Tuesday, February 21, 2012
Co-Own A Plane!
With aircraft ownership costs skyrocketing, finding a partner could keep you flying
|Type Of Legal Entity: The type of entity you join—or create—will impact your liability exposure, taxes and fiduciary responsibility.
The limited liability company (LLC) has gained much popularity with aircraft-owner groups. Such an effort will cost more money and be slightly more complex to set up than a simple partnership, but the liability protection is well worth the added costs.
Selecting Owners: The compatibility of the owners is paramount. Such elements as piloting experience, mission profile and overall financial standing are important to discuss openly.
Termination Procedure: If a member doesn't work out, or if a member chooses to leave the group, there needs to be an exit strategy. Events such as a member's loss of medical, divorce, sudden illness, bankruptcy or even death need to be addressed. Can a member sell his/her shares or does the company purchase them? What type of advanced notice is required? What if the aircraft loses some of its value?
Management And Administration: The partnership must stipulate whether members will manage the finances, maintenance, book-keeping and membership duties for the group, or whether these tasks will be hired out. The group must decide who will be authorized to handle the financial side of the co-ownership, who can write checks and who will authorize expenses.
Insurance: Insuring larger groups has become more difficult in today's litigious society, and the typical limits of liability per occurrence and per accident are hardly adequate. Insurance pricing can vary wildly, so various sources should be looked at.
Maintenance: Many partnerships require the members to get their hands dirty, especially at annual time. This keeps maintenance costs at a minimum and imbues each pilot with intimate knowledge of the mechanical condition of the airplane. Some groups can afford to simply farm out the maintenance to a local facility.
Resolution Of Disputes And Problems: Establishing documented resolution procedures will help keep you out of court. Remember that as soon as you begin talking with an attorney and start dealing with the court system, costs will mount quickly. Consider how disagreements between co-owners will be resolved, and what procedures will be followed (such as mediation) before resorting to the legal system.
Aircraft Management: Issues such as scheduling and squawk procedures will need to be specified. Several free and paid options exist, from simple to feature-rich. You must decide whether the aircraft will be allowed to be used for instruction, and what the check-out requirements will be for new members, as well as currency requirements for existing members. Such details as weather minimums and how minor maintenance will be handled should all be addressed.
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