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Types of Ownership

Individual Ownership| Partnerships | Leasing | Limited Partnership
Corporation | Limited Liability Company

Owning a Standardbred racehorse must be approached as a business: There will be revenues and expenses, risks to be managed, and tax and regulatory considerations. Thus, you will want to structure your racing business in one of several ways:

Individual Ownership

 In this case you pay all the bills and take all the risks, but you also reap all the rewards–and the purses your horse wins.

Partnerships

In a partnership, you and your partner(s) share paying the bills and assuming risks–and each takes a cut of the purses. Partnerships can also be “unbalanced,” in which each partner owns a different percentage, and thus pays a different percentage of the expenses and earns a varying cut of the purse. Your trainer, of course, can also be your partner.

Leasing

Horses, like any business asset, can also be leased. In a lease, you (the lessee) will have control of the horse for a fixed period of time–in exchange for a stated percentage of the purses won. During the term of the lease the lessee generally pays all the expenses associated with racing. The benefit is that it’s usually cheaper to lease a horse than pay what might be a high cost of buying one. The U.S. Trotting Association mandates that copies of the lease be registered with the USTA (to divulge true ownership).

Limited Partnership

A growing number of people, especially those with limited amounts to invest, or who fear losing more than what they have budgeted, have invested in limited partnerships. It’s a common investment form: In a limited partnership you put up a fixed amount towards the management of a horse’s racing career. A “general” or “managing” partner makes all the decisions about acquiring a horse, including selecting a trainer, and making stakes payments. You will share proportionately in the purses won, when they exceed expenses, and in a worst-case scenario will not lose more than what you have invested. Such partnerships are widely advertised in trade publications and online.

Corporation

Racing corporations, just as in the business world, are entities that are legally separate from its owners or stockholders. They offer their owners legal and tax advantages not enjoyed by sole owners, partners, lessees, or limited partners, but are heavily regulated.

Limited Liability Company

These are partnership and corporation hybrids, combining features of both. It offers the company members the legal protection afforded to corporations, but frees them of the considerable regulatory hurdles placed before corporations. Get legal and accounting advice! Your legal and tax advisors will be key members of your stable. Your lawyer will you advise about the various ownership forms, and your tax advisor will tell you how racing finances are governed by state and federal tax regulations.


Questions? Call us at
1-877-800-USTA(8782) ext.2
 
e-mail us at:
owners@ustrotting.com
 
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FAST FACT:
Many owners like to have their trainer as a partner. What employee could be better motivated? Your trainer, given more substantial financial interest, will certainly be motivated!