Aircraft Partnership Agreement: Clause-by-Clause Checklist
This checklist is for pilots who have decided to share an airplane and need to put the deal in writing. It lists the clauses an aircraft partnership agreement should contain, the questions each one must answer and the red flags to catch before anyone signs. It is general information, not legal advice. Have an aviation attorney draft or review your final document.
Operating agreement or co-ownership agreement?
The clauses are the same either way. Only the wrapper changes.
- LLC operating agreement. The LLC owns and registers the aircraft, and each partner holds a membership interest. Transfers happen by assigning membership interests, so the FAA registration doesn't change when a member leaves. For the LLC to register the aircraft, it generally has to meet the FAA's U.S.-citizenship tests. Your attorney should confirm eligibility before closing. See LLC ownership structure.
- Co-ownership agreement. The partners own the aircraft directly as co-owners and all appear on the registration. A change in owners means new FAA paperwork. It is simpler to set up, but it offers no entity to hold contracts, bank accounts or liability.
Either way, the FAA registration certificate is valid for seven years and costs $5 to issue or renew (14 CFR 47.40 and 47.17). Your agreement should name who is responsible for keeping it current. See the FAA registration guide.
The master checklist
| Clause | Questions it must answer | Red flag |
|---|---|---|
| Parties and aircraft | Who the owners are, their percentages, and the aircraft's make, model, serial and N-number | Percentages that don't match actual contributions |
| Capital and capital calls | Initial contributions, how extra cash is raised, and what happens if someone can't contribute | No mechanism for an unplanned overhaul |
| Expenses and reserves | Fixed vs hourly costs, dues dates, the hourly rate, reserve accounts, the treasurer | "We'll split things fairly" |
| Scheduling | Booking system, limits, trip length, holidays, cancellations, no-shows | No cap on weekend or holiday bookings |
| Pilots and insurance | Who may fly, minimum qualifications, coverage limits, who pays deductibles | No rule for a pilot who can't meet insurer requirements |
| Operating rules | No commercial use, guest pilots, instruction, where the aircraft is based | Silence on renting to non-members |
| Maintenance and voting | Managing partner's spending limit, votes for big items, shop choice, grounding authority | Unanimous approval required for every repair |
| Default | Notice, cure period, late fees, suspension, forced buyout | No remedy short of a lawsuit |
| Buy-sell and right of first refusal | Notice, valuation formula, timelines, approval of new members, payment terms | "Fair market value" with no method to set it |
| Death, disability, divorce | Mandatory or optional buyout, timing, funding | Heirs or ex-spouses become members automatically |
| Disputes and deadlock | Mediation, arbitration, tie-breaks for two-person groups | Two 50/50 owners with no deadlock clause |
| Dissolution | Triggers, sale process, order of payouts | No agreed way to force a sale |
| Financing | Guarantors, contribution among them, lender consent | One partner guarantees everything with no indemnity |
| Records and amendments | Who keeps the logbooks, the books and tax filings, and how the agreement is changed | Logbooks in one partner's garage with no access rule |
1. Ownership, capital and capital calls
Record each partner's contribution and percentage. Equal shares are simplest, but unequal shares are fine if costs and votes follow the percentages. Then deal with the question most groups skip: what happens when the group needs cash it doesn't have? Specify how a capital call is approved, the deadline to pay and the consequence of not paying. A missed capital call is usually treated as a default, or the paying partners' extra contribution becomes a loan to the non-payer at a stated interest rate.
2. Expenses, reserves and payment timing
- Fixed costs (insurance, hangar, annual, subscriptions, loan payment) are shared by percentage and paid as monthly dues. Example: a $13,300 annual fixed budget split three ways is $4,433 a year, or $369.44 a month per member, before any loan payment.
- Hourly rate for engine, propeller and maintenance reserves, plus fuel "wet" or "dry". Say who reviews the rate and how often. Once a year is typical, and fuel prices and overhaul quotes move.
- Reserve accounts held in a group bank account, with the balance reported to all members.
- A treasurer with read access for everyone, and dual approval above a set amount.
- Due dates and late fees in numbers, for example dues by the 5th and a stated fee after the 15th.
For how different allocation methods change what each partner pays, including an equal split vs an hours-based split, see the aircraft partnership cost breakdown.
3. Scheduling rules
- The booking tool everyone uses, and a rule that the airplane isn't flown without a reservation.
- Limits on open reservations, for example no more than two weekend days booked at a time.
- A maximum trip length, how far ahead long trips must be requested, and whether long trips carry a daily minimum charge.
- A holiday rotation.
- Cancellation and no-show rules, and what happens to a booking when maintenance or weather intervenes.
