Company owning an Experimental Aircraft?

idleup · #1 01-25-2007, 10:06 PM

Is there any reason why a company can't own an experimental aircraft? The only operating limitations I know about are ? 91.319. but those dont state you can't use an experimental for business purposes, just that you cant "Carry persons or property for compensation". Is there something that I am missing?

Another question, why doesnt anyone rent out experimentals? is there a FAR against that?

- Matt

David Johnson · #2 01-25-2007, 10:13 PM

As I understand it, there is no problem with a company owning an experimental aircraft, as long as it's not used for commercial purposes except personal transportation in connection with business, of course. Lots of folks have their experimentals owned by an LLC for the illusion of asset protection in the event of a lawsuit, though that's a dubious proposition at best.

The name on the title isn't the issue...it's the use of the aircraft that matters to the FAA.

Dave

rv9builder · #3 01-25-2007, 10:38 PM

Quote:

Originally Posted by David Johnson

Lots of folks have their experimentals owned by an LLC for the illusion of asset protection in the event of a lawsuit, though that's a dubious proposition at best.

Dave

It's interesting you say it's dubious--I thought so, too--but then I read an article about aircraft partnerships in this month's issue of EAA's Sport Pilot and the author recommends forming a sub-chapter S corp or an LLC for asset protection. Does anybody know the straight scoop on this stuff?

David Johnson · #4 01-25-2007, 10:46 PM

I'm partnered with an attorney in my 182. We set it up as an LLC but it was more for convenience in adding or removing owners as we go than for asset protection. He is pretty clear that an LLC is pretty transparent as far as asset protection goes. If asset protection is top priority, then a different arrangement that includes widely distributing your assets among a web of friends, relatives and businesses is the best protection available, because the cost of going after assets in so many different holding structures is more prohibitive than it's worth for the garden variety personal injury suit.

Dave

Paul Eastham · #5 01-25-2007, 10:49 PM

I'm not a lawyer, but I just happen to have a corporate law book sitting here. It says:

Quote:

In some instances, courts will disregard an LLC's or corporation's separate legal status and hold its owners persoonally liable... Generally, the entity's limited liability protection will be disregarded if the owners fail to respect the separate legal existence of their LLC or corporation (they treat it as an extension of their personal affairs)...

("LLC or Corporation?" Mancuso - Nolo)

It is not clear to me if a corporation formed solely to hold an aircraft for the personal use of one person/family is distinguished enough from their personal affairs to be treated as a separate entity. At a minimum, I bet you would have to be very careful to keep the two things separate (different bank accounts, paying rental fees to the corporation for use of the aircraft, etc)

Owning my own aircraft for better or worse,
Paul

idleup · #6 01-25-2007, 11:03 PM

I should clarify my original post. Having it owned by my company is not for asset protection, it is for a benefit. The company currently owns a plane and pays all the costs and I just get taxed on my personal usage at a fair market value hourly rate (it ends up being a lot cheaper than me owning it). The company can justify a plane because we use it for business too. But now I want the company to own my RV-7 when I finish it and I will pay the tax on my personal usage like I do with the existing plane. I just need to make sure that there is no problem with the company owning an experimental... that is the purpose of my original question. I am 90% sure it is not a problem but wanted to run it by you all because I am sure many of you have a similar situation...

pfactor · #7 01-25-2007, 11:04 PM

insurance issues maybe? (saw this earlier ..so just linking, too naive/un-informed to really know)

http://www.vansairforce.com/communit...97426#poststop

az_gila · #8 01-26-2007, 12:55 AM

This was from a previous posting of mine...

It would look like your standard Operating Limitations would get in the way...
UNLESS it is solely used for Recreation and Education

http://www.vansairforce.com/communit...ng+limitations

---- old posting ----

If this is your #1 Operating Limitation... (from an FAA web site via the EAA)

(1) No person may operate this aircraft for other than the purpose of meeting the requirements of ? 91.319(b) during phase I flight testing, and for recreation and education after meeting these requirements as stated in the program letter (required by ? 21.193) for this aircraft. In addition, this aircraft shall be operated in accordance with applicable air traffic and general operating rules of part 91 and all additional limitations herein prescribed under the provisions of ? 91.319(e). These operating limitations are a part of the FAA Form 8130-7, special airworthiness certificate, and are to be carried in the aircraft at all times for availability to the pilot in command of the aircraft.

It seems like a lonnnnggg stretch to get this to cover the commercial activities you are describing....

This sample operating limitation covers the first bit of my previous posting - "the purpose for which the certificate was issued"

? 91.319 Aircraft having experimental certificates: Operating limitations.

(a) No person may operate an aircraft that has an experimental certificate?

(1) For other than the purpose for which the certificate was issued; or

(2) Carrying persons or property for compensation or hire.

gil in Tucson

pierre smith · #9 01-26-2007, 06:47 AM

Matt,
My business, Smith Aviation, Inc. offers crop-dusting services (30 years now) and my Airtractor and vehicles are owned by the corporation.

My 6A, on the other hand, is owned by me and my partner (who is not a partner in my business), and we use it for Transition training under waiver issued by the EAA and approved by the FAA. (The waiver allows us to receive compensation for it's rental and dual instruction).

If I need a part for my Airtractor or need a part for anything else, I consider that flight recreational..

as I fly to wherever that part is located. Heck, every time I fly this little rocket, I consider it recreational.

Regards,

jhphillips · #10 01-26-2007, 07:37 AM

1 - Hire a knowledgeable lawyer and a knowledgeable accountant to give you legal and accounting and tax advice.
2 - If you're the builder and someone/something is injured, you're at risk.
3 - If you're the pilot and someone/something is injured, you're at risk.
4 - If you're the owner and someone/something is injured, you're at risk.