Partnership of 5

Oldmanb777

Oldmanb777

Line Up and Wait
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Oldmanb777
I'm looking at a partnership. 5 People in it. I have never done that. Seems like it a lot of partners for one airplane. But really I can't justify my own, even though I could afford it. It's not my dream plane either, but a good solid honest capable airplane for what I will primarily do. Soooooooooo What wisdom is there. Any advice? Whats your experience? I do want to meet all the members before I proceed very far. Compatibility seems very important, especially with so many people involved.
 
Make sure everything is in writing, no matter what they say. Find out how they make financial decisions. Does everyone have to agree, or just a majority? Do they have a reserve fund for engine overhaul? If not, how do they expect to pay for that once the day comes. How can you leave the partnership? Do you have to find someone to buy your share, or do the other partners buy you out? How do they handle scheduling? First come first serve? Any limit to how many days you can take the airplane, or overnights?
 
Check the scheduler going back as far as possible to see how much the plane is used. I joined a partnership of 9, years back and it was awesome. I was the only one who flew it and paid 1/9 the fixed costs. I wish I still had that deal. If the other partners use it every weekend and are just looking to collect funds for upcoming upgrades, it probably is a bad deal.
 
We have a four person partnership that works well. It helps that one partner is out of medical right now and hasn’t flown in 5 years, but keeps paying his share of the bills. I am the secretary/treasurer, so collect all the money and pay all the bills.

Your post is not clear. Are there currently 4 and you will be #5? Or are there 5 and you will replace one? Or are there 5 and you will be #6? One thing I learned is 4 pilots is the magic number as far as the insurance company goes. More than 4 and they consider it a club. Also, rates are based on the lowest time pilot, regardless of how experienced the others are.
 
There are 5 partners. I would be buying out one of the partners. Seems like a lot of partners. So if the plane doesn't fly much (seems that way) flying skills could be an issue, if it fly's a lot availability is an issue. Maintenance costs are spit at the time they occur. I think that includes engine overhaul. I want to look into it further, but don't want to waste my time or theirs. I am as concerned about politics surrounding the plane, its costs, its use etc as I am about anything else. So for example, if someone wants to spend on new costly gadget, will you be on the hook for something you deem unnecessary and very costly. Or are there several "ring" leaders who control the group, and everybody else just needs to pay up and shut up. Things like that concern me as much as anything. Seems like their quoted cost for insurance was pretty low as well. So lots to consider. Thanks for the input.
 
Do any of the partners have other planes? Are those planes poorly maintained and carrying a Loran?
 
I can’t imagine not asking all your questions directly to the partnership. If they aren’t transparent when addressing these than you might want to reconsidering joining. It takes a good leader and group of partners to make it work smoothly and equitably, otherwise it may have the politics your are most concerned about. Getting all of figured out before joining is definitely not a waste of time, it’s due diligence.
 
You are asking the right questions. Make sure the answers are documented, especially those around dollars.

I'm in the same situation. I could afford to own a plane solo, but it's much more affordable with partners. Plus the plane flies more frequently, which is good for the plane.

What do you want to use the plane for? What do the other partners want to use the plane for? And when? I set of 5 that all have M-F 9-5 jobs and all want to fly around on the weekends and the plane will be busy on the weekends and sitting around during the week. That's when it's nice if one or more partners is retired, semi-retired, or has a job with a different schedule.

A good compatibility on usage is nice. Not just time, but how you want to use it. If many of you travel then you will all want it in good shape for traveling. Someone that just wants to go flying for an hour every now and again isn't as concerned about dispatch, as they can just go another time. If you were planning a trip and some known issue wasn't dealt with in a timely manner and now the plane is down, that's a bigger problem. If something is starting to act up, do they deal with it immediately? Or do they wait until the plane is no longer airworthy and then finally get around to getting it fixed?

