If you want to race a Quarter Horse, why notdo it with friends?The purchase, training, and racing of a good qualityQuarter horse can be expensive. It is advantageousto share the cost among a few friends and you canall share the fun.

Multiple ownership can take many forms from asimple contract between two friends for the purchase

of a horse, to limited partnerships, corporations, trusts, joint ventures, and avariety of other vehicles. Each has its own special rules and the choice of vehiclesshould be carefully considered before any money is expended on the venture.

Co-ownership AgreementsAt its simplest level, a multiple ownership agreement could be a co-ownershipagreement between two or more friends to purchase a horse, train it, race it,and eventually with luck, sell the horse at a profit. Each of the friends maycontribute a portion of the purchase price. One may contribute the training andhorse expertise in lieu of funds towards the purchase. Whatever the arrangement,there are some basic points that should be observed to make the venture asuccessful one:

• Put the agreement in writing. This should be done immediatelyon the purchase of the horse. There is no sense making upthe rules after the arguments have started.

• The agreement should specifically indicate what eachowner is expected to contribute. It should indicatewho will pay for the upkeep of the horse, training,racing, and all the other details inherent in trainingand racing quarter horses.

• The agreement should contain a "dispute resolution"clause, ie. if the owners cannot agree on an issue, thereshould be some mechanism to break the stalemate. As an

Get INVESTED. Get INVOLVED.

example, if one owner is contributing the horse expertise, thatowner could be given the final say on issues dealing with thehealth and training of the horse. As another example, a trustedadvisor or mediator could be chosen by the owners to medi-ate the dispute or decide the issue.

• Make sure the agreement contains an escape clause. If oneowner wants out, there should be a buy out clause allowing theother owners to purchase that partner's share of the horse at anagreed price. The agreement should also make clear the eventsthat will trigger a sale of the horse. Many disagreements arisebecause one owner wants the horse sold and the others do not.As the value of a horse can fluctuate wildly due to injury orsuccess, the timing of a sale is very important.

• Discuss the transaction with a financial planner. The co-ownersof a horse have an undivided percentage interest in the animal.If the owners are participating in the venture to make a profit,there are tax planning issues that should be considered to allowfor a maximum return on the investment.

• When drafting the agreement, look ahead, plan for foreseeableevents or problems, and where possible, have the agreementreviewed by a lawyer with experience in this area. The cliche, "An

ounce of prevention is worth a pound of cure,"applies as much in law as it does in medicine.

No matter how simple or small the purchase,I cannot stress enough the importance ofputting down some basic guidelines for therelationship between the co-owners onpaper. Without this, a disagreement betweenco-owners regarding the maintenance or sale

of the horse may quickly deteriorate and theresulting dispute could harm the position of

all parties involved as well as end friendships, in-crease cost and precipitate court action.

Catherine Willson, B.A., Ll.B.

by Catherine Willson, B.A., Ll.B.Willson Lewis LLP • www.willsonlewis.com

Co-ownership Agreementsand Horse Syndications

Photos by Dave Landry

CorporationsThe corporation is another vehicle used to purchase higher quality expensive horses or to undertakemore serious horse ventures. It is a creature created by law and has special properties that make itsuse beneficial.

Legally, a corporation is treated like a person. It can own property, buy and sell, and must submit regulartax returns. The debts of the corporation are its own. Creditors must claim against the corporation formonies owing to them by the corporation. Creditors cannot go behind the corporation to claim againstthe people who control it (with some limited exceptions). This characteristic of limited liability makesthe corporation a popular choice for money making ventures, especially where the risks are high andthe investors want to protect their other assets from possible claims by creditors.

A corporation is treated differently than an individual from an income taxperspective. Income earned by a corporation is taxed at the cor-

porate level which is lower than the tax on most individuals.Shareholders have the option of removing money from thecorporation in the form of dividends which are taxable at aspecial rate, or leaving profits in the corporation for use inother money making enterprises.

Another benefit to the corporation is its longevity. Companiesnever die if properly maintained. If the horse venture is to be a long-

term investment such as the set up of a breeding or racing stable,it makes sense to use a vehicle that will continue to exist as the var-

ious partners in the venture pass away.

A disadvantage caused by the separate nature of a corporation is that, for income tax purposes, theincome earned by a corporation cannot be sheltered by losses incurred by the shareholders personally.Similarly, the losses incurred by the corporation cannot be flowed through to the shareholders and offsetagainst other income earned by the shareholders. Income tax considerations such as these have led tothe use of other vehicles for syndications such as the limited partnership.

