Shared ownership of race car

Anyone that's part of a multi-owner team, do you have a written partnership agreement?

We're putting together a budget-endurance team, and will have 3 owners. I'd love to see how others have set up their partnership agreements.

Any other advice is also appreciated.

At a minimum an Operating Agreement. Who owns what, who does what, who pays for what, etc etc. Is the car registered? If there is any potential income an LLC might be a good idea. Not sure how that applies in Canada.

In reply to P5Racer :

So as someone who does contracts for a living I will saying getting everything in writing protects everyone.

It's easy to say we'll split everything 3 ways but there are multiple things that need to be addressed

If the car gets wrecked, you can split the cost but what if the car is wrecked through gross negligence? What do you do if the if driver A gets the red mist and punts someone..............should the other two be on the hook for it?  You could spell out that if the damage is a result of over aggressive driving that driver pays.  The dividing line could be if driver A gets penalized for over aggressive driving by race officials as part of said crash than they are on the hook for 100%.

What do you do if you have one of the drivers repeatedly money shifting the car and breaking it? Can to two other drivers vote Money-Shift out and if so do you want a buyout clause and how much money is the buyout.

Spell out the division of work and similar to above what do you do if one person isn't pulling their weight, is there a buyout? Wil you perhaps have one person funding the majority of the team and the others providing sweat equity? 

If I'm using my vehicle to tow the teams car how am I compensated for that; are we rotating out who tows the car or are we designated someone's tow vehicle/ trailer and I get some sort of credit for that?

You need an exit clause; life happens guys get busy. Do you allow a 4th party to buy out one of the original three?

You also need to address approvals for modifications to the car; I decided to bolt a bigger turbo onto the car a week before the event..............the motor promptly blows.............now what? Spell out the procedure for making mods to the car.

I would also specify that every dime spent and every minute working on the car be documented via some sort of log. This will eliminate a lot of squabbling that happens in these type of arrangements.

I use this analogy when explaining how contracts go off the rails:

You tell me you got two tickets to Grease for my Birthday, I pack my bags because I think I'm going to the Acropolis (Greece) and then I'm bitterly disappointed to learn we're going to a crappy musical"

Again spell everything out.

I was on a team with shared ownership.   We had a shared bank account, we'd do a collection, $4-500 a piece when funds got low or before a race.   car/racing costs would be debited from that account.  When the team fizzled out, we sold the car and split that income.   I'm not saying it was a great system, but it worked for us for a few years.  There was no contract or anything written, but it was guys I knew and trusted.

It doesn't work very well in practice. Pick an owner and have the others pay to race.

ross2004 said:

It doesn't work very well in practice. Pick an owner and have the others pay to race.

I agree.  Even with everything in writing, you will wind up with disagreements about the direction to take the car because different people have different opinions on the proper balance between budget and performance.  When the engine gets tired, do you rebuild it with high compression and bigger cams so that it goes faster, or just swap in another junkyard one?  Stuff like that.

All of this is solved if one guy owns the car, makes all the decisions, and the others are simply buying time on it.

I've been co-owner of a car since 2018.  We've done it the risky way. Completely informal. I probably put in a little more money because my partner puts in more elbow grease and storage since he and the car are 4 hours away from me. It's worked out great thankfully, but I'm not sure I'd risk it again with another party.  Our bigger problem is how slow work happen between races since there's shared responsibility and a good drive between us.  As always YMMV.

We have "shared ownership" of one racecar, and used to share ownership of both. We are very lucky that we all like each other, and the core group who bought/built the cars are still driving them. We've had no written agreement, no verbal agreement and 10 years later no problems.

This has never been an issue with the teams I have been a part of over the last 15 years. 

I agree that the best long term way is the one "leader" who ends up doing a bit (or more) work and can afford it just owns the car than everyone else should just pay for the seat time.   It all works informally until it doesn't. 
 

Our team did it the informal way with 2 varying cars at a time for many years without issue, then the one guy who contributed the least crashed the new (long and tedious) build and basically did nothing about it.  2 years later of letting him drive the other car and putting out goals on hold we told him he wasn't going to drive due to his lack of action to solve the problem, he flipped out and basically broke up the team as one other member is his brother.   Frankly I don't really miss the one guy who caused the problem but miss his brother.  
 

We would have been better if we had something in writing that if you cause the car to break, you are primarily responsible for fixing it.  I thought that was assumed after years of working together, but apparently not.  Even if you don't have the skills to do the work yourself there is still a lot you can do.  

In reply to Sonic :

Your situation is exactly why I said get it in writing. 

I do like the one owner, other drivers buy a seat model, as an alternative.

Three owners is exactly why our $2002 Challenge winning car got sold. We could work together building it okay, but deciding who got to use it, when, what happened if it broke or got crashed, who housed it, etc etc proved too much of a problem.

Tom1200 said:

In reply to P5Racer :

So as someone who does contracts for a living I will saying getting everything in writing protects everyone.

It's easy to say we'll split everything 3 ways but there are multiple things that need to be addressed

If the car gets wrecked, you can split the cost but what if the car is wrecked through gross negligence? What do you do if the if driver A gets the red mist and punts someone..............should the other two be on the hook for it?  You could spell out that if the damage is a result of over aggressive driving that driver pays.  The dividing line could be if driver A gets penalized for over aggressive driving by race officials as part of said crash than they are on the hook for 100%.

What do you do if you have one of the drivers repeatedly money shifting the car and breaking it? Can to two other drivers vote Money-Shift out and if so do you want a buyout clause and how much money is the buyout.

Spell out the division of work and similar to above what do you do if one person isn't pulling their weight, is there a buyout? Wil you perhaps have one person funding the majority of the team and the others providing sweat equity? 

If I'm using my vehicle to tow the teams car how am I compensated for that; are we rotating out who tows the car or are we designated someone's tow vehicle/ trailer and I get some sort of credit for that?

You need an exit clause; life happens guys get busy. Do you allow a 4th party to buy out one of the original three?

You also need to address approvals for modifications to the car; I decided to bolt a bigger turbo onto the car a week before the event..............the motor promptly blows.............now what? Spell out the procedure for making mods to the car.

I would also specify that every dime spent and every minute working on the car be documented via some sort of log. This will eliminate a lot of squabbling that happens in these type of arrangements.

I use this analogy when explaining how contracts go off the rails:

You tell me you got two tickets to Grease for my Birthday, I pack my bags because I think I'm going to the Acropolis (Greece) and then I'm bitterly disappointed to learn we're going to a crappy musical"

Again spell everything out.

 

 

Thanks for the insight, I had at least half of this written already, but you mentioned things I hadn't thought of.

We've (me and 2 others) been a team for 2 seasons already, but my financial situation requires me to either get investors, or liquidate, and both my teammates are interested in keeping it going long-term. Basically, they're each buying a 1/3 share of the team, and each have their own ways to contribute beyond just money. I just want to have a written agreement in place that covers all likely (and some unlikely) eventualities.

P5Racer said:

Thanks for the insight, I had at least half of this written already, but you mentioned things I hadn't thought of.

We've (me and 2 others) been a team for 2 seasons already, but my financial situation requires me to either get investors, or liquidate, and both my teammates are interested in keeping it going long-term. Basically, they're each buying a 1/3 share of the team, and each have their own ways to contribute beyond just money. I just want to have a written agreement in place that covers all likely (and some unlikely) eventualities.

Tom laid out a good set of points. 

If any of the 3 of you own real property (home, land, etc) forming an LLC would be a good idea. In case something happens the LLC takes the hit not you or your property.