Syndicate advice
 

Firstly, I've google'd/searched the forums and most threads pertaining to syndicates/shares are OLD!

I'm at the stage with my flying where I would like to do some 'light' and 'not so light' touring. I'd like to be able to fly to certain destinations and park the aircraft for as long as I'd like to explore the town, scenery, and local attractions. I'd like to be able to do multiple leg journeys over a few weeks.

After running the numbers the minimum daily use and/or overnight fees rapidly add up for a hired aircraft even though I'm part of an aero club. There is also the added pressure to get the aircraft back so as to minimise disruption to other bookings.

I have started looking into forming a syndicate and I'm confident that if I buy the right aircraft and it is thoroughly checked out that the hourly costs can be kept to reasonable level. At this stage I'd be looking to have one or two other owners at most, to keep things simple.

The one thing that I haven't been able to get much information on is the best way to legally to set it all up. Does anyone have any advice as to a good solicitor in Sydney who has a bog standard agreement or experience in drafting them for a reasonable price, or any thoughts on how the whole thing should be structured?

Apart from a sound legal agreement, making sure any prospective aircraft is thoroughly checked out, and being on 'the same page' with other syndicate members, is there anything else that I should consider? I want this to be an overall positive experience, not a nightmare! :ok:

Put a life on it- review after 5 years, mandatory sell at 10 years. Those that want to remain can buy back in etc.

Thanks scroogee, that's something I hadn't considered.

Would you also suggest a clause (my father suggested this as he had been a few partnerships on racing yachts) that if someone wants to sell their share that the other parties have first right of refusal to buy it, plus the right to veto the sale if it is to a particular person that is not the sort of character they want involved?

I'm in a well established syndicate (but I joined late in the piece). Owners have onus to approve new member.

Runs pretty well I'd say.

You can set it up as a PTY LTD company.

Three equal shares (or more). Someone listed as Director.

No need to set up your own company, I believe you can use one that is already registered, but inactive.

Sorry, don't exactly know details as I joined an established one.

Ask your chosen Syndicate Lawyer if above is possible.

That's probably wise to protect the syndicate members? Does anyone know how GST works for/against these situations?

For a Pty Ltd (private) company you must register for GST if the income exceeds $50,000 (Is it still $50K?) per annum. Aircraft hirers would pay GST on their aircraft hire. Completing a BAS Return each quarter would result in refund of the GST paid, less GST received. The Company must lodge an Annual Return each year and would pay company tax on it's profits. You will probably need to hire an accountant or a smart book keeper each year to complete these requirements.

You really want to go there for one small aircraft?

An Aero Club is usually a not for profit company with low overheard costs and reasonably high annual aircraft utilisation. A fair percentage of an aircraft operating cost are the Indirect Costs or fixed annual cost (insurance, interest, parking, hangerage, annual inspection, repaint and refurbishment and other fixed costs).

The greater the aircraft annual utilisation, the lower the hourly Indirect Costs and thus lower total hourly operating cost. (Direct Costs are flying hourly based - fuel, maintenance, parts, engine/prop overhaul etc.)

Conversely, low utilisation private aircraft often have very high real hourly operating costs due to amortising the direct cost over a reduced number of annual flying hours. Alternatively, some syndicates require a significant monthly payment to cover the Indirect Costs, whether the aircraft is flown or not.

Not teaching you to suck eggs, but be very careful and do your sums well before embarking on a venture you may regret.

From one who knows a little about accounting and who has owned eight aircraft, seven boats and five sports cars and spent the rest of my income foolishly! :rolleyes:

I've been in a syndicate in Scotland since January 1990. You don't need to be alike. The only essential is you all want cheap flying. Guys who don't actually fly are great for availability.
Consider the cost of lawyers compared to the value of the aircraft before thinking of legally binding clauses.
We've just a simple agreement, which new members agree to.
Monthly payment to cover fixed costs.Each hour flown MUST make a profit. We've recently upgraded radio and tx, and are having the wing recovered at present. And hopefully there'll be enough engine fund left in the kitty.
The Group has varied between 6 and 8 members over the years. Four is possibly the minimum to avoid bitter disputes. Three will lead to 2 V 1. 3 V 1 will likely succeed in getting their way. 2 V 2 will be better than 1 V 1.
We've had 2 insurance write-offs in the 27+ years.
(Jodel DR1050 tailwheel.)

A first right of refusal clause and a clause about agreeing to new members are probably good ideas.

Depending on the aircraft you can also set a minimum number of hours at a fixed rate per member to cover all your fixed costs, if members choose not to fly they still pay, so your overheads are covered. This can help keep the utilisation up to a good minimum to maximise the annual checks.

I say, this Moderating gig does pay well, where do I sign? ;)

Yes, Megan, extraordinarily well remunerated to compensate for the onerous duties.

Indeed, my PPRuNe salary doubles each year!! :ok:

Took me some years before I realised that twice zero still equals zero!! :ugh:

Despite what Tailie says, Megan, I suspect there's a shared pool amongst the mods, thus any addition will reduce the return.

Anyone with that number of flying and floating machines clearly hasn't learnt the '3 F's' rule and needs all the help they can get....:}

FP.