Aircraft Partnership Buyout: How a Partner Exits Cleanly

Your partner just took a job in another state and wants out of the Archer by spring. If your agreement has a real aircraft partnership buyout clause, this is a few emails: the remaining partners get first shot at the share, the price comes from a method you agreed on years ago, and the money moves on a schedule everyone already signed. If it doesn't, you're about to negotiate the value of an airplane with someone who wants to leave, using rules none of you wrote.

1. What happens if there's no buyout clause?

State law fills the gap, and it wasn't written with a shared four-seater in mind. Under the uniform partnership act many states have adopted, a departing partner can often require the partnership to buy their interest at a statutory price based on what they'd get in a hypothetical liquidation. Under some other states' rules, a partner walking away can dissolve the partnership outright. LLCs follow their own state statute and whatever the operating agreement says. None of those defaults tell you who's allowed to buy the share, what the airplane is worth, or what happens to the engine fund.

So the clause is worth writing even in a two-person partnership where you trust each other completely. Especially then. The usual exits are a move, a lost medical, a divorce, or a death, and the person across the table may be a spouse or an estate rather than the partner you know.

2. Right of first refusal vs right of first offer

These are the two standard ways to keep a stranger from buying into your airplane, and they get confused constantly.

Right of first refusal (ROFR)

The departing partner goes out and finds a buyer. Before the sale closes, the remaining partners can match that buyer's offer and take the share on the same terms. The outside offer sets the price, which keeps it honest. The downside is that outside buyers know their deal can be taken away after they've done the work, so some won't bother making an offer.

Right of first offer (ROFO)

The departing partner has to come to the remaining partners first, before marketing the share. The partners make an offer. If the seller turns it down, they can sell to someone else. Good agreements add that they can't then sell to an outsider for less than the partners offered. Sellers tend to prefer this one because they can shop the share freely once the partners pass.

You'll also see put and call options. A put lets a partner force the others to buy their share at the agreed price, which matters if nobody outside wants a quarter of a 1978 Archer. A call lets the group force a partner out at the agreed price, usually tied to default, like a partner who's stopped paying their share of the bills.

3. The terms an aircraft partnership buyout clause should settle

1. Who may buy. Remaining partners only, outsiders with group approval, or anyone. Say whether a new partner needs to meet pilot or insurance requirements.
2. Mandatory or optional. Do the remaining partners have to buy the share, or do they just get the first chance?
3. Price method. An independent appraisal, a formula (a published value guide plus adjustments), or an agreed value the group resets every year at the annual meeting. Agreed value is the cheapest and works only if somebody actually updates it.
4. Reserve fund. Does the departing partner get their slice of the reserve account back, or does it stay with the airplane because it's already priced into the value?
5. Debts both ways. Unpaid flight charges, capital calls, and any loan balance come off the payout. Credits owed to the partner get added.
6. Payment timing. A lump sum within a set number of days, or a deposit plus installments. Installments make a mandatory buyout survivable for the remaining partners.
7. Deadlock. If two partners can't agree on the appraiser or the number, name the tiebreaker now: a third appraiser, mediation, or arbitration.

Events that should trigger it

• Death of a partner. Spell out whether the estate must sell, may sell, or can keep the share.
• Loss of medical or inability to fly for a set period.
• Relocation, if your agreement cares where partners live.
• Default: missing payments for a set number of days, or failing a capital call.
• Voluntary exit with notice, say 90 days.

4. A worked payout

Three equal partners own an Archer. At the January meeting they set the agreed value at $96,000. The reserve account holds $9,000, there's $15,000 left on the note, and the departing partner has $420 in unpaid flight charges and a $180 fuel reimbursement not yet credited. Their agreement returns a departing partner's share of reserves.

• One third of the agreed value: $32,000
• Plus one third of reserves: $3,000
• Less one third of the loan: $5,000
• Less unpaid charges: $420
• Plus pending fuel credit: $180
• Payout: $29,760

The clause calls for 25% within 30 days and the rest over six months, so the remaining partners pay $7,440 up front and then $3,720 a month. If the agreement had said reserves stay with the airplane, the payout drops to $26,760. If nobody had updated the agreed value since it was set at $110,000, the departing partner would be owed about $4,700 more than the airplane is worth today, and that gap is where the standoff starts.

The two numbers that cause the fights are the reserve balance and what each partner owes. If those live in a spreadsheet one partner maintains, expect a month of reconciliation before anyone agrees on the payout. Check the reserve against the engine's time too. If it's short, the departing partner leaves with a slice of a fund that won't cover the overhaul, and the partners who stay make up the difference.

Before the next partners' meeting, pull out your agreement and check whether it answers the seven terms above, and if the agreed value is more than a year old, put it on the agenda.