Beginning Consideration of a Partnership

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Star Keeper

Pre-takeoff checklist
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Star Keeper
After obtaining my private pilots license and doing the rental thing for the last few months I'm beginning to figure out what my typical missions look like. Having identified that whats the process for beginning to find that partner. Having been in various business dealings I understand most of the contractual parts of it but what I don't know is where do people go that are also looking to partner up. The goal is to look for a partner and then look for the plane. Even with this crazy economy the finding the plane part will probably be easier. Currently renting covers part of our mission but there are many flights we haven't taken either because an aircraft wasn't available or because the daily minimums made it not viable. This is going to be a long and methodical process for me and I tend to over do it on the research side of things.
 
I've heard the process of finding a partner compared to dating, so there's lots of different ways it's done. Some pilots just run into each other, start talking, and end up as a great partnership. Some pilots find so many unreliable or worse partners that they feel like there aren't any good partners left out there. Some pilots advertise everywhere they go that they're looking for a partnership, whether that's the grocery store, the drive-thru or the FBO. Some pilots never find a partner and some don't want one. Oh no, wait, that's what I saw when I watched kids dating in college. ;)

Seriously, though, one of the first places to look for partnerships is at the local airports. Talk to the people at those places and see if anyone else is asking around. If you have any pilot or A&P friends, tell them you're looking for a partner and to let you know if they know anyone or come across another pilot looking for a partner in the area. You could also try posting on your social media of choice, whether that's in the Classifieds here, or in a facebook pilot group.
 
Ended up in a great partnership from a Craigslist ad.
 
I purchased the plane first and then started shopping for partners. It’s a harder way to do it but it gave me some more control. So far it has been really good.
 
Often people look for a partner when they find they really can't afford the plane they bought.
 
If you buy it, they will come.

Morgan is right. You’ll have more control, and you won’t need to accommodate someone else’s ideas about what to buy, if you can swing it.
 
Find a partner that could afford it himself but understands the benefits to having a partnership. Don’t partner with somebody who is using your money to get into a plane that they normally could not afford. Place the aircraft in an llc.
 
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Morgan3820 said:
Find a partner that could afford it himself but understands the benefits to having a partnership. Don’t partner with somebody who is using your money to get into a plane that they normally could not afford. Place the aircraft in an llc.
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This is probably some of the most grounded advice I've received on this topic so far. Thank you.
 
MauleSkinner said:
Have a good written exit strategy so that if any of you want and/or need to get out of the partnership, you don’t have to negotiate terms at that time.
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I was looking at a way to predefine a process for valuation in order to make the exit process easier. Also how do you handle things like selling your share to a new party? I would assume the remaining shareholder has a say in the new partner?
 
Star Keeper said:
I was looking at a way to predefine a process for valuation in order to make the exit process easier. Also how do you handle things like selling your share to a new party? I would assume the remaining shareholder has a say in the new partner?
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That all depends on how you write the agreement, which is one of the reasons why you want this established up front.
 
Star Keeper said:
I was looking at a way to predefine a process for valuation in order to make the exit process easier. Also how do you handle things like selling your share to a new party? I would assume the remaining shareholder has a say in the new partner?
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It is really up to the founding partners how setup the agreement. There are no rules. In our group the remaining partners have first right of refusal. AOPA has a partnership template. But there’s no obligation to follow it. We started by having a meeting at the local FPO where we sat down and went over line by line scribbling out things that we didn’t want adding things that we did. If you can’t come together on a partnership agreement then maybe you shouldn’t have a partnership with those people. It really is kind of a marriage. You don’t have to be best buddies but you need to be cooperative and cordial. Also this is where putting the aircraft in an LLC is helpful because you don’t have to involve the FAA registration branch you’re merely changing who owns the corporation. We treat the partnership as a business, with checking and credit card accounts. I am the treasurer. Another guy is in charge of maintenance. But we all pitch in.
 
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Star Keeper said:
I was looking at a way to predefine a process for valuation in order to make the exit process easier. Also how do you handle things like selling your share to a new party? I would assume the remaining shareholder has a say in the new partner?
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Our agreement states that each year at annual we will place a value on the plane. It is typically less than what we would sell it for. Either partner can exit at any time they have three choices, sell to the other partner at the agreed upon value at the previous annual, find another partner but the other partner has to be in agreement or sell the plane outright and divide the proceeds between the partners. If my partner decided to sell out today I would probably buy him out, I would be less likely to accept another partner than I would to sell the plane and split it.
 
For those of you currently in partnerships would you mind sharing other aspects? How do you handle a partner behind on payments? What actions have you and your partners set as options? For exit options do you require the buyer (incoming partner) to be approved by the existing partner or do you require them to simply sign on in agreement with the current partnership agreement? Do you set up existing partners first right of refusal?
 
Star Keeper said:
For those of you currently in partnerships would you mind sharing other aspects? How do you handle a partner behind on payments? What actions have you and your partners set as options? For exit options do you require the buyer (incoming partner) to be approved by the existing partner or do you require them to simply sign on in agreement with the current partnership agreement? Do you set up existing partners first right of refusal?
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I’m not in a partnership but I would think you should get dues paid up front at the beginning of each year to save on admin. I would also get the plane first and then find partners, you can post an ad here, barnstormers, trade-a-plane, at your local flying clubs/school, etc. Important to discuss maintenance norms (I would almost rate it on a scale of 1 to 10, do you fix every small problem and spend $$$ or somewhere in the middle), discuss avionics and upgrade desires and plan, way in and out, reservation schedule (do you want people taking the plane for the day, every weekend, the whole month, the whole winter?), number of partners, who does and arrange mx, pet policy, insurance minimums (or pay the difference?), rules (you probably need a fine or penalty structure - didn’t pay, damages, disappeared, hiers in case the partner went west), etc.
 
I'm looking to offer a partnership in my SR20. Any ideas on how to offer this?
 
John Feddersen said:
I'm looking to offer a partnership in my SR20. Any ideas on how to offer this?
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Local FBO bulletin board, word of mouth. Tell the airport employees that you were thinking about putting plane up for partnership. Define the minimum requirements for a partner upfront.
 
Morgan3820 said:
Local FBO bulletin board, word of mouth. Tell the airport employees that you were thinking about putting plane up for partnership. Define the minimum requirements for a partner upfront.
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Thanks Morgan for the reply...helpful. I have it Facebook and will start going around to the FBO's if they will let me.
Best, John
 
Having a good exit plan, and making sure both can survive it on their own are both great points, and they're tied together. The last thing you want is where one or both parties can't afford to get out of it, and really want to. I don't think it's possible to stress this too much.
 
We've been partners for over 10 years and it's been without issue. However I am retiring to SC and the plane is in NY so I have to search for a good partner in a plane that requires 12 hours transition training. Not easy so I need to look. I'm on a Facebook page or partners and a another aircraft partners page. POA does not permit me to pulish this unless I have x amount of posts first.
 
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