Sole ownership of an aircraft is expensive and time-consuming, and it may not be right for every person or business who needs private aviation. Forming an aircraft partnership with trusted individuals can reduce the expense and risk of aircraft ownership while maintaining readily available access to flight time.

The term “partnership” is generally used for those intending to buy and operate an aircraft together for business purposes, while “co-ownership” refers to simply that—sharing the ownership of an aircraft. However, the principles are the same, and it is wise to take a businesslike approach to setting up co-ownership, just as you would with a partnership.

In either case, you will need to consult an aviation attorney to work through the risks, benefits, and legal procedures for partnerships in general and your own in particular. The attorney can draw up an aircraft partnership agreement that is structured and balanced, avoiding conflict before it starts and resolving it when it arises.

Is This Partnership Right for You?

The suggestion of partnership often arises between colleagues, friends, or family members. Chartering, leasing, and fractional ownership are all viable options for private flights, but they do generally involve working with strangers and management companies. There is an obvious appeal to the idea of a plane held locally with only a few owners, who already know and trust each other.

But do your interests really align? What about your management styles? Due to FAA regulations and frequent expenses, aircraft ownership requires a great deal of administrative work. As in any business, working with your aircraft partners can lead to conflicts that you would not have anticipated, even after a long acquaintance. The question of what your partners intend to do with the plane has serious legal and financial implications.

Potential aircraft partners may want to fly with clients, travel to job sites, or otherwise use the aircraft for the purposes of a business that is not aviation-oriented. The FAA calls this “general aviation,” and it is regulated under Part 91 of the FAA code. But partnerships are also used between owners who fly commercially—operating charter flights on demand, helicopters, tours, and other related businesses. The FAA regulates these under Part 135, and it holds Part 135 operators to higher safety and operating standards than under Part 91. Part 135 compliance is thus far more expensive and time-consuming than compliance with Part 91. Your partnership must be completely aligned on the proper use of the aircraft, or you risk running afoul of the FAA, tax regulations, and other laws.

A frank discussion of what each person needs from the partnership and what they can contribute will save trouble at the outset. An aviation attorney can help facilitate these conversations and advise as to how the FAA will regulate your proposed uses.

Putting Together an Agreement

Aircraft partnership agreements should address, among other issues:

  • The legal and registered owner of the aircraft

Who or what will be the legal owner of the aircraft, registered with the FAA? How will the aircraft be held, by tenancy, shares, or percentage? Aircraft are often owned by corporate entities created for the purpose of ownership, but your attorney can suggest the ideal form for your partnership’s needs.

  • Accounting and disbursements

How will the operating finances be handled, and who will do it? Which bank account will you use, and how often will the partners make deposits? Discuss the various expenses, such as insurance premiums, hangar fees, taxes, and other costs.

  • Aircraft purchase and/or ownership transfer

Does one of you already own the aircraft, or do you plan to buy one? If the aircraft is known, identify it by its serial number, registration number, and other distinguishing information.

Note how and when the title transfer will take place, as well as what will happen to the partnership if the purchase cannot be completed. Your attorney can prepare documents for the separate transactions as necessary.

  • FAA compliance

Which part of the FAA regulations governs your activities? How will you divide the various administrative requirements, such as inspections and maintenance? Settle these issues, together with the responsibility for any fines that may be incurred.

  • Aircraft base and use restrictions

Where will the aircraft be based, and who has the authority to change that? How long may it stay out of its home airport? Are only certain persons allowed to fly the plane? With partners who may live and fly in different states, it’s wise to set this down. You will also want to agree on certain types of usage that you will not authorize, such as subletting, unlicensed commercial operations, or operating under flight conditions that are unsafe for your craft.

  • Scheduling and allocating flight time

How much flight time is each partner entitled to, and how is it allocated? Create a framework for further scheduling.

  • Partnership exit procedures

Plan the steps that the partnership will take when a partner wants to sell out or terminate the partnership entirely. Include provisions for the death or incapacity of a partner, as well as for a forced sale, in case one partner refuses to communicate or repeatedly undertakes activities unauthorized by the partnership.

  • Governing law

Specify the state law under which your partnership will operate, in order to avoid later confusion and disputes.

These are only some of the issues you will need to address. A final partnership agreement should be as individual as your own needs. At Aero Law Center, we can help you with any agreement, from co-ownership between friends to a Part 135 partnership for charter flights. Call us at 954-869-8950 for a consultation on your needs.