Selling a plane with a partnership and maintenance fund

Ron Levy said:
Your statement assumes that reduction in selling price of the asset is directly equal to hourly maintenance costs. That ain't so. And June has not been "subsidizing Jim's fixed costs all along" since the fixed costs should be shared equally using some sort of fixed monthly payment -- and we know nothing about their revenue structure beyond that the maintenance fund is based on hours flown. Given the lack of information about cost and revenue structure, and the lack of any written agreement on how the dissolution should proceed, we're back in lawyer-land.
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The fund is not a maintenance fund, it is an engine fund.
 
JoseCuervo said:
It is people like you would would always be the ones to ruin a partnership experience.
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You know nothing about me if you say that. You confuse advice and commentary with intent.

There is nothing to question, and there is nothing worth "considerable legal wrangling".
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There are plenty of lawyers getting rich off people who believe that.
 
Ok..... I give up.....

Why did June buy into the plane and not use it?:idea::dunno:
 
I give up, too. You can either call a lawyer now to sort it out, or call one later after one of the partners calls his/her own because s/he isn't happy with the split. Anything else is dreaming in Technicolor.
 
N801BH said:
Ok..... I give up.....

Why did June buy into the plane and not use it?:idea::dunno:
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Based on the names of Jim, John, Jane, and June, I'm pretty sure the OP posed his question as an overly simplified hypothetical to make it easier to think about.

Or June just likes to throw money around...
 
Ron Levy said:
You know nothing about me if you say that. You confuse advice and commentary with intent.

There are plenty of lawyers getting rich off people who believe that.
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There ain't a single lawyer getting rich off of trying to screw partners out of engine maintenance reserves.

How come you skipped the math portion of my post where you explain what happens to ownership interests if they convert the reserve fund into a newly overhauled engine?

Please tell us what claim the partners would have on the equity of the plane after paying to fix the engine.
 
JoseCuervo said:
There ain't a single lawyer getting rich off of trying to screw partners out of engine maintenance reserves.

.
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Jose,

I don't think Ron was saying lawyers are "screwing" anyone...but lawyers do deserve to be paid lawyer's fees if "hired" by a partner or partners.

He seems to be saying that partners can save that money if they draft well written, tight Partnership Agreements right out of the gate that have verbiage that spells out exactly how just such a scenario(s) will play out.

It seems the OP does NOT have such verbiage in their "agreement" which appears to be a verbal agreement only IIRC.

I also don't think Ron is saying one of the partners SHOULD get a lawyer or that it's likely that one WOULD get a lawyer and cause trouble...I think he's saying it is easy to foresee that happening and if it did it would be a shame, because it was a completely avoidable situation if thought out in advance and put in writing.

<Jose said, "It is people like you would would always be the ones to ruin a partnership experience. ">

Not to keep defending Ron, but I don't get the idea that he would be the type of aircraft partner that would cause trouble by taking advantage of the other partners just because there is some wiggle room in a negotiation lacking a written contract between them. He seems like a well rounded, feet planted firmly on the ground, reasonable and honest guy. I think his admonishments are directed at the less scrupulous individuals that are out there who seem to easily place themselves in the center of the universe.

All this being said, I think you are both correct. You see it as no problem and a no brainer because it is the honest thing to do. That is because *you* are honest and down-to-Earth. Ron is saying the same thing, but has the attitude of, "Trust but Verify" and have a written contract...especially with friends and family...IF you really want to keep your friends and family as...well...friends and family.

Ron and Jose...I'd take either of you as an aircraft partner any day. Contract or no contract.

Gene
 
DFH65 said:
First let me say that I do not own a plane or am I in a partnership just applying logic here.

In that case I would evenly divide the money assuming that all parties own equal shares in the plane. The logic being that Jim devalued the plane more than June did. If you were to overhaul the engine with that money or do other maintenance before selling it then I would assume there would be no question and you would split the money. In this case the maintenance theoretically has simply been deferred and sits in cash in the bank.
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:yes::target::yesnod:
 
Let's say the plane was worth $45k when the partnership started. When the plane depreciated to $35k, one of the partner sold his share and based the price on the $35k. Partnership somehow falls apart and the new partner haven't flown and therefore haven't contributed to the fund. Plane sold for $35k. If we split the $10k fund evenly, the new partner is getting a windfall with no contribution. There should be some type of accounting for much or how little depreciation a partner suffer on the sale.
 
johnrweb said:
Let's say the plane was worth $45k when the partnership started. When the plane depreciated to $35k, one of the partner sold his share and based the price on the $35k. Partnership somehow falls apart and the new partner haven't flown and therefore haven't contributed to the fund. Plane sold for $35k. If we split the $10k fund evenly, the new partner is getting a windfall with no contribution. There should be some type of accounting for much or how little depreciation a partner suffer on the sale.
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The plane might have depreciated by $10k, but the partnership is still valued at $45k because of the engine fund.

A new partner is NOT buying into a "plane"...He/She is buying into a "partnership".

The new partner would have to put in his/her share based on the value of BOTH the plane's current value AND the engine fund's current account balance.

Gene
 
Gene, that explanation make sense. I always assumed you get into a partnership based on the present value of the plane. If the engine fund is part of the share cost, then it make sense to get a share of it when the partnership dissolves.
 
johnrweb said:
Gene, that explanation make sense. I always assumed you get into a partnership based on the present value of the plane. If the engine fund is part of the share cost, then it make sense to get a share of it when the partnership dissolves.
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The new partner would also get part of the value / liabilities of a hangar lease, the beer fridge, and any beers left in the fridge.