I've been in a few partnerships. Two were "non-equity", so just another form of renting, but we had a solid set of "partners". The current one I own 1/3 of the plane. These planes are all traveling planes, so we don't typically fly them for an hour or so on a Saturday, then blocking a weekend trip for the others. We are going places and usually have the plane for the weekend or longer.

How is the cost structure set-up? In my current group they just charged and hourly rate. I tried to tell them that a monthly fee for the fixed costs and then an hourly rate for the variable costs fit better, but that's how they had it set-up. Well, winter came and we flew less, then COVID hit and we didn't fly much, and suddenly we were short on funds. :rolleyes: They shifted to monthly plus hourly and one partner dropped out. We found a new person to buy his share. Is there an "account" for the engine reserve? If not, can everyone write the check if the engine needed to be rebuilt tomorrow? Fortunately with 5 people that check become easier to write, but it still may be a stretch for some people. We proper reserves for rebuild and maintenance then those things are not an issue when they pop-up.

How much insurance coverage is there if the cost is low? Is that enough for you? Is it enough if the plane is totaled to get your money back out? Is there enough liability for you?
 
TrueCourse said:
I can’t imagine not asking all your questions directly to the partnership. If they aren’t transparent when addressing these than you might want to reconsidering joining. It takes a good leader and group of partners to make it work smoothly and equitably, otherwise it may have the politics your are most concerned about. Getting all of figured out before joining is definitely not a waste of time, it’s due diligence.
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At the moment I have no idea even what to ask. I'm pretty ok with the airplane itself type questions. The Partnership questions are a whole other matter. I have seen some partnerships that ended badly. Several I could predict. So I'm asking what experiences others have had, so maybe I can ask better questions.
 
Oldmanb777 said:
There are 5 partners. I would be buying out one of the partners. Seems like a lot of partners. So if the plane doesn't fly much (seems that way) flying skills could be an issue, if it fly's a lot availability is an issue. Maintenance costs are spit at the time they occur. I think that includes engine overhaul. I want to look into it further, but don't want to waste my time or theirs. I am as concerned about politics surrounding the plane, its costs, its use etc as I am about anything else. So for example, if someone wants to spend on new costly gadget, will you be on the hook for something you deem unnecessary and very costly. Or are there several "ring" leaders who control the group, and everybody else just needs to pay up and shut up. Things like that concern me as much as anything. Seems like their quoted cost for insurance was pretty low as well. So lots to consider. Thanks for the input.
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Good questions. Ones that I considered when looking for partnerships. Never did find one that suited me. There was one that was pretty good. The thing that killed it for me was the 'exit' policy. It was a you owned a piece of the plane type partnerships. Equity based I think it's called. Be sure you know what happens when you, or anyone sells their share or decides to leave the partnership. In the one I was looking at, there was no way I would ever get one penny of my buy in back. Even if I sold my piece to a new member.
 
I am told several of the owners are retired. I have not met any of them yet. The insurance seems cheap. While I would not want to loose my "investment" in the hull, it would not be financially devastating. If some lawyer decides there could be some shared liability, then that's a whole different thing. There is a monthly cost, and an hourly rate, dry. Actually fairly affordable, but I don't think includes much in the way of maintenance expenses.
My use would be mostly the AMU burger and a rare couple days trip. Might even be a long fishing trip in there of a couple weeks. But not often. Mostly pleasure flying on nice days. although I want it to be IFR. If you are going somewhere, filing IFR sure makes the trip easier. I don't mind being involved in the maintenance, however my plate is pretty full. So I don't really want to be "the maintenance guy". And there again, I have no interest in assuming the legal lability for maintenance. My wife won't get in a light airplane, so taking trips is probably not often. I do have other family members who fly, so trips to see siblings and an occasional trip with them could happen.
 
Oldmanb777 said:
182 Not my dream plane, but hard to beat. Yes exit policy would be something you need to know. I had not really crossed that idea yet.
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182 is a great plane. Sure wish I had the opportunity to get in a 182 partnership. I think you have a good start with what others have posted. I think I would copy what others have posted and have the other 4 read and answer you questions. Good luck, I hope it works out for you
 
There are other threads on the topic. so without a lot of typing:

Request the monthly financial reports for all of 2021.

