I

idleup

Well Known Member
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
 
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
 
David Johnson said:
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
Click to expand...

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

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)...
Click to expand...
("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
 
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...
 
Operating Limitations

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/communi...&page=1&pp=10&highlight=operating+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
 
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Yes

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,
 
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.
 
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?
Click to expand...

I think an LLC probably has little value for an individual owner. In the event of an accident, anyone harmed will probably sue both the owner of the plane (the LLC) and the pilot or his estate. Since virtually all accidents are the result of pilot error, I think there is minimal protection at best.
 
FWIW, I believe the only reason for an individual owner would be if you have a property tax issue with your state, you would need to set it up as an LLC in Montana, or a State with no property tax.
 
This is a touchy subject which the legal expert would have to weight in on, but as others have said it's not nearly as cut and dried as you may think. If you truly do have a company (like mine, or superior, etc..) that uses the plane for business purposes (I don't have my plane in the company because its is my personal plane that I built before I started this company), then yes having it owned by your company will probalby work fine. But, if the only reason you put it into an LLC or something is to try and shield yourself from liability, then it's likely of little value. The "veil" works both directions, and to keep it intact means clearly keeping business & personal assets separate, as to with their usage. There are a number of companies which own & operate their experimentals for business purposes, and as such makes perfect sense. Otherwise, I probably wouldn't bother. Later on down the road it may be difficult for you to prove that it was used for business purposes and not personal.

Just my 2 cents as usual,
Stein.

RV6, Minneapolis
 
Company Q

SteinAir said:
There are a number of companies which own & operate their experimentals for business purposes, and as such makes perfect sense. Otherwise, I probably wouldn't bother. Later on down the road it may be difficult for you to prove that it was used for business purposes and not personal.

Just my 2 cents as usual,
Stein.

RV6, Minneapolis
Click to expand...

Stein ... do you know how these companies "get around" the Operating Limitations that say "education and recreation"??

Do they get different Operating Limitations?

I'm talking about other business uses here, not transition training...

gil in Tucson
 
Gil,

Your issue regarding Operating Limitations that say "education and recreation" is probably what has me worried the most. I would also like to know how you would get around that...

The other items such as proving that it is used for business purposes is no problem. There are a couple of clients that we only got the contract because we have a plane and ability to reach there locations quickly. Also the justification for why experimental is easy considering the price/speed ratio vs. certified...
 
idleup said:
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
Click to expand...
The OPERATING LIMITATIONS that are issued with the SPECIAL AIRWORTHINESS CERTIFICATE (FAA form 8130-7) are part of the Special Airworthness Certificate says that the aircraft "cannot be used for compesation or hire." Therefore, no rentals.

Companies do own Experimentals. Look at Van's Aircraft. Anytime that a company owned aircraft has an application made to the FAA, a letter on company letter head must be included that states that the person signing the FAA form is authorized by the company to do so.

Every Experimental that I have delt with that is owned by a corporation was PURCHASED and not built by the corporation. An Amateur Built Experimental is build by an individual or individuals for recreation and or education. A corporation build amateur built aircraft does not meet the intent of the regulation in my opinion. Could it be done? Maybe. Would I be the DAR on that project? NO!
 
Vans are not Amateur Built

RV6_flyer said:
The OPERATING LIMITATIONS that are issued with the SPECIAL AIRWORTHINESS CERTIFICATE (FAA form 8130-7) are part of the Special Airworthness Certificate says that the aircraft "cannot be used for compesation or hire." Therefore, no rentals.

Companies do own Experimentals. Look at Van's Aircraft. Anytime that a company owned aircraft has an application made to the FAA, a letter on company letter head must be included that states that the person signing the FAA form is authorized by the company to do so.

Every Experimental that I have delt with that is owned by a corporation was PURCHASED and not built by the corporation. An Amateur Built Experimental is build by an individual or individuals for recreation and or education. A corporation build amateur built aircraft does not meet the intent of the regulation in my opinion. Could it be done? Maybe. Would I be the DAR on that project? NO!
Click to expand...

