Has anyone ever split ownership of a race car with 2 or 3 people

[oldrx7]

Has anyone ever split ownership of a race car with 2 or 3 people, can you show me the contract you used? When you sold the car or get divorced did you still talk to the other car owners?

[Team Infiniti]

Handshake between 2 brothers and another local racer.

[enginerd]

If you have to ask, you shouldn’t be spitting with that person....IMO. 

 

Our car car is split between myself and my brother-in-law, no contract. I keep track of expenses on google sheets and he evens up on PayPal every year or two.

 

No plans to ever sell the car, no divorces looming either!

[Jer]

At Schumacher Taxi we all sorta owned two cars together.  Everyone contributed money at the start of each season and also paid in per race run.  Worked well for many, many years.  Eventually I moved to Denver and they sorta gave me the Miata which I had initially contributed to the team.  I had also contributed the original Corolla too so perhaps they felt that made it fair.  But we all showed up on work days too.  Still love those guys and am driving for them at Charlotte.  

Edited April 2, 2019 by Jer

[Cam Benty]

“If you have to ask” are wise words.

 

   The best way to approach a race car is understand it will be a write off.  The fastest way to end a friendship is start a race team.

 

 

 

   You will not get your investment out of it. Ever. If all understand that have a go. 

[ablesnead]

Its more fun to race with team mates whose word is good  no matter what ...

[Team Infiniti]

Dirt tracking is the best way to learn, anything/everything (car, truck, trailer, equipment) that leaves the house to go racing may never come back worth more then whatever scrap is paying Monday morning.

 

This is for fun, NEVER expect to recoup "investment", split it as you go.

 

 

Edited April 1, 2019 by Team Infiniti

[MoparBoyy]

43 minutes ago, Cam Benty said:

 The fastest way to end a friendship is start a race team.

 

True dat.

 

Our first team had 7 owners, too many cooks in the kitchen and stressed our friendships.  We decided to just sell the car and split the money and remain friends.   My current team is just 3 of us with one full time paying driver.  Its much easier this way since we all have the common goal which was addressed and discussed when the team started.

[StaibRX-7 75]

We split the car, but no contract in place.

 

In the beginning we had several folks leave and 1 leave more recently. We say it's on the person leaving to find someone to buy their share, but ultimately the rest of the team facilitates the deal. Early on, no one had any real money into it so it was very easy (we had 3 people agree on the car, but bail before our first race). The last one wanted equity that he was leaving behind... he got no where near what he put in as expected.

[BollingerChump]

29 minutes ago, StaibRX-7 75 said:

We split the car, but no contract in place.

 

In the beginning we had several folks leave and 1 leave more recently. We say it's on the person leaving to find someone to buy their share, but ultimately the rest of the team facilitates the deal. Early on, no one had any real money into it so it was very easy (we had 3 people agree on the car, but bail before our first race). The last one wanted equity that he was leaving behind... he got no where near what he put in as expected.

Our team entered into a business partnership as equal shareholders of an LLC.  We all agreed upon a "business plan" and terms of ownership.  Our terms of ownership spelled out what is required to buy into the team, what the company is required to reimburse (nothing) to individuals who choose to leave the team, what happens if the car is totaled (start over, we knew this could happen), what happens if we liquidate, etc.

 

What we came up with was a $2000 buy in for ownership. This buys into the company (equal share owner) and pays for two events.  Incorporating documents state a plan to revisit annual investment amounts on a yearly basis.    We all signed and the company is listed and we all equally own a race team ("Yes I co-own a Champcar team" HA).  'Race Team, LLC', after being funded by owners, bought the car from one of the team members and buys all parts, spares, fuel, etc.  Yes this is a bit of extra work/hassle than just playing by seat of your pants and hoping your friends are who you think they are.

 

One benefit it has that I've yet to see discussed much is that, as an LLC, the owner of the car has limited liability in the event of anything bad happening and lawsuits being filed.  Seems ridiculous and yes we all sign the waiver and assume the risks blah blah, but consider just one of many examples: team member is injured racing car and rendered short term or long term disabled; team member's spouse or children bring suit for damages via claimed incompetence on the part of car owner, you know the age old "they knew it wasn't safe but let him go out anyway".  Without an LLC, car owner is liable for all costs assosciated with suit including whatever settlement if any is determined.  With an LLC, I can leave the car, pile of parts, and some paperwork out at the street for said plaintiff.