If you get them, and they seems reasonable, proceed. Otherwise, say thank you for your time and run.
 
This situation is a lot more appealing to me than renting, renting solves more of the problems, or issues and you have access to more types of planes that fit the mission better. But also raises other issues. Some ownership, hopefully,, would have people treating the plane better than renters. Maybe not, but I think so.
 
Ravioli said:
There are other threads on the topic. so without a lot of typing:

Request the monthly financial reports for all of 2021.

If you get them, and they seems reasonable, proceed. Otherwise, say thank you for your time and run.
Click to expand...

I'd go back farther than just this years. And not just the club Treasurers summary. Make sure you see Bank Statements. Are there any loans on the plane. Do they have a history of being late with payments. etc etc
 
I guess I assumed the guy can read a Balance Sheet, Income Statement, and AR aging report.

The real test, is can they be provided quickly? If you ask for the customary reports for x months back and receive them in a few hours, you're probably okay. If you get a lot of himing and hahing and the eventual thing is meeting notes with the "treasurers" commentary? Get those track shoes moving.

Wouldn't ask for or expect bank statements. And while I was the treasurer of a 14 member 2 plane club I would not provide bank statements. The membership candidates received the same details they would receive at the monthly meeting. (In our case the board got the package by the 2nd of the month, and the general membership got it at the meeting on the second Tuesday of the month)
 
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Ravioli said:
I guess I assumed the guy can read a Balance Sheet, Income Statement, and AR aging report.

The real test, is can they be provided quickly? If you ask for the customary reports for x months back and receive them in a few hours, you're probably okay. If you get a lot of himing and hahing and the eventual thing is meeting notes with the "treasurers" commentary? Get those track shoes moving.

Wouldn't ask for or expect bank statements. And while I was the treasurer of a 14 member 2 plane club I would not provide bank statements. The membership candidates received the same details they would receive at the monthly meeting. (In our case the board got the package by the 2nd of the month, and the general membership got it at the meeting on the second Tuesday of the month)
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Yeah. There may be some less scrupulous than you Treasurers out there though. Curious, why not Bank Statements. I would think, ok, here's the minutes of the last meeting and here is the Treasures report, some of which is compiled from the latest Statements. But he don't want me to see the Statements. It would make a hair or two on the back of my neck to get a little twitchy.
 
You ever see the bank statements of the company you work for? Or do you rely on the officer generating the financial statements and the CPA signing them off each year?

I'm not sure what you think a "Treasurers report" is. Financial reporting is pretty much what I said above - Balance Sheet, Income Statement, and AR aging. I also included the aircraft usage logs in the package so everyone would know who is doing the flying and can confirm the pot was right on the engine reserve contributions each month.

Someone could spoof one if they tried, but if you have 6 months trailing it gets harder. Things that take time to produce I don't trust.
 
Oldmanb777 said:
At the moment I have no idea even what to ask. I'm pretty ok with the airplane itself type questions. The Partnership questions are a whole other matter. I have seen some partnerships that ended badly. Several I could predict. So I'm asking what experiences others have had, so maybe I can ask better questions.
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Actually, you already have the questions complied here in this thread. Present the “what if’s” to the partners. If it were me, I’d spend time talking with these partners. Get to know them and see if you can get a pulse on how credible they are, how they will handle all these situations you have presented. But, like everyone else has said, get the basics in writing on how everything will be handled even if it’s not a comprehensive legal contract. History will show how they have treated the partners in the past and it can give you some insight to what might happen in the future.
 
I think turnover of "owners" might be interesting as well. Good insight, thanks.
 
