Forming Partnerships

TOC Articles: Buying Racehorses

Partnerships, Forming

By Tracy Gantz

Ask any Thoroughbred owner-nothing compares to the thrill of winning. Whether your horse comes from the clouds to nail the frontrunner or stubbornly stays on the lead to thwart all challengers, when your number goes up first on the tote board, you giddily head straight for the winner’s circle.

The fun increases exponentially when you have friends with you to share the experience, especially if all of you own the horse in partnership. Take a look at the winner’s circle the next time a partnership wins–it’s one big excuse to party. Partners often come out to the track together, have some lunch, go to the paddock to shake hands with the jockey, and maybe take photos of each other. Then if they win, the high-fiving in the winner’s circle becomes an epidemic, with a sea of broad grins eagerly facing the camera for the official winner’s photo. “I enjoy my partners,” said Tony Scott, who has several partnerships on horses trained by Doug O’Neill. “I like seeing them at the track. I like going to dinner with them. I like having other people to celebrate with and go to the winner’s circle.”

Partnerships flourish today not only because it’s fun to win races with your friends, but because it gives people a way to buy better horses and more horses than they could afford on their own. “I’d rather take a 25% interest on three horses instead of buying one horse because you might pick the wrong one,” said Freddie Carvajal, who owns horses in partnership with trainer Caesar Dominguez. Carvajal said that by buying several horses, he and his partners have a much better chance of making money.

“We bought Weekend Squall in Kentucky for $20,000,” Carvajal said. “We made over $100,000 with her and sold her for $260,000.”
Gary Margolis and Tom Tuttle are among the partners in groups put together by trainer Wally Dollase. You have to be able to buy good horses to be competitive,” Margolis said. “I was in the partnership on Deputy Commander and Helmsman.” Added Tuttle, “The only down side to partnerships is the loss of control. But you can go to the winner’s circle with a minimal amount of investment.”

So how do you put together a partnership? It’s easier than you think.

Have Common Goals

People in successful partnerships agree that the most important factor is for all partners to have the same goals for their horse

“Avoid partners who don’t have the same theory in racing as you do,” advised Scott. “In my partnerships, we claim horses from $20,000 up to about $62,500. We try to get the best horses we can, go racing, and have fun.”

Your trainer should also have the same goals you do.

“Find the type of trainer you’re looking for,” Tuttle said. “If you’re looking for a Derby horse, find someone who races two-year-olds. Another trainer might have older horses or grass horses. Each partnership has a different direction and thrust.”

You and your partners should also agree on how to make decisions affecting the partnership, when to buy or claim a horse, and when to sell a horse.

Rollin Baugh, a bloodstock agent who has put together many partnerships, emphasized the importance of knowing how to end a
partnership and knowing what to do if a partner wants out or defaults on a bill.

Get It in Writing

Though the easiest way to start a partnership might be a handshake, a written agreement spelling out what to do in certain contingencies can help you avoid many problems. For example, if a partner defaults on a bill, a written agreement could stipulate how long he has to pay and whether his interest in the horses could be forfeited for non-payment.

A written agreement could also set rules on how decisions are made. Often the partner with majority interest has the final say, but that doesn’t have to be the case.

“Every partner has veto power on the financial decisions in our partnerships,” Tuttle said, though Dollase, as the professional
trainer, makes the day-to-day decisions.

Dominguez casts the deciding vote in his partnerships. “If it’s 50-50, he makes the decision in the best interest of the partnership,” Carvajal said.

Scott relies on O’Neill’s expertise when it comes to claiming horses. “Any partner can recommend a horse to claim,” Scott said.
“But the final decision is Doug’s. If he tells us not to claim the horse, then we don’t.”

A written agreement can also stipulate how a partnership is funded, another aspect with no concrete rules. Some groups put up enough money to buy a horse or horses and then bill the partners for their share of the monthly expenses. Others use some of the start-up funds for the early bills.

“I always keep some money in reserve so that the partners don’t have to pay monthly expenses,” Scott said. Margolis said he estimates what a year’s worth of expenses will be and keeps that in escrow so that he doesn’t have to go back to his partners for more money.

Who Keeps the Books?

Owners, whether they are in a partnership or not, rely on their trainer’s expertise to condition their horses. In some cases, however, a trainer can offer you even more help and might be interested in becoming one of the partners. You can make whatever arrangement works for you, your partners, and your trainer.

For example, Dominguez often owns an interest in the horses he trains. Carvajal said that Dominguez puts the partnerships together and does the paperwork, even billing the partners separately for their percentage of the expenses. “He’s the captain who runs the ship,” Carvajal said.

You or one of your partners can do the accounting yourself, however, or you can hire an accountant. Margolis is a CPA, an advantage for his partners. Scott is an attorney, which allows him to manage the partnership without hiring outside help.

“I don’t want to spend partnership money on legal fees,” Scott said. “We want to use the money to buy horses.”

Peggy Johnson, speaking at a Thoroughbred Owners of California ownership seminar, said that she and her partners take turns keeping the books. Each year a different partner receives that task.

And if the idea of keeping books fills you with dread, you can join one of the many large-scale partnerships with general partners who take care of those details. Bear in mind, though, that these people often receive monetary compensation for their efforts. So it’s wise to inquire about those operating expenses in advance and then make your own decision as to whether the cost is worth it.

How Active Are You?

If you decide to own horses in partnership, you should decide whether you will be an active or passive partner.

If you tell your partners,” Just tell me when the horses are running and send me my bills or profits,” you will likely be deemed a
passive partner. This can impact your ability to write off your horse business against other income on your taxes. The IRS often
determines whether you are passive or active based upon the records you keep and whether you spend 500 hours or more annually engaged in your horse business.

It’s best to be an active partner, not only for tax purposes, but because it’s more fun. Being active means attending the races, coming out in the mornings to watch your horses work, going by the barn to see what’s happening to your horses. And let’s face it, that’s why you want to own a racehorse, isn’t it?

TOC’s Free Partnership Directory

TOC’s partnership and syndicate directory includes the names, contact numbers, and general information of many partnerships that operate racing stables in California.

The directory is free. Simply contact the TOC office by mail (285 W. Huntington Drive, Arcadia, Calif. 91007), by phone 626-574-6620, or by e-mail at

The TOC office also has sample partnership agreements available, as well as the California Horse Racing Board forms for General
Partnerships (for use with three or fewer partners) and for Statement of Multiple Ownership (four or more partners).

Questions to Consider When Forming a Partnership

The following are some of the questions you might think about before forming your partnership. Any or all could be addressed in a written partnership agreement.

  • What are the primary goals of the partnership and do all partners share the same goals?
  • How long will the partnership last and how will the partnership be dissolved?
  • Who will train the horses and how will trainers be chosen?
  • How will the partnership make decisions?
  • What name(s) will the horses run in?
  • Whose silks will the horses run in?
  • Who is responsible for the bills and in what proportion?
  • Who will keep the books and write checks for the bills?
  • Will the partnership hire a lawyer and/or accountant?
  • Who will keep the partners up-to-date on the partnership’s activities and how often?
  • How will disputes be handled, i.e., via a lawyer, arbitration, mediation?
  • If a dispute arises, in what location will it be resolved and under what law?
  • What provisions are made in case one partner defaults on a bill?
  • If someone wants to leave the partnership, how will that be handled?
  • What happens if a partner dies?
  • May all partners see their horses whenever they want and if not, when may they visit?
  • What provisions are in place if a horse doesn’t run to expectations?
  • Will profits go back into the partnership or be disbursed to the partners?