Partnerships

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4RNB

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4RNB
What are the elements of a successful partnership? What needs to be hashed out in advance? What are the pitfalls? Please share your good and bad partnership story.

I know a guy that I think could work things out with. He has owned his current plane for two years but still does not have his PPL...
 
Have you searched ‘Partnerships’? There are a dozen threads on the topic.
 
Must like pina coladas, getting caught in the rain, something something something and like the taste of champagne... wait different type of partnership...

Make sure you are in sync in terms of how you plan to use the airplane (work out a rough scheduling arrangement), when/how you want to upgrade it, how much you want to charge yourselves for maintenance/insurance/engine fund, make sure you can both afford to put money into major repairs when they come up (see the piles 'o cash comment above). Have a good operating agreement that lays out the aforementioned items, but don't treat it as the word of God.

Honestly, the most important thing is probably just make sure your personalities match. At work we call it the beer test - when hiring someone, ask yourself, "would I want to have a beer or two with this person?" I guess now we call it the coffee test due to HR issues... but you get the idea.
 
catmandu said:
Odd numbers for effective voting.
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Good point if more than 2 people. Two people can usually work things out. Four people can cause problems and the more people the more problems without a tie-breaker.
 
I was in a very successful partnership with my best buddy for nearly 20 years. My thoughts...

Limit the number of partners. The first partner saves each partner 50% of the fixed costs. A third partner only saves an incremental 17% more. A fourth only 8% more. Like JohnH said, two people can usually work things out... with three, there is the possibility that one will be the odd man out. I don't even want to think of 4+.

Get a partner with similar flying needs. Over our 20 year partnership deal, our flying hours were pretty much the same every year. The way we worked it was every other week was someone's priority week. If it was your week, the plane was there for your use unless you allowed your partner to use it. Over 20 years, we only had I think three or four times that we both really wanted to use the aircraft at the same time.

Get a partner with similar economic means. We were able to agree on many upgrades, and flying was not a strain on our finances. I've seen partnerships fail simply because one partner could not realistically afford what the other partner wanted.

Get a partner with a similar flying and safety attitude. I knew exactly how I would find the aircraft if my partner flew the aircraft before me. He was meticulous and safe, and didn't take risks. We got along just fine.

Split the ownership tasks evenly with your partner. In our case, my partner took care of the books, insurance and hangar, I took care of the maintenance.

Settle up on a regular schedule. We did ours annually... and rarely did one owe the other more than 1 AMU.

Fly together often. Whether it be for currency or $200 hamburgers, good partnerships are about friendship as much as flying. Frequent touch points also limit any brewing concerns.

Know that the breakup is coming someday. In our case, my partner retired and moved to Colorado. I bought his share... in fact the "price" discussion lasted less than five minutes.

In reality, I miss having my former partner around..... miss the friendship and comradery, the flying... and somewhat the 50% of additional fixed costs I am now paying. :)

If you can't afford the aircraft that you really want, IMO adding a partner is a good way to have the best of both worlds.

David

P.S. despite the conventional wisdom, we never had a written contract for the partnership. We both came at it from the perspective of mutual respect, and a handshake deal meant something. Flame away if you must, but I don't regret this at all.
 
I considered a partnership. Decided to fly with the guy for awhile first even though I'd known him for years. Along the way I noticed he cared more about leather interior and new carpet and plastic than mechanical issues and capability upgrades. We would have fought about everything. I don't mean he would let the plane be unairworthy, but keeping the plane running well was secondary to how it looked. He'd spend $15,000 on the interior while I'd spend it on an engine overhaul. That sort of thing.
 
The ideal partnership: A CFI, an A&P and a doctor .

