Not long ago, I was talking to a friend who had recently sold his partnership in a small light single-engine aircraft. It was a single engine Piper Archer, which if you know anything about the Piper line of aircraft then you know that is a beautiful bird. It turns out he didn't have enough money to buy the airplane out right for himself, and he was hoping to divide the cost amongst several members of a limited partnership. He ended up with two other partners, so he owned one-third of that aircraft.
Amongst them they came up with a legal partnership agreement allowing each one of them certain weekends or months to have the airplane at their disposal exclusively. Occasionally, there was one partner who would take the airplane out of turn, and this caused conflict with him and his family as they had been planning to take a trip but couldn't after arriving at the airport, as it was their turn for the airplane, but the aircraft was gone. After this happened several times throughout the year, he decided to take the airplane away, and park it in a friend's hangar during the times that he was entitled to the airplane as per their agreement.
By doing this there's no way the other partner could take the airplane out of turn. Of course, when the other partner learned that he was removing the aircraft from its normal spot during that month or weekend he became furious. And he threatened to put a lock on the airplane's propeller with a chain to prevent anyone from using it until they picked up a key from him personally. But that wasn't in the agreement. Later they had to hire a lawyer to sue the third partner for violating the terms of their limited partnership agreement.
Suffice it to say it's important to get everything in writing if you are considering some sort of independent fractional ownership or limited partnership in a small light aircraft. Further, just because you have an agreement doesn't mean that each party member is going to hold up their responsibilities and obligations. Airplanes are expensive enough to own whether it is a partnership or not, and this horror story case study explains that even if you do everything right, you are still dealing with humans, and therefore it may not be as smooth as you are led to believe when you initiate your partnership.
In this case the lawyer charged them $10,000 before it was all over, just so they could exercise their rights. Their third partner got quite upset and sold his one-third share, and the other two remaining partners could not afford the airplane by themselves, so my acquaintance sold his third, and the remaining partner eventually sold the aircraft, and he took a loss. That's too bad. Indeed I hope you will please consider all this and think on it.
Recommended Reading:
1. "Buying and Owning Your Own Aircraft," James E. Ellis, Iowa State University Press, 1980, 172 pages, ISBN: 0-8138-0165-6. Chapter 2,"Partnerships, Clubs, and Leasebacks, page 18: "Limited Partnerships".
Lance Winslow has launched a new series of eBooks on the Aircraft Cleaning and Detailing Business. Lance Winslow is a retired Founder of a The Aircraft Wash Guys, a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net/
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