- Who pays to recover the airplane if a partner leaves it at another airport because of weather or a mechanical problem.
- How the airplane must be returned: fuel level, cleanliness, squawks logged, and tie-down or hangar secured.
4. Pilot qualifications, insurance and operating rules
- Named pilots: only members, plus any instructor the insurer approves, may act as pilot in command. The insurer's requirements for hours and training become group rules.
- Coverage: hull value (reviewed yearly), liability limits, and the group or LLC named on the policy. Add the lender if the aircraft is financed.
- Deductibles and premium increases: commonly the partner flying at the time of a claim pays the deductible, sometimes capped, and any premium increase tied to their claim or qualifications.
- Uninsured or disqualified pilots: what happens if a partner loses their medical or can no longer meet insurer minimums. Typically they keep ownership but can't fly until they requalify, or the buy-sell clause is triggered.
- No commercial use: members fly for themselves. Renting the airplane to non-members or carrying passengers for compensation can turn a private partnership into an unauthorized commercial operation and void coverage. Pilots should also respect the private-pilot cost-sharing limits in 14 CFR 61.113.
- Base airport and any rule on keeping the airplane away from base overnight.
For how lenders and insurers handle a financed, multi-pilot airplane, see aircraft insurance for financed planes.
5. Maintenance authority and voting
Name a managing (maintenance) partner who can approve routine work up to a dollar limit without a vote. Give any partner authority to ground the airplane for a safety concern. Then set vote thresholds for everything else. Common choices:
| Decision | Typical approval |
|---|---|
| Routine maintenance and inspection items under the spending limit | Managing partner alone |
| Airworthiness items above the limit (ADs, required repairs) | Managing partner, with notice to all. The work isn't optional. |
| Non-required repairs above the limit | Majority |
| Changing the hourly rate or dues | Majority |
| Upgrades and modifications (avionics, paint, interior) | Supermajority or unanimous |
| Engine overhaul vs exchange vs sell-as-is | Supermajority |
| Admitting a new member | Unanimous or supermajority |
| Borrowing, refinancing or pledging the aircraft | Unanimous |
| Selling the aircraft or dissolving | Unanimous or supermajority |
| Amending the agreement | Unanimous |
Also name the preferred maintenance shop, say who holds the logbooks and how members get copies, and require every member to log squawks before leaving the airplane.
6. Default by a partner
Default clauses feel awkward to write and are the most valuable ones when trouble comes. A complete clause covers:
- What counts as default: unpaid dues or hourly charges after a set number of days, a missed capital call, flying without a reservation or outside insurance requirements, or a material breach of the agreement.
- Notice and cure: written notice and a cure period, for example 15 or 30 days.
- Interim consequences: late fees or interest, and suspension of flying privileges until the account is current.
- Covering the gap: the other partners may advance the defaulting partner's share. The advance becomes a debt secured by that partner's interest.
- Forced buyout: if default continues, the others may buy the share at the formula price less a discount, with amounts owed deducted.
Example: using the valuation formula below, a one-third share is worth $33,000. A 10% default discount sets the forced-buyout price at $29,700, before deducting the defaulting partner's unpaid dues. If the aircraft is financed, add a contribution clause: any guarantor who pays more than their share of the loan can recover the excess from the others.
7. Buy-sell, right of first refusal and voluntary exit
- Notice: how much notice a departing partner gives, and that they keep paying dues until the share is sold.
- Valuation formula: avoid "fair market value" without a method. Pick an agreed-value schedule updated yearly, an independent appraisal with the cost shared, or the average of two broker opinions.
- Right of first refusal: remaining partners get the first chance to buy, at the formula price or matching a written outside offer, within a stated window.
- Outside buyers: the approval standard for a new member, such as insurability, credit and flying experience, and that approval can't be unreasonably withheld.
- Payment terms: cash at closing, or installments at a stated rate, secured by the transferred interest.
- Deadlock tool: for two-partner groups, a buy-sell ("shotgun") clause lets one partner name a price and the other choose to buy or sell at it.
| Appraised value of the aircraft | $210,000 |
|---|---|
| Plus group cash and reserve balances | $12,000 |
| Minus group loan balance | −$120,000 |
| Minus unpaid bills | −$3,000 |
| Net group equity | $99,000 |
| One-third share | $33,000 |
If the group has a loan, a partner's exit usually needs the lender's consent to release their guarantee and approve the buyer. Build that step into the timeline. See financing a co-owned aircraft. Incoming buyers often have to finance a share outside conventional aircraft loans. See financing a partnership share.
8. Death, disability and divorce
- Death: the estate sells the share to the surviving partners at the formula price within a set period. The alternative is a mandatory sale of the aircraft if they decline. Some groups fund this with life insurance on each partner.