The most important component are partners who don't fly much but don't whince if there is a check to be written ;-)


I have been in two partnerships. Both work well. Never a challenge that couldn’t be resolved with a phonecall or email. Every partner vote ends up being unanimous. As mentioned above, mutual respect and good communication Are the key. Oh and everyone has to pay their bills according to whatever mechanism is agreed upon. No quibbling ‘Bbbut I think we could have saved $200 by buying that air pump on eBay’ and the like.
3 partners is imnho the best balance of availability and cost savings.
 
weilke said:
The ideal partnership: A CFI, an A&P and a doctor .

The most important component are partners who don't fly much but don't whince if there is a check to be written ;-)
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An acquaintance of mine has developed the penultimate partnership for his Cessna. His 50% partner is a rich man who lost interesting in flying, but likes to brag he owns an airplane.

My friend has to pay for fuel and oil, but everything else is 50/50 with him essentially having 100% exclusive usage.

Love to get me one of these situations!
 
Get everything in writing! One partnership based at my airport has had their share of interesting partners. They have nothing in writing. At one time, one of the partners loaned the plane out to another pilot. In his eyes, he owned a share of the plane and could loan it to anyone he wanted! It wasn't in writing that he couldn't!

They had one guy buy a share who decided he didn't really want to fly anymore, so his son could take lessons in it. They both ended up flying it.

Recently, a share came available and another guy I know bought it. It's a Cessna 172 they bought for about $50 originally and it's a very nice plane. There are 5 partners, but the plane never flies. Now one of the partners wants to upgrade the radio ($10K) and the autopilot ($15K) and says everyone wants them and had agreed to it before the previous partner sold out. So the new guy gets a deal for about $8K on the plane, then he's being asked to chip in another $5K for upgrades on a plane that none of the other guys fly! I think the plane has flown less than 10 hours all year.

Did I say to get everything in writing?
 
David235 said:
P.S. despite the conventional wisdom, we never had a written contract for the partnership. We both came at it from the perspective of mutual respect, and a handshake deal meant something. Flame away if you must, but I don't regret this at all.
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LOL, I was just saying the opposite. I'm sure a handshake deal would work most of the time, but after what I've seen, I'd be reluctant.
 
NordicDave said:
An acquaintance of mine has developed the penultimate partnership for his Cessna. His 50% partner is a rich man who lost interesting in flying, but likes to brag he owns an airplane.

My friend has to pay for fuel and oil, but everything else is 50/50 with him essentially having 100% exclusive usage.

Love to get me one of these situations!
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A Sugar Daddy.
 
My partnership has been pretty simple. A lot of that has to do with having a simple airplane, a Citabria. Maintenance is minimal, major upgrades really aren't necessary. Its not really a travelling airplane, so its not gone for days at a time. All of the owners just use the airplane to occasionally beat around the pattern in, get along good, and the worst problem is that between the 4 of us the plane still doesn't get flown as much as it should.
 
Lowflynjack said:
LOL, I was just saying the opposite. I'm sure a handshake deal would work most of the time, but after what I've seen, I'd be reluctant.
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Admittedly, our situation was somewhat unique. I would not hesitate to have a solid written partnership agreement if entering one with someone I did not trust implicitly. In our situation, the informal agreement worked better than any written agreement could have. YMMV.

Let's put it this way... I valued the friendship more than the plane. If he called today needing a few grand for whatever reason, I'd have the money on the way to him ASAP, knowing that he was good for it. We should all be so lucky to have such a great partner.
 
A handshake with an honest man is worth more than a 50 page tomb of an agreement with a weasel. Both partnerships I have been in have bylaws or operating agreements. Nobody ever looks at them until the formalities of the buy in buy out process have to be looked up.
 
I've also seen people who both thought their view on an engine fund was correct. They never used the engine fund before disbanding the club and selling the plane.

One owner says they each bought into the plane by paying 1/5 of the total cost, so they should get 1/5 of the selling price plus 1/5 of the engine fund. Seems logical to me.