As a fairly new member (just under 1 year in my current club) one of the things I found investigating 3 different clubs is that there are members in clubs who don't fly anymore yet still pay monthly dues much like the pilot owners who don't fly their plane yet continue to pay for tie downs/hangars. In the club I joined we have 9 members and I have never had an issue booking time on the weekend because only about 4 of us actively fly the plane. Check the financials, check the MX logs and ask to see the schedule for the last 12 months.
 
I was in a 6 person partnership in a Cherokee 6. I bought out one partner who had lost his medical and wasn't flying. I got in ridiculously cheap, which was good. This was my first foray into aircraft "ownership" and learned a lot good and bad and what to do differently.

The good was that I was in a pretty capable PA-32-300 with 5 other guys, but only two of us actually flew the thing. So it was like I was in a two-person partnership for 1/3 the cost. The other partner who flew also had a partnership in a Baron, so if there ever was a scheduling conflict (only happened once), he ended up taking the Baron and I flew the -6. So, in reality, it was almost like having my own airplane at 1/6 the cost.

The bad: Since only 2 of the 6 of us really flew, nobody wanted to put money in for any upgrades. They would pay for safety of flight stuff that needed to be done to keep the plane airworthy, but as far as any "upgrades" like interior, etc., they weren't ponying up the cash for that. When it came time to sell, there was some heated discussions about selling price with the other flying owner really trying to set the price high, and the other 4 guys just wanting out and putting the price on the lower end of fair. I was getting ready to move to Germany and got in so cheap I was indifferent. I let those guys hash it out. We sold cheap. Also, when it came time to sell, and the new owner had a pre-buy done, I was shocked at the amount of fixes that needed to be made. After that, I wondered if we were getting the "pencil whip" annuals all this time. That ****ed me off a bit.

If I was going to do another large partnership like that, especially when there are several non-flying members (especially the one who is in charge of the maintenance), I would take a bigger role in the finances and maintenance oversight that I did.
 
I'm in a partnership of 4 on our plane. Two fly once a year, myself and the other put most of the time on the plane. We've never gotten to a 50 hour oil change before annual. The other active partner and I fly a lot of other aircraft, this one is just for fun.
 
Sluggo63 said:
I was in a 6 person partnership in a Cherokee 6. I bought out one partner who had lost his medical and wasn't flying. I got in ridiculously cheap, which was good. This was my first foray into aircraft "ownership" and learned a lot good and bad and what to do differently.

The good was that I was in a pretty capable PA-32-300 with 5 other guys, but only two of us actually flew the thing. So it was like I was in a two-person partnership for 1/3 the cost. The other partner who flew also had a partnership in a Baron, so if there ever was a scheduling conflict (only happened once), he ended up taking the Baron and I flew the -6. So, in reality, it was almost like having my own airplane at 1/6 the cost.

The bad: Since only 2 of the 6 of us really flew, nobody wanted to put money in for any upgrades. They would pay for safety of flight stuff that needed to be done to keep the plane airworthy, but as far as any "upgrades" like interior, etc., they weren't ponying up the cash for that. When it came time to sell, there was some heated discussions about selling price with the other flying owner really trying to set the price high, and the other 4 guys just wanting out and putting the price on the lower end of fair. I was getting ready to move to Germany and got in so cheap I was indifferent. I let those guys hash it out. We sold cheap. Also, when it came time to sell, and the new owner had a pre-buy done, I was shocked at the amount of fixes that needed to be made. After that, I wondered if we were getting the "pencil whip" annuals all this time. That ****ed me off a bit.

If I was going to do another large partnership like that, especially when there are several non-flying members (especially the one who is in charge of the maintenance), I would take a bigger role in the finances and maintenance oversight that I did.
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That brings up some things I found when looking to buy into partnerships. I did a lot of due diligence and found some pretty questionable stuff. One was the maintenance dude had quit the club and no one else took over and took care of stuff. It was a pretty active club and needed oil changes between annuals that weren’t getting done. On the upgrades thing there was one where they needed overhaul/replacement. Timed out engine is a pretty prevalent common denominator when partnerships are looking for ‘new blood.’ This one had been run with an ‘engine fund.’ But via the tyranny of the majority, it had been depleted for leather seats, paint and Gucci avionics.
 
