I'm not a big fan of massive legal documents either, but I've heard that not ironing things out up front is the quickest way to a very bad end when things go awry.
For example, one of our potential partners was in another partnership where they spent into five figures defending their ownership against one member's soon-to-be-ex-wife - She and her lawyer asserted that her husband owned a lot more of the plane than they did. They had good documentation, too... Didn't prevent a huge legal bill.
And what happens if an engine overhaul comes due suddenly and one or more partners don't have the money to cough up for their share of the bill? What happens if one partner becomes a deadbeat?
Worse yet, what happens if one partner loses their job and can't pay the bills? If you say "sell" that means that partner will likely have to give away their share for next to nothing. Word of that gets around, and YOUR share ends up being worth a lot less as well.
Nate, you said you have a way to potentially increase your number of partners to five - How do you decrease? Is it possible for the remaining partners to buy out someone who wants to leave? How is the price decided on?
How do you handle the money? Do you have a fixed monthly rate, a dry or wet hourly rate, and the understanding that there may be on occasional assessment for surprises? Do any of your rates include reserves for maintenance or overhaul, and do you do that on an hourly or monthly basis or both? Or do you just split all the bills evenly?
I can't speak for the other guys, but it's pay the lawyer up front to pretend stuff has already happened or pay the lawyer after something actually does happen. A pretty low risk on the latter and a 100% chance of loss on the first.
Oh and even with an "iron-clad" contract in the scenario above, guess who's still suing (because they're crazy) and who's getting paid to defend, even if it's a lower overall dollar amount? The lawyers. Ha. Seriously. Not kidding.
Engine overhaul was a worry of mine so we discussed it. All partners at the time could have written a check for their share at least. We still it'd make us feel better to start funding an engine fund. We all whined that it's an awful thing to do with capital to tie it up making nothing in an account for an engine but it was "the right thing" to do. It also tends to put more of the engine replacement overall burden on whoever is flying most, which is fair. Some groups don't care and just pay their chunk even if you flew the airplane 2x what the others did.
The job loss thing would generally be negotiable. Most of us are older with few(er) bills and what not. I could pay the airplane bill not flying it for a loooong time without a job. A few years ago that might have had to come from retirement investments, today it could come from the emergency fund.
A buy out to leave we decided would have to be valued at the time it happens. The airplane is worth whatever it's worth. It's generally been going down like the Titanic and even stuff like the DME barfing have their toll, so it's a "meeting to discuss" if someone needs to sell.
All three of us put in some capital in the LLC to start. Discussion / Voting where to spend that capital has generally been the easiest and simplest. That capital was kept separate from the engine fund which is designed to run about $5-$10k short at TBO time, on purpose, because we'd rather write another check each, at that time. It covers enough in case someone just walked off, basically, that the others aren't completely holding the bag.
Maintenance is out of pocket. It breaks, we fix it. We've always just split those evenly but I've offered to put a GPS in on my own dime and the original consensus was "no, that's not fair". I have countered with the fact that I'll use it far more for required stuff I want to do than they will. They're "ok" with that. We may end up discussing more later on value, but I've made it clear it's a don't-care for me. I need/want the functionality more than I care if I'll get some pro-rated "payback" if I were to sell my share. The benefit to the co-ownership to me is an aircraft I couldn't or wouldn't want to maintain and operate on my own. Tossing a useful Garmin in the panel isn't going to break the bank, or sour the deal for me.
I think the biggest thing I've learned from this is that you really don't want a really broke co-owner unless everyone is equally broke.
Example: Our annual plus things we wanted done plus things the A&P found ran $8000 this year. We met up for a beer, whined a little bit, and agreed we all would survive our 1/3 of that and it was a lot better than paying the full bill, and toasted our good fortune... In an odd sort of way.
I think that meeting would be awkward if we knew someone was struggling to pay the monthly bills, etc.
Sounds crazy, but only buy an airplane if you have more money to blow than you think you do, and only with people who also do. Stuff is going to come up and it's going to hurt. Hell, a battery for the silly thing is almost $300 nowadays.
Or... Buy it with a whole bunch of broke people and sell it quick after everyone hits a particular flight goal. LOL.
The two happiest days of an airplane owner's life... And all that...
