basic tenant is to be sure that the partner is financially capable and an honorable individual.

[FLYFST]

Brett, heed the good advice already provided in the other post responses.

Finding the "right" partner for you, one with compatible views on ownership and operation as well as intended use is critical.  You also need to secure the advice of an aviation knowledgeable attorney and CPA to make sure you strucuture things in a way that helps ensure compliance with FAA and IRS regulations.  For example, if not properly structured, option 2 could put you at risk of being considered a Part 135 operation (you are receiving money from another party for the use of your airplane, and the additional requirements compliance with the FAA requires may not be want you want or intend.  Similarly, that same situation may cause a violation of the terms & conditions of your insurance policy (e.g., commercial use).  Additionally, setting up a partnership likely means setting up a business entity (e.g., LLC, S-Corp, etc) and filing partnership returns with the IRS and you State.  I am neither an attorney or CPA, so please keep that in mind when considering my comments. 

While it may seem like I am trying to discourage you, I am not.  What you want to do can be done while ensuring compliance with the FAA and IRS, but doing it right requires expert advise, so please seek it.  The AOPA Legal Services Plan staff can also provide valuable advice in this area.  If you would like to discuss further send me a PM and we can set up a time to discuss the approach I have taken for a similar situation.

best regards - Hank

[jetdriven]

Quote: Aviator4Life

 For example, if not properly structured, option 2 could put you at risk of being considered a Part 135 operation (you are receiving money from another party for the use of your airplane, and the additional requirements compliance with the FAA requires may not be want you want or intend.  Similarly, that same situation may cause a violation of the terms & conditions of your insurance policy (e.g., commercial use).  

best regards - Hank

[FLYFST]

Quote: jetdriven

FAR 135 accusations usually center around the holding out to the public for transporting persons or goods for hire.  Renting out your plane, or leasing it I don't think gets near that.