Tricky parts would be if the Partnership somehow ended up owing $$$$, and then each partner could be liable for up to 100% of the outstanding debt, in excess of their original share percentage if other partners are broke.
 
We're all making a lot of assumptions based on the OP. First, that a real partnership actually exists. If it does, there's likely some partnership agreement. And it may even address this issue, even if not specifically.

If there's no partnership agreement at all, a partnership doesn't necessarily exist. I don't think this is a situation where a partnership would arise by operation of law, the "partners" might just be co-owners of a plane. But if there is an actual partnership, and whatever agreement exists between the partners doesn't indirectly address this issue, the state's statutes do.

Taking the OP at his word, the only ambiguity I really see is whether payments to the engine fund are capital contributions or something else. IMO, they are something else, i.e., compensation to the partnership for the use of partnership property. But you could look at how these funds are characterized on the partnership books and tax returns.

Based on my conclusion that these are payments and not capital contributions, there's no return-of-capital issue, and any profit or loss on the sale would be distributed in equal shares to each partner. Even if that's not in whatever partnership agreement there is, it's likely what the relevant statute says. The OP says all costs are split evenly, which further supports the equal distribution.

None of the above should be construed as legal or tax advice, and is intended as general information only. If you need legal advice, you should seek out an attorney licensed in your local jurisdiction.
 
JoseCuervo said:
Tricky parts would be if the Partnership somehow ended up owing $$$$, and then each partner could be liable for up to 100% of the outstanding debt, in excess of their original share percentage if other partners are broke.
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That's usually correct with respect to third parties if it is a general partnership (do folks use GPs to own planes?), but not between the partners.
 
This stimulated a lot more conversation than I thought it would. Thanks everyone for responding, seems like people are saying the money gets split evenly unless there is something else written that says otherwise.

And yes, June is single and likes to throw around money (the best kind of partner you can have) - take a number boys. :stirpot:
 
numl0ck said:
This stimulated a lot more conversation than I thought it would. Thanks everyone for responding, seems like people are saying the money gets split evenly unless there is something else written that says otherwise.

And yes, June is single and likes to throw around money (the best kind of partner you can have) - take a number boys. :stirpot:
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It's the fair and right way to do it.
 
numl0ck said:
This stimulated a lot more conversation than I thought it would. Thanks everyone for responding, seems like people are saying the money gets split evenly unless there is something else written that says otherwise.
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That may be what people here are saying is the "right" thing to do, but it's not necessarily what the law in your state says is the legally required thing to do. If all four agree on that course, mighty fine. But if even one does not, you are going to need a lawyer.
 
numl0ck said:
This stimulated a lot more conversation than I thought it would. Thanks everyone for responding, seems like people are saying the money gets split evenly unless there is something else written that says otherwise.

And yes, June is single and likes to throw around money (the best kind of partner you can have) - take a number boys. :stirpot:
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Hope she enjoys life..... I ain't leaving Jackson Hole for anyone....:no::nonod::wink2:
 
Ron Levy said:
That may be what people here are saying is the "right" thing to do, but it's not necessarily what the law in your state says is the legally required thing to do. If all four agree on that course, mighty fine. But if even one does not, you are going to need a lawyer.
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If there's no default provision in the code (or a majority doesn't like the default provision), they can take a vote of the partners on what to do. So I don't think they're stuck until there are two on a side.

Of course people litigate everyday even when there's nothing to really argue about. But its not necessary.
 
Ron Levy said:
That may be what people here are saying is the "right" thing to do, but it's not necessarily what the law in your state says is the legally required thing to do. If all four agree on that course, mighty fine. But if even one does not, you are going to need a lawyer.
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What state has a law that allows the partner who destroys the most value to increase their share of the partnership?
 
Ron Levy said:
Lawyer
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The OP said nothing about disagreements or animosity in the partnership, yet all of your posts except one are doom and gloom about the horrors about to befall him. You're not the only one, of course.

It's just odd how some of those replying have focused on what a disaster this is going to be, when all the OP asked for was advice on how to treat the funds accumulated for the engine overhaul. There was no indication the partners are unhappy with each other.

I must compliment some posters on their elegantly constructed Strawmen.

:D

:yesnod:
 
3393RP said:
The OP said nothing about disagreements or animosity in the partnership, yet all of your posts except one are doom and gloom about the horrors about to befall him. You're not the only one, of course.

It's just odd how some of those replying have focused on what a disaster this is going to be, when all the OP asked for was advice on how to treat the funds accumulated for the engine overhaul. There was no indication the partners are unhappy with each other.

I must compliment some posters on their elegantly constructed Strawmen.

:D

:yesnod:
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Life experiences determine how one deals with things. Personally, I never loan anything I expect to see again including money. Never buy or sell anything to family or friends. Never do a partnership on a verbal agreement. And it's not that a lawyer is smarter legally than you, it is more that he is an impartial observer who can translate your wishes into an agreement which then has the backing of law.
Maybe you don't need it and all parties remain civil. But if they do not, holding someone to a verbal agreement will be a fight. See recent FRIENDS star Kudrow and her manager and friend.
You only have to get screwed once to know what not to do. Unfortunately, that screwing could be years away when the exact content of that agreement is twisted by time.
 
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