- Disability or loss of medical: the partner keeps paying and may keep the share for a set period, then may elect, or be required, to sell.
- Divorce or bankruptcy: an ex-spouse or creditor who receives an interest doesn't become a member with flying or voting rights. The group has an option to buy that interest at the formula price.
- Interim operations: the remaining partners keep operating and paying the bills while the estate or transfer is settled, with the absent share's dues accruing against its value.
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9. Disputes and deadlock
Write a ladder: a direct discussion, then a group meeting, then mediation with an aviation-experienced mediator, then binding arbitration, before anyone sues. Say who pays for mediation and arbitration, and that the airplane keeps flying under existing rules during a dispute unless there is a safety issue. Two equal partners need a tie-breaker: a named third party, a coin-flip rule for small items, or the buy-sell clause above.
10. Dissolution and sale
- Triggers: a vote, too few members left to carry the costs, a hull loss, or failure to fill a vacancy within a set time.
- Sale process: an appraisal, a listing period with a broker, and a rule for cutting the price if it doesn't sell.
- Payout order: pay off the loan and any liens, pay outstanding bills, return reserve balances according to each member's account, and split the rest by ownership percentage.
- Wind-down: the final partnership tax return, closing the bank account, and filing LLC dissolution papers.
What do lenders look for if the aircraft is financed?
If you borrow, the lender will read your agreement. Expect it to want:
- no transfer of any member's interest without the lender's written consent;
- no other liens on the aircraft or the membership interests;
- hull and liability insurance with the lender as loss payee;
- every member, or every member above a set percentage, signing a personal guarantee;
- a clear authority clause saying who can sign loan documents for the LLC.
Make sure your default, buy-sell and contribution clauses work with those terms rather than against them.
How to work with an aviation attorney
- Agree on the business terms as a group first: percentages, dues, the hourly rate method, vote thresholds, the valuation formula and exit windows. This checklist is your agenda.
- Choose an attorney who regularly handles aircraft ownership. Type clubs, aviation associations and aircraft lenders can often refer one.
- Ask for a flat-fee quote for the operating or co-ownership agreement, and for LLC formation if needed.
- Have each partner read the draft independently. A partner who didn't read it is a future dispute.
- Review the agreement whenever membership, the aircraft or the loan changes.
How this guide differs from related guides
This page covers the agreement itself. Whether to share at all is covered in aircraft partnership vs sole ownership. For what each partner pays per year and per hour, see the aircraft partnership cost breakdown. For how a group borrows and what happens to the loan when a partner exits, see financing a co-owned aircraft. For buying into an existing group, see how to finance a partnership share. For forming the entity, see LLC ownership structure.
Frequently asked questions
What should an aircraft partnership agreement include?
At minimum it should cover ownership and capital contributions, how fixed and hourly costs are paid, reserves, scheduling rules, pilot qualifications and insurance, maintenance authority and voting, what happens when a partner defaults, buy-sell terms with a right of first refusal, death and disability, dispute resolution and dissolution. If the aircraft is financed, it should also match the loan documents.
How does a right of first refusal work in an aircraft partnership?
A partner who wants to sell must first offer the share to the remaining partners, either at a formula price or on the same terms as a written outside offer. The others get a fixed window, often 30 to 60 days, to accept. If they decline, the seller may sell to the outside buyer on no better terms, usually still subject to the group approving the new member.
What happens if an aircraft partner stops paying?
A good agreement spells it out: written notice, a cure period, late fees or interest, and suspension of flying privileges until the account is current. If the default continues, the other partners can buy the defaulting share, often at a discount to the formula price, with the unpaid balance deducted. Without these terms, the only remedy may be a lawsuit.
How is a partnership share valued when someone leaves?
Most agreements use a formula: the aircraft's appraised or agreed value, plus group cash and reserves, minus any loan balance and unpaid bills, divided by ownership share. For example, a $210,000 appraisal plus $12,000 of reserves, minus a $120,000 loan and $3,000 of bills, gives a one-third share worth $33,000.
Do we need an attorney to write an aircraft partnership agreement?
It is strongly recommended. Templates miss state-law issues, FAA registration eligibility, insurance wording and the interplay with any loan. An aviation attorney can draft or review the agreement and the LLC operating agreement if you use one. Decide the business points as a group first, then ask for a flat-fee quote. That keeps the legal bill predictable.
What happens to an aircraft partner's share when they die?
That depends on the agreement. Most groups require the estate to sell the share to the surviving partners at the formula price within a set period, rather than letting heirs become members. Some fund this with life insurance on each partner. Without a clause, the share passes through the estate, and the heirs may have no interest in flying or paying dues.