Writing A Partnership Agreement

Now it's time to take off and write the partnership agreement. As a reminder, an aircraft partnership typically can be of any number, but practically has three to five members. The legal structure is a little more complex than a co-ownership, as it should be with more pilots involved. The insurance policy is more expensive than for a single pilot, but not excessive. For a majority of pilots who want to fly a more expensive aircraft than their budget allows, a partnership makes good sense. Flying clubs will be covered in future articles.

The Partnership Agreement 

A partnership agreement, also known as Articles of Partnership, is a written agreement between two or more individuals who join as partners to share one or more assets. The asset, in an aviation partnership, is an aircraft. The partnership agreement defines the relationship, the capital contributed by each partner, their rights and responsibilities, and liability issues. It is similar in function to a business partnership, but the agreement is specific to asset management.

Caveat: An aviation partnership agreement should be written up, or at least checked over, by an attorney with aviation experience. You're dealing with an asset worth many thousands of dollars and pilots with hundreds of opinions. Invest in qualified legal counsel.

Articles of Partnership

Components of a typical aviation partnership agreement include clauses (called Articles) covering:

  • Partner Names and Contacts
  • Partnership Purpose
  • Duration of Partnership
  • Partnership Meetings
  • Partnership Rights
  • Partnership Responsibilities
  • Asset(s) Definition
  • Asset(s) Valuation
  • Share Valuation
  • Fixed Expenses
  • Aircraft Insurance
  • Operating Expenses
  • Overhaul and Propeller Funds
  • Accounting
  • Billing and Delinquencies
  • Home Base
  • Usage by Partners
  • Aircraft Scheduling
  • Aircraft Reservations
  • Aircraft Fueling
  • Procedures Away from Home Base
  • Usage by Non-Partner Pilots
  • Aircraft Flight Log
  • Aircraft Maintenance Logs
  • Aircraft Servicing (Squawks)
  • Equipment Upgrades
  • Accident Management
  • Partner Death or Loss of License
  • Partnership Dissolution
  • Arbitration
  • Signatures

To develop a simple outline for your partnership agreement, review the topics and questions outline in the last column of The Frugal Pilot, Especially focus on the What If questions that can make the difference between a enjoyable partnership and caustic litigation. Also review the Creative Partnership ideas in that article as they can help you develop an everyone-wins aviation venture.

Next, look to sample aviation partnership agreements and sound advice developed by the AOPA, EAA, and other aviation advocate groups. The AOPA, especially, has a variety of resources for pilots considering co-ownership, partnership, or flying clubs.

Once all partner candidates have discussed and verbally agreed to the partnership agreement, it's time to put it on paper. Again, seek legal counsel with aviation experience to review your outline, answer questions, and help all partners feel comfortable with the agreement.

Aircraft Registration

The primary asset, in this case an aircraft, is registered with the FAA either in the names of the individual partners or in a partnership name. It's typically easier to establish and use a partnership name because a change in partners doesn't require a change in FAA records. For example, if Joe Smith buys out Jane Jones' partnership share, the "Flying Fools Partnership" can change the partnership agreement without having to notify the FAA. "Flying Fools Partnership" still owns the aircraft. 

If the aircraft or any share of it is financed through a lending institution, it may require notification of the lender if any partners change. Check with your lender to be sure.