The other owner says he flew a lot more than the other guys and should get the money back that he put into the engine fund, not just 1/5 of it. To me, he lowered the value of the plane by flying it more than the other guys and that money went to the engine, which they each own 1/5 of, but I've found a lot of people don't agree.

Another reason to have things in writing! Both are nice guys, but they're no longer friends over a small amount of money.
 
I have a 50% partner. We're both lawyers. We have almost nothing in writing. Nothing's been an issue yet because if something comes up, we talk about it and we decide what to do, together. He's still a student, so scheduling hasn't really been an issue, but if it became one, I am confident we could work it out. We estimated our operational costs for the first year, and then went with actuals after that. When we fly the plane, we "rent" it from the partnership at a wet rate that includes our actual maintenance costs plus a reserve. We each put in an amount monthly to cover fixed expenses.

Some of the issues others have mentioned would not be an issue for me. For example, if he wants to fly our plane away for the weekend, I have access to others. But practically, that's not going to happen because we've got similar use cases. If he wants to let someone else fly it, who's fully insured, I don't think that would bother me either.

If you plan to be very attached to your plane or have very particular requirements, partnership might not be a good idea. Also, perhaps counterintuitively, if you can only afford a plane in a partnership, I'd say it might not be a good idea.

Everyone saying to get everything in writing is not wrong. But I tell folks in small partnerships that partnership agreements serve two practical purposes: 1) make sure everyone is on the same page at the beginning, and 2) arrange in advance the terms of the breakup at the end. In between, if you're constantly pointing at the terms of your agreement to determine who can (or must) do what when, you're going to have a very unhappy partnership.
 
5 total in my partnership. Respectful communication is number one in my book. We have a pretty simple "no jerk" rule. If a partner wishes to sell his share, we have a pizza meeting with a couple of beers to determine if the new potential partner will fit. We explain how we operate and make sure both we and a new potential partner feel comfortable with each another. We're very lucky with the personalities in the partnership. Some do the cleaning, some do the maintenance, all respect the plane and hangar.
 
Lindberg said:
I have a 50% partner. We're both lawyers. We have almost nothing in writing.
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Sorry I got to raise the bs flag on the first half or second half of this statement, you pick. I’m just kidding of course, couldn’t resist. Ask an attorney for an answer and they will Give you the answer it depends.
 
Nmm347 said:
Sorry I got to raise the bs flag on the first half or second half of this statement.
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I agree, an attorney who says you don’t need a contract... BS! Kidding of course...well, sort of...
 
Lowflynjack said:
I agree, an attorney who says you don’t need a contract... BS! Kidding of course...well, sort of...
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I gotta tell you that’s a first for me as well. But I get @Lindberg’s point - there is no agreement that will protect against argumentative members of an LLC or a partnership. I remember a law school professor describing partnerships like marriage- pick your partner wisely. Having dissolved numerous LLC’s with squabbling members, there is value in thinking through carefully how the divorce is going to get handled.
 
Lowflynjack said:
I've also seen people who both thought their view on an engine fund was correct. They never used the engine fund before disbanding the club and selling the plane.

One owner says they each bought into the plane by paying 1/5 of the total cost, so they should get 1/5 of the selling price plus 1/5 of the engine fund. Seems logical to me.

The other owner says he flew a lot more than the other guys and should get the money back that he put into the engine fund, not just 1/5 of it. To me, he lowered the value of the plane by flying it more than the other guys and that money went to the engine, which they each own 1/5 of, but I've found a lot of people don't agree.

Another reason to have things in writing! Both are nice guys, but they're no longer friends over a small amount of money.
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Hmmm... sticky situation. How’d it turn out?

I’d be curious for more stories / anecdotes of these types of failures - they all have a lesson in them.
 
Lowflynjack said:
I agree, an attorney who says you don’t need a contract... BS! Kidding of course...well, sort of...
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I didn't say don't have a contract. In most cases it's a good idea to have everyone's expectations in writing. But it's naive to think that a written agreement prevents disputes.
 
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