[enginerd]

11 minutes ago, BollingerChump said:

Our team entered into a business partnership as equal shareholders of an LLC.  We all agreed upon a "business plan" and terms of ownership.  Our terms of ownership spelled out what is required to buy into the team, what the company is required to reimburse (nothing) to individuals who choose to leave the team, what happens if the car is totaled (start over, we knew this could happen), what happens if we liquidate, etc.

 

What we came up with was a $2000 buy in for ownership. This buys into the company (equal share owner) and pays for two events.  Incorporating documents state a plan to revisit annual investment amounts on a yearly basis.    We all signed and the company is listed and we all equally own a race team ("Yes I co-own a Champcar team" HA).  'Race Team, LLC', after being funded by owners, bought the car from one of the team members and buys all parts, spares, fuel, etc.  Yes this is a bit of extra work/hassle than just playing by seat of your pants and hoping your friends are who you think they are.

 

One benefit it has that I've yet to see discussed much is that, as an LLC, the owner of the car has limited liability in the event of anything bad happening and lawsuits being filed.  Seems ridiculous and yes we all sign the waiver and assume the risks blah blah, but consider just one of many examples: team member is injured racing car and rendered short term or long term disabled; team member's spouse or children bring suit for damages via claimed incompetence on the part of car owner, you know the age old "they knew it wasn't safe but let him go out anyway".  Without an LLC, car owner is liable for all costs assosciated with suit including whatever settlement if any is determined.  With an LLC, I can leave the car, pile of parts, and some paperwork out at the street for said plaintiff.

Regarding the liability part... it seems odd to me that a bit of paperwork “limiting the liability” could be the difference between a large $$$ lawsuit and a lawsuit yielding some spare parts and tools.

 

Does anyone have experience of it actually working like this, or would a competent civil trial lawyer take the guy who prepped the car for a lot more, paperwork be damned?

 

This is a similar situation to what I have heard about racetracks carrying high liability insurance because the forms you fill out when you come through the gate “releasing all liability” won’t hold up.

Edited April 1, 2019 by enginerd

[BollingerChump]

11 minutes ago, enginerd said:

Regarding the liability part... it seems odd to me that a bit of paperwork “limiting the liability” could be the difference between a large $$$ lawsuit and a lawsuit yielding some spare parts and tools.

 

Does anyone have experience of it actually working like this, or would a competent civil trial lawyer take the guy who prepped the car for a lot more, paperwork be damned?

The idea is that the LLC owns minimal assets (car and associated parts). I'll save the sueing party the cost of taking me to trial, they can have all of the assets and everyone's hands are clean.  Sue the LLC for more, there isn't any more there there.

Edited April 1, 2019 by BollingerChump

[Andrew D Johnson]

1 hour ago, Cam Benty said:

“If you have to ask” are wise words.

 

   The best way to approach a race car is understand it will be a write off.  The fastest way to end a friendship is start a race team.

 

Why would starting a race team end a friendship? Why would you have friends that are not part of or contribute to your race team? if they don't help with the race team, they don't sound like very good friends to me. 

[enginerd]

5 minutes ago, BollingerChump said:

The idea is that the LLC owns minimal assets (car and associated parts). I'll save the sueing party the cost of taking me to trial, they can have all of the assets and everyone's hands are clean.  Sue the LLC for more, there isn't any more there there.

I know that is the idea... I was wondering if it actually works in court, or if the ‘owner’ can be sued beyond the LLC.

 

I did some reading:

https://info.legalzoom.com/can-owner-llc-sued-personally-24362.html

The very first article I found lists some cases where the owner can be named in a suit. 

[Racer28173]

2 hours ago, enginerd said:

I know that is the idea... I was wondering if it actually works in court, or if the ‘owner’ can be sued beyond the LLC.

 

I did some reading:

https://info.legalzoom.com/can-owner-llc-sued-personally-24362.html

The very first article I found lists some cases where the owner can be named in a suit. 

This could easily become a 100 page thread.  The world of law has so many shades of grey.  

Anyone can be named in a suit.  Anyone.  I can sue you for impeding my ability to earn a living playing guitar (I don’t play guitar and Nate and I have only met at a race or three). That being said, you would very easily get that lawsuit dismissed because it has no basis. 

An LLC doesn’t prevent individuals from being sued.  But it does create an entity that is the obvious “responsible entity” and MAY reduce the costs of defense for the individuals and the liabilities of the individuals.  The important word there is MAY.  LLCs are like storm shutters.  They are better than unprotected glass, but they aren’t anything approaching invincible. 