Lots of good advice here. I've been in a shared-ownership with 2 other pilots for almost 17 years in a 182. Only one change of partners in that time. If it is structured properly and well-documented it can definitely work with five, if everyone is a 50-100/hr year (or less) pilot (which is common). Really depends on the use/scheduling/flexibility of the other partners.
 
Just to repeat how important partner flight activity is, when I was young my dad was in an awesome 3-way; one was an alcoholic who never ever flew, the other just wanted to brag to people he owned an airplane. Subsidized flying!
 
Oldmanb777 said:
I'm looking at a partnership. 5 People in it. I have never done that. Seems like it a lot of partners for one airplane. But really I can't justify my own, even though I could afford it. It's not my dream plane either, but a good solid honest capable airplane for what I will primarily do. Soooooooooo What wisdom is there. Any advice? Whats your experience? I do want to meet all the members before I proceed very far. Compatibility seems very important, especially with so many people involved.
Click to expand...

I was in a 5-way partnership. We had a solid and fair scheduling system and a number of the partners didn't fly much. There was never an issue with availability and never any conflict around the schedule.
Would it have been nice to have only 3 people to sort the schedule out with: Sure
Was it nice to have 5 people put their check on the table when the engine needed an overhaul: You bet.

Having a cordial group of partners is more important than the plane itself.
 
^^^^^^ Yes, I am thinking that the group is the make or break factor, not the plane. Sure the plane could be a no go and break the deal. But the partners in the group would be at least as important.
 
Lot of good advice on here. I am the founding member of an LLC that holds a capacity of 4 managing members. We currently have 3 members and find that odd numbers work well for tie breaks in spending issues. We limited it to 4 as insurance said anything over that constituted a "club". So check on that in your area.

None of us own the plane, we own shares in a company that ownes a plane. Our operating manual lays out all of the usage parameters, expectations, and responsibilities. This is your Bible for settling any issue....make sure it is complete and there is no room for wiggle.

We use Flight Circle to manage on line scheduling, billing, and maintenance reminders...as well as currency and credentials. It honestly has been the most cost effective way for me to fly a well maintained and equipped plane. In 7 years, I have never had a scheduling conflict....why? First come first serve with 1/3 limits.

Something breaks, how is it fixed? Define the operational requirements of the aircraft (vfr/ifr/day/night)...if the 430 goes out, the plane is grounded until fixed because we have it in our operations manual that it must be ready at all times for IFR Night operations. Grounding the plane puts urgency in the repair.

All fixed costs split, maintenance split, repair replace split, responsibility for cleaning and operations split. Upgrades are a different beast. Example...operational 430W, someone wants a 650 installed instead. Well, we then put on the sales hat and try to convince the others to share the cost, but any one member can "upgrade" anything if they are willing to carry the burden of cost. But it must be an improvement over what is there. If any individual member carries the cost of an upgrade, then their share value is recognized for that cost at the time of sale. Meaning, I want an AP installed, the others don't. I say fine I'll pay for it and I get a $15K AP put in. When we sell or buy out the shares I would receive 2/3 the cost of the upgrade that I paid for in the sale.

Long story made longer...it is awesome if it is all set up in the beginning. I will probably never own a plane independently as I have always had a great experience in partnership.
 
My brother and I are partners in a 172 and a Rans S6S. I own a 150 and my RV9A, and he owns his RV9A. We split the cost of EVERYTHING 50/50 on the 172 and the S6 (except our fuel). I own the 2 hangars that they're kept in. e
Either one of us flies any of the 5 airplanes whenever we want to. Never had a scheduling problem. :)
 
Thanks everybody for the info. Guess I was too slow to jump. It is sold. But while I think it would have been a very good fit, It' didn't work out. There will be another opportunity and maybe I will be more prepared to jump on it. Again thanks for the insight.
 
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