PartnershipsPartnerships, including limited partnerships, usually consist of a number ofinvestors that come together to perform a specific business venture. Whentwo or more people carry on a business together with a view to making a profit,they have formed a partnership. Each partner has some degree of personalinvolvement and control. Each partner is entitled to a share of the profits andis liable for a share of any loss.

There are two main advantages to using a partnership, the first being its easeof formation and dissolution. It is recommended that the names and addressesof the partners and the name under which trade is carried on be registeredwith the appropriate government agency. Filing fees are low. Dissolution ofthe partnership takes place when one partner gives notice of dissolution or,where the partnership has been created for a fixed term, at the end of thefixed term.

The second advantage is its flexible management structure. The relationshipbetween the partners is contractual. The partners can draw up an agreementbetween themselves dealing with the management of the partnership,distribution of profits, liabilities, and anything else they feel is important. Assuch, the partnership can be organized to accommodate a variety of businessarrangements. Syndications are a form of partnership.

Income and loss flow through the partnership to the individual partners andare shared between the partners equally or in accordance with their partnershipagreement. The income or loss must be included in the partners' personalannual tax filings.

Photos by Kelly Counsell

Racehorse Ownership SeminarsJoin us for Brunch on Sundays at Ajax DownsSeptember 12th and October 17thLearn about the benefits of getting invested as a breeder and/or racehorseowner in the Quarter Horse racing industry.

Network with industry professionals and learn about the different types ofownership from special guest speaker Catherine Willson of Willson Lewis LLP.Willson Lewis LLP is an industry member of the Ontario Equestrian Federationand a member of the international Equine & Animal Lawyers Association.Catherine is a legal representative for the Horse Racing Alliance of Canada.She has given conferences across Canada on equine law for Equine Canada,the Ontario Equestrian Federation, and the Jockey Club of Canada. She adviseson contracts, syndicates, litigation, disputes, and tax issues related to horses.

Attention Trainers and Breeders! Take this opportunity to direct potential new customers to oneof these seminars. Reservations are required.

To attend a Racehorse Ownership Seminar you must reserve your seat throughthe Ontario Quarter Horse Racing Industry Development Program by contactingSandy Anthony at 416-213-0520 or email qhprogram@ontarioracingcommission.ca.

Family Fun Dayat Ajax Downs

Every partner is jointly and severally liable with the other partners for alldebts and obligations of the partnership incurred while a partner. Further,partners are jointly and severally liable in respect of any wrongful acts oromissions by any partner acting for the partnership and for the misapplicationof any money or property received for, or in the custody of, the partnership.

To be "severally liable" means that a partner can be sued independently forthe whole amount of the loss. That partner would then have to go after theother partners to recover whatever contribution they were supposed tomake under the partnership agreement.

To protect yourself from this situation, maintain an active role in thepartnership. If you sit back and trust others to run the business, you mayend up paying when the creditors come knocking.

A limited partnership consists of one or more partners who act as generalpartners and many more partners who act as limited partners. A limitedpartner is only liable for the debts of a limited partnership to the extent of themonies provided by that limited partner to the partnership. A limited partnermust not take a controlling interest in the partnership.

Horse SyndicationsThere is no magic to the term "horse syndication". It refers to a transactionthat can take the legal form of a corporation, partnership, or other vehicle.Key to the concept is that it involves investors coming together to perform

a particular venture, whether it be the purchase of a race horse, stallion,or horse operation, with a view to making a profit on the investment. It isa business.

In most syndications, the role of the investors is relatively passive. Theremay be one managing partner or experienced horse person that takes therole of management and control of the horse operation.

The reasons vary why people enter into these syndications. Often itprovides a mechanism whereby people who could not afford to participatein the horse business may do so. Often, there is some tax advantage toparticipation in a syndicate.

Multiple co-ownerships, in any form, make available to many of us the joy ofowning and watching a good horse perform and succeed. There are also theperks of ownership such as passes to the clubhouse or box seats, entryinto the training areas or stables, and of course, hobnobbing with the richand horsey. It also helps the sport to succeed - the more quality horsesintroduced into the sport in Canada, the better the action. With care and ifRevenue Canada cooperates, we should see more of these cooperativeefforts in Canada in the future.

Catherine Willson is a partner at Willson Lewis LLP in Toronto (www.willsonlewis.com).This information deals with complex matters and may not apply to particular factsand circumstances. The information reflects laws and practices that are subject tochange. For these reasons, this information should not be relied on as a substitute forspecialized professional advice in connection with any particular matter.

Partnerships - continued from page 2...

