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Ownership Options
Several legal entities are able to own horses and understanding the various ownership types is very important for new owners. The ownership form you choose can have business, investment, and tax implications. The following information will introduce you to the various forms of ownership but, as with any investment or tax decision, it is recommended that you consult with your legal and/or tax advisor before deciding which is right for you.
Sole (Individual)
As the name implies, individual ownership means you are the only owner of the horse. You pay all of the bills, take all of the risk, and keep all of the purse money earned. Sole ownership is the simplest form of ownership because you, along with your trainer, call all the shots.
Partnership
In partnerships, each of the partners share the bills, share the risk, and share the purse money earned. Partnerships can either be balanced (50/50, 33/33/33) or unbalanced (50/25/25). One advantage of partnerships is that they offer owners, who might not otherwise be able to afford it, an opportunity to own a part of several horses. By spreading your investment across several horses, your chances of reaching the winner’s circle are improved.
Limited Partnership
No one likes to lose their investment, but some are more risk-averse than others. Limited partnerships were created to cater to those who want to invest in horses, but also want to limit their downside risk. In limited partnerships, you invest in the racing career of a horse and a managing partner makes all of the decisions for you. If the horse is successful, you share in some the profits according to the terms of your partnership agreement.
Corporate
With corporate ownership, the corporation owns the horse(s) and is a separate legal entity from the shareholders who own stock in the corporation. Shareholders can come and go without affecting the legal ownership of the corporation’s horses. This type of ownership can provide tax and liability benefits not available through other types of ownership.
Limited Liability Company
This form of ownership combines some of the attributes of both partnerships and corporations. Limited liability companies provide their shareholders with many of the same liability protections available through corporations, but they are usually simpler to set up and come with less governmental overhead.
Leasing
Though not technically a form of ownership, leasing a horse is a way to ‘rent’ and control a horse’s racing career for a specific period of time. When you lease a horse, you take on all responsibility and risk and share, on a proportional basis, any money earned by the horse with the owner. Rules governing the leasing of horses are available on the United States Trotting Association website (http://www.ustrotting.com).
