Looking for info on structuring aircraft partnerships/shares

[proppilot]

Hello,

A friend of mine has decided to sell 1/3 share of his privately owned aircraft to myself and another colleague. I am looking for feedback/discussion on how to best structure this legally to reflect joint ownership (or if not, how do people generally set these arrangements up) ?

I have discussed with lawyers and accountants and have some general ideas but wish to see what 'best practices' or agreement structures ( i.e. forming a company around the airplane ) etc are typically used to support these arrangements ?

Any discussions welcomed.

Regards,

Tony Varga
CYKF

[Lost Lake]

Try COPA. They provide free purchase agreement contracts as well as partner contracts. Not sure if you have to be a member. If you're not a member, you should be.

[proppilot]

Been a member for 14 years and have the info/guides from there and AOPA. What I am looking for is what people have actually done, have in place and works.

Thanks,

[nbinont]

The most important thing, by far, is to have a group of people that work well together.

Pick one of the recommended approaches from COPA/AOPA: partnership/corporation/etc, and do that. Corporation will provide you a bit more liability protection, but at a $ cost. Partnership works great among friends.

You'll all have to realize that owning a plane is expensive, and probably more so than you expect (especially if you want to upgrade/change things). Make sure everyone in your group realizes this and is ok with spending the money.

Figure out how much you realistically expect to fly. Figure out estimates for your fixes costs, and variable costs per flight hour. Everyone pays their share of the fixed costs, and a per hour amount that covers the variable amount.

Enjoy your new bird!

[mmartin1872]

We have our airplanes in 2 different types of partnerships... one of the airplanes, is in a 3 way partnership with each person being named on the registration.

The other one is partnered through a company, and each person having shares and shareholder loans. (both airplanes are registered privately even though this one is owned by a company)

The best is the 2nd option we have found, because we do the 'books' for it also,
if one person 'puts in more' money than the others, his shareholder loan goes up, share holder loans , get paid out before the 'shares', if the airplane were to be sold, or crashed.
If you want out, all you have to do is sign your shares and shareholder loan over to whoever 'buys' you out. its just signing of a certificate, and you can transfer ownership, no dealing with transport canada.
The company can 'rent' the plane to each owner for $xx, to build up a bank account.

[Wilbur]

Register a company or society that owns the aircraft, and then sell shares to an odd number of partners so that there will never be a tie vote when making decisions. Set out in writing all the details of how the company/society will function and attribute costs to the partners. For example, what condition will the aircraft be maintained at; A basic beater for buidling time, an Oskosh winner, or something in between? What level of insurance coverage will be maintained? Consider how costs will be shared. Everything equally regardless of usage level, divided by hour flown, or a blend of the two. In my experience, it works best to have a blended system. Fixed costs such as hanger, insurance, annual, and upgrades that add to the asset value (new paint, radio's, etc) split equally. Fuel, oil, wear and tear maintenence, engine time, etc split on an hourly usage basis. Address sharing of basic work/time requirements such as washing and upkeep. Have in writing how accidental damage repair costs will be assessed; everything from a write-off to something too minor to trigger an insurance claim. Most importantly, have a detailed method of exiting the partnership. A system allowing the company/society first right of refusal to buy back your shares (in practice the remaining partners) and then reselling them to a new partner acceptable to the others works best. The trick is defining a process for assessing the value of the organization's assets (aircraft, bank account, remaining insurance coverage, hanger rent, etc). Aircraft value can be a big point of conflict between partners, so it's really important to spell out a system for how the value will be determined. It's especially important if the seller has their own buyer who claims they are willing to pay more, but is not a person acceptable to the others. Have processes to deal with a partner who doesn't/can't pay their share of the annual bill, abuses the airplane (mishandling the engine, wrecklessness, etc), or violates the partnership agreement.

Thorough, detailed, and concrete rules that foresee and plan for every contingency will maintain a long lasting and functional partnership, and protect friendships. Anything less almost always ends in disaster. It's real easy to get into a partnership when everyone is motivated and excited about their new toy. The real test will come a couple years down the road when some are flying lots, others not so much and the big bills start to come in.

Your situation also presents a twist with a single owner selling shares in "his" airplane. Will it still be "his" airplane with a couple others helping with costs, or will it be "our" airplane with everyone having an equal say in what happens? How will he feel if the two new partners over-rule him on some decision?

[proppilot]

Wilbur/all. Thanks for the great information and comments. I did end up finding some excellent material at COPA as well as AOPA and from a few on Commander.org so enough to get going.

we will form a company and the owner of the plane will exchange it for shares in the company thus rolling the aircraft into the company and the company then fully owns it (but he only has shares). In a back to back transaction, he will sell #2 and I each 1/3 of his shares and then it is done.

A solid operating agreement and we should be flying.

Cheers.