QUARTER HORSE RACING AT FORT ERIEThree Full Day Race Cards of Quarter Horse Racing:Saturday, October 2nd, 9th and 16thTwo Days of Mixed Race Cards Throroughbred and Quarter Horse Racing:Saturday, October 23rd and 24th

A Horsemen's Information Session is scheduled for end-of-August (in Ajax) to present details on race conditions, bonusesand incentives, and race entry details.

• More than $650,000 available in purses for Quarter Horse races

• Up to $200,000 in added money for stakes races and feature races

• All Ontario Quarter Horses starting at Fort Erie (Ontario Quarter Horses with one-or-more starts in Ontario in 2009 and 2010) are eligible for a Transportation Subsidy

• Open races at Fort Erie eligible for QHRIDPOntario Bred and Ontario Sired Purse Bonuses

• Eligible horses racing at Fort Erie earn QHRIDP Breeders Awards, Stallion Awards and Breeder/Stallion Stakes Bonuses

• Discount hotel rates for Horsemen at Fort Erie Holiday Inn

• Stabling available at Fort Erie

Heads Up!...

Information Links:www.ontarioracingcommission.cawww.qrooi.comwww.ajaxdowns.com

Television Pilot to Reach Potential 3.5 Million ViewersThe Full Quarter...The Ontario Quarter Horse Racing Industry Development Program (QHRIDP) is funding the production of afour-episode television pilot, The Full Quarter, to capture the imagination of a potential 3.5 million CTV viewersin the GTA and Golden Horseshoe regions of Ontario.

Four episodes of The Full Quarter will air on CTV on Saturday mornings at 11:30 a.m. beginning August 14th. Theprogram will showcase Quarter Horse racing in Ontario, with additional feature highlights focusing on QuarterHorse athletes in rodeo, barrel racing and other sports.

Goals and objectives of the Ontario Quarter Horse Racing Industry Development Program include attractingnew investment from sponsors and horse owners and introducing potential new owners to the sport.

This program is moving into new areas to raise awareness of the Quarter Horse racing industry inOntario," said Wendy Hoogeveen, Director at the Ontario Racing Commission which oversees the QuarterHorse Program. "The theme fits with the Program's objective of attracting investment and new audience,as well as promoting life after racing for ex-racehorses. This is a pilot project and the outcome will be carefullyassessed to determine that it has met the goals and objectives of The Program.

Developed and administered by the Ontario Racing Commission in cooperation with industry stakeholders, theOntario Quarter Horse Racing Industry Development Program is designed to be an economic driver for ruralOntario. For more information on the Ontario Quarter Horse Racing Industry Development Program and Ontario'sHorse Improvement Programs visit: www.ontarioracingcommission.ca

WannaBet Team Sells Superpacks Like Hotcakes!Tuesday, August 3rd, marked thefirst of a series of six visits to AjaxDowns from the WannaBet Team.Their goal is to engage customerscoming through the front doorand to get them interested inwagering on live racing. To makeit easier for customers, the Teamassembles and sells a series ofpre-selected bets for six racescalled the Superpack. Customersreceive their pre-selected wageringvouchers in an envelope thatincludes a brochure with tips onhow to wager on Quarter Horseracing. During the first visit toAjax Downs, the WannaBet Team was faced with a flurry of salesand curious slot customers from the time they set up at the track.

The Team runs contests and draws for prizes between each raceto generate excitement and get new players committed to horseracing. One of the prizes is a race presentation in the Winner's Circle.

Guest Speaker - Peter Gross

HandicappingBrunchesThe Quarter Horse Program hosted twoHandicapping Brunches at Ajax Downs, June27th and July 13th, featuring guest speaker andbroadcast personality Peter Gross. Over 20guests were in attendance at both events. TheHandicapping Brunches provide a very costeffective way to educate new customers onhandicapping and wagering, effectively turningthem into repeat customers for live QuarterHorse racing, and introducing them to thepotential of racehorse ownership.

Quarter Horse Programat Guelph's PremierOutdoor Equine ExpoThe Quarter Horse Program was an exhibitorat the first Outdoor Equine Expo in Guelph June4th-7th. There was an impressive turnout of in-dustry exhibitors, and the final day of theevent was geared specifically for the racingindustry. Speakers representing the QuarterHorse racing industry included QROOI PresidentBob Broadstock and VP of Corporate Affairs atAjax Downs, Nick Coukos.

Program representatives spoke to attendeesabout the racing program, the breedingprogram and the industry support programsand ran a daily draw, collecting contactinformation for persons interested in race-horse ownership.

WannaBet Dates at Ajax Downs:

• Tuesday, August 3rd• Sunday, August 15th• Tuesday, August 31st

• Sunday, September 12th • Tuesday, September 21st• Sunday, October 17th