4. Who are the players?
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Managing partner: depending on the type of partnership, one
individual or a group of individuals will have primary
decision-making authority. The success and overall profitability
of the partnership are dependent on the skill of the managing
partner. Consequently, determine to your satisfaction what the
managing partner's credentials and experience are in the
industry. Ask whether he intends to have and maintain a
financial interest in the partnership.
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Team players: in addition to the managing partner, identify who
the other professionals involved are - the trainer, bloodstock
agent, pedigree advisor, veterinarian and farm manager. You may
want to meet them and verify their references.
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Other partners: how many partners are there in the partnership?
What will their role and /or percentage of interest be? Will
each partner own the same percentage? Are any of the partners
related to the managing partner? Remember, these are your
business partners. It is important that you are confident that
you are compatible and that you find them trustworthy.
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The athletes: if the partnership does not yet own any horses,
determine the procedure and criteria for their acquisition. If
the horses have already been purchased, examine how closely the
price of partnership share reflects the purchase price.
5. What type of entity is used?
Equine partnerships can be formed in a variety of ways. Your
personal expectations and comfort level should be considered along
with the tax and liability implications associated with the form of
partnership utilized.
6. How are the finances handled?
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Managing partner's compensation: frequently, the managing
partner seeks to be, and is, compensated for his experience,
time and related expenses. Compensation may either be a
management fee, an equity percentage in the horse or a
commission for finding or selling the horse. As an investor, it
is essential that you are informed and aware of the arrangement.
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Your initial investment: ascertain what is included in the
offering price and the number of horses in which you are
purchasing an interest. Some partnerships offer "packages" while
others are for individual horses.
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Expense allocation and income distribution: in addition to the
cost of a share in the horse, there are other expenses such as
training or board, veterinary charges, farrier fees, accounting
bills, vanning fees, stud fees (if applicable) and licenses for
which you will be responsible. Be certain who authorizes these
expenditures and how investors will be notified and billed.
When income is recognized from purse money or sales, does this
income flow directly to investors or is it maintained in an account
to cover future expenses? At what point does the partnership settle
up? Is it monthly, quarterly or annually? Is each partner provided a
statement reflecting cash receipts and disbursements? If so, how
often?
7. How are decisions made and by whom?
As indicated above, depending upon the degree of knowledge and
expertise of the partners, it may be desirable for the managing
partner to have the final say. However, it is imperative that you
know going in whether decisions will be made in a democratic manner
or whether the managing partner has full authority.