That is the really short answer as it has been explained to me.  

[LuckyKid]

LLC and an Operating Agreement is an easy way to go.  Initially I used rocket lawyer for operating agreements otherwise the LLC will default to the states rules.

 

Run the LLC like a business and don't comingle funds and you've got a good shot at separating liability.

 

If you are renting seats or generating revenue you can see some tax benefits as well, so long as the business could be profitable.

[bendawson3]

Our car was a donation that a couple of us paid to ship over from the west coast. We just split up the costs from the get-go. We are a group of dudes who are good buddies, no matter what's happening with the car. That's not empty rhetoric, we've tested that premise!

 

We used to run 2 cars just for that added fun of having racing buddies from far away come to run with us. that was never for revenue but just to spread the fun around. 

 

We all operate on the assumption that the car could be totaled just getting it on the trailer. So, any fun we get to have with it is just gravy. 

 

If one of us does something boneheaded that causes a bunch of damage, we still split the repair up and learn and grow together. IF it's like a windshield or something, the offending party will usually eat replacement cost, as a sacrifice and a token of atonement. 

 

The big winner for us, keeping track of all the money, when we each purchase things for the car or pay entry fees is an app called Splitwise. We are too dumb and lazy for LLC and all that or hiring an accountant but this app keeps us all straight. 

 

Highly recommend it!

[Jer]

We never ever had an issue at Schumacher on workload, financial contribution, etc.  If you stopped racing with the team you simply walked away, you didn't own anything.  Only one teammate did this before me.  I think a few have come and gone though.  Great people make great teammates and those guys are great people.  

[E. Tyler Pedersen]

Did it once and will never do it again. I had people complaining about buying an alternator vs a clutch and it was a mess. I contributed the most so now I own the team and have a solid group of 10 drivers in my pool. I rent out my seats. 

[wvumtnbkr]

16 minutes ago, E. Tyler Pedersen said:

Did it once and will never do it again. I had people complaining about buying an alternator vs a clutch and it was a mess. I contributed the most so now I own the team and have a solid group of 10 drivers in my pool. I rent out my seats. 

We pay Tyler in Money and also blood, sweat, tears, and sometimes sexual favors.

 

It works out well.

 

Tyler is also in my driver pool.  My wife owns the car and lets us race it.  The pool of drivers helps pay for necessary upgrades and upkeep.  Only a few are close enough to work on the car on a regular basis.  

[Fitsbain]

1 hour ago, wvumtnbkr said:

We pay Tyler in Money and also blood, sweat, tears, and sometimes sexual favors.

 

It works out well.

 

Tyler is also in my driver pool.  My wife owns the car and lets us race it.  The pool of drivers helps pay for necessary upgrades and upkeep.  Only a few are close enough to work on the car on a regular basis.  

 

I'd work more, but you are taking the car away!!

[wvumtnbkr]

31 minutes ago, Fitsbain said:

 

I'd work more, but you are taking the car away!!

Yea, but now you can come and enjoy Charleston SC AND work on the car.  Its only like $150.00 roundtrip from some of the local airports.

[FlorahDorah]

We have a team, but one car owner. We contribute to upkeep, maintenance, and improvements. Drivers pay extra for consumables like tires, fuel, oil, fluids. You break it, you pay or do the work. 

 

We keep track of expenses via Google Docs. Owner functions as the 'bank'. We had one teammate who fell behind in contributing, so no racing until he pays down his balance. Everybody can see what everyone owes. 

 

Like others have said: if it's a hobby, contracts shouldn't be needed. If it's a business, well that's different.  

[Jer]

57 minutes ago, FlorahDorah said:

We have a team, but one car owner. We contribute to upkeep, maintenance, and improvements. Drivers pay extra for consumables like tires, fuel, oil, fluids. You break it, you pay or do the work. 

 

We keep track of expenses via Google Docs. Owner functions as the 'bank'. We had one teammate who fell behind in contributing, so no racing until he pays down his balance. Everybody can see what everyone owes. 

 

Like others have said: if it's a hobby, contracts shouldn't be needed. If it's a business, well that's different.  

We did pretty much this same thing.  Everyone knew where everyone stood.  That being said, no one ever got very far behind.  

[Jer]

Now I'm simply the owner and chief mechanic of my Miata.  I give one driver deep discounts on racing because he helped build the car and continues to help with issues.  Everyone else pays per race and I use that money to improve the car, buy spares and all consumables.