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The consensus from those we spoke with was that choosing your “buddy from the club” as your aircraft partner is a risky proposition. You may be bet- ter served with someone who aligns with your key interests but is outside your social circle.
And while there is no one right an- swer regarding the number of part- ners versus complexity and costs, we learned that in most cases, less is more. Adding numbers to the pack will drive down your costs but exponentially in-
crease the complexity of your part- nership. The formula for successful partnerships is to keep it simple. The program offered by Partners In Avia- tion, “PIA Managed Co-Ownership,” limits matches to two operators.
KEY TAKEAWAY: Adhere to a checklist for partnership re- quirements and stick to it without compromising. Include location and willingness to concur on pre- defined terms important to you.
3. Agree on Pre-Defined Terms.
How is the aircraft going to be shared? What are the exit options? How will the aircraft be managed? Who is paying for what, and when? If these questions aren’t clearly answered before the partnership begins, it’s likely you’re going to run into trouble.
When it comes to associated costs, there are three approaches in a part- nership: his, mine or ours. Owners are either splitting the cost 50/50, splitting based on usage or splitting based on a combination of both. For example, partners could split annual fixed costs 50/50 but pay usage costs proportionate to the amount flown by each partner. This all should be predetermined be- fore the partnership begins.
KEY TAKEAWAY: Agree on predefined terms including the air- craft’s schedule, maintenance opera- tions, management, contract term, exit options and base airport.
4. Get Legal & Tax Counsel.
Before entering a partnership, it’s important to talk to the necessary legal and tax experts to ensure you are protected. Your counsel can help determine the smartest entity for you in regards to your state and local laws, then draft the agreement for you.
“The most common partnership mis- take I see is when one or both parties are looking to maximize income tax deductions, yet set up a single LLC together,” said Cheung. “That makes it difficult to navigate from a tax perspec- tive. Partners in this scenario should set up separate entities that are best suited for their situation.”
According to Cheung, good counsel will not only have a knowledge of the IRS and local laws but also a thorough understanding of FAA regulations to ensure sure you are in full compliance.
KEY TAKEAWAY: Get aviation legal and tax counsel to determine the best entity for you to use, separate from your partner’s entity.
5. Involve a Management Company.
Historically, most aircraft partner- ships have forgone the use of a
ASE Recurrent Training
CD Management, Inc.
26 • TWIN & TURBINE / April 2019