A Horse Racing Partnership
Creating a horse racing partnership can come with many concerns. Below we will be addressing some of the most common questions, Equilaw has received regarding the syndication of horses and this unique horse racing partnership. If you are considering entering into a horse racing partnership, contact us today!
What exactly is an equine syndication?
Equine syndication is something that allows people to come together to acquire what they consider to be a special or potentially valuable horse in any number of disciplines, although this type of horse racing partnership typically occurs within the racing industry. Equine syndication simply comes down to a matter of money. The purchase of a valuable yearling at the Lexington sales, both for Standardbred or Thoroughbred racehorses, can easily be in the six figures. The cost of training, racing and so forth can cost tens of thousands of dollars over the course of a year.
By coming together in this type of horse racing partnership an individual can own a fractional share, and participate in the ownership of that horse. Owning a fractional share limits their investment and also limits their return. Essentially a horse racing partnership or equine syndication allows people to participate in an equine activity where they never could do it themselves due to the cost of acquiring, owning and sustaining a horse over its career.
Why Create an Equine Syndication?
Essentially creating a horse racing partnership allows for equine owners to share in the ownership expenses rather than assuming a hundred percent of the financial responsibility. In the racing industry, expenses can be very significant over the course of the horse’s career.
You typically won’t see a horse racing partnership in sport horses, such as show jumping simply because people participate in those sports not for making money but for the joy and pleasure of watching their horse compete. Since there is not a financial reward for competitions horse racing partnerships or an equine syndication are less common. However, an equine syndication can be created for sport horses if there is a sale of a horse, especially at an upper international level where they can value close to a million dollars. If an individual acquires a foal or young horse for $20,000 or $30,000 there can be a significant return upon the sale.
How is an Equine Syndication Created?
There are many ways to create a horse racing partnership. Some of them are very simple, and some are them are very complication. The simplest way to create an equine syndication is to have a group of people come together and agree to share in the expenses and the ownership of the horse. This can be done in an informal manner although that is not encouraged.
A horse racing partnership really should be done through the creation of an entity. This entity is normally a limited liability company where each of the individuals owns a membership interest in the entity. The individuals can participate through the amount of percentage of interest they have in the entity, in the ownership of the horse, and the benefits that is derived.
In the racing industry and significant racehorses, especially breeding stallions, the syndication can be very complicated. It may still be a limited liability company, but you may have many more participates.
Horse Racing Partnership: California Chrome
For example, when the thoroughbred California Chrome retired to stud, a 2% fractional share of an interest in California Chrome cost $800,000. Also, in that syndication, because it is a racing syndication involved breeding or acquiring a manager. Managers then have special rights as well as members to the potential foals of that breeding stallion.
Equine Syndication Structure
The structure of an equine syndication can be very simple or very complicated depending on the cost of the investment and the hopes of the anticipated return on investment from the participates. When entering into a horse racing partnership or other type of equine syndication, consider talking with Equilaw to ensure your assets are protected adequately.