Gary... Vans is an exception, their planes are not Amatuer Built..

N666RV

Engine Manufacturer LYCOMING
Engine Model 0-320 SERIES
Classification Experimental
Category Crew Training - Market Survey

Even if a company owns a previously amateur built Experimental, in general, don't they get the same Operating Limitations that were issued to the original builder?

gil in Tucson
 
And what about operating the experiemental with an FAA 7162 exemption (which I have) for transition training? Hadn't thought about this until now, but I'm wondering if I couldn't incorporate my transition training instruction. Hmmm... My typical hamburger flights would now be *marketing* expense! Hmmm...
 
Thanks for the Information Gary. The plane will be completed by me and flying before the company purchases it from me. So in that case it will be the same scenario that you are used to.

I appreciate the feedback from a DAR.
 
kevinsrv7.com said:
How about protecting YOUR airplane during a divorce.
Click to expand...

Problem with that is that even if you transfer ownership of the plane to a company, your ownership stake in the company itself might be a community asset (depending on what state you're in). So she'll own half of the company, which owns the plane, which means she owns half of the plane.

You could form the company and give a partial ownership stake to a trusted friend. That way even if she got half of your ownership in the company, it wouldn't be enough to control the plane, much less dispose of it.
 
Company Ownership of Experimental

Matt-

I know a real estate developer, who writes off all of his RV-6 flights for business purposes. He has also been depreciating the cost of his RV, since he completed it 6 years ago. There is a distinction between FAA operating limitation regulations and business ownership of experimentals or business tax write-offs. FAA operating limitations do not preclude business ownership or write-offs for legitimate business expeneses. Forming a Sub-Chapter S would provide an effective shield against personal liability, unless the shield could be pierced, e.g. by proving the corporation was a sham and formed only to evade creditors, commit fraud etc. You have to conduct the corporation as a valid corporation, i.e. maintain adequate insurance, keep records and minutes, hold meetings, issue stock, etc. You can do all this as an individual. Nolo Press has easy to read books on this. Good luck

Ron
 
I've said it before, I'll say it again:
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.

If you have enough that you're concerned about taxes (federal and state income taxes, sales and use taxes, franchise taxes, personal property taxes), concerned about accident liability (as builder or as owner or as pilot), concerned about divorce, etc., pay a professional (who's got malpractice insurance!) for competent advice.
 
Same question

combat404 said:
Matt-

I know a real estate developer, who writes off all of his RV-6 flights for business purposes. He has also been depreciating the cost of his RV, since he completed it 6 years ago. There is a distinction between FAA operating limitation regulations and business ownership of experimentals or business tax write-offs. FAA operating limitations do not preclude business ownership or write-offs for legitimate business expeneses.
..........
Click to expand...

OK Ron .. same question that I asked Stein.... :) (with no answer yet... :) ...)

Stein ... do you know how these companies "get around" the Operating Limitations that say "education and recreation"??

Do they get different Operating Limitations?
This seems pretty specific to me on business purposes.

This seems pretty specific to me with no differentiation on business purposes.
Ther are are other categories of "Experimental" that would seem to cover business purposes, not "Amateur Built".

gil in Tucson
 
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az_gila said:
OK Ron .. same question that I asked Stein.... :) (with no answer yet... :) ...)

Stein ... do you know how these companies "get around" the Operating Limitations that say "education and recreation"??

Do they get different Operating Limitations?
This seems pretty specific to me on business purposes.

This seems pretty specific to me with no differentiation on business purposes.
Ther are are other categories of "Experimental" that would seem to cover business purposes, not "Amateur Built".

gil in Tucson
Click to expand...
Gil:

ANYONE can get a copy of the operating limitations for ANY registered airplane for $10 if you know the N number and Serial Number.

http://162.58.35.241/e.gov/ND/airrecordsND.asp

The operating limitations are public records.

The latest revision to FAA ORDER 8130.2 will contain what is REQUIRED to be in the operating limitations. The FAA or DAR cannot remove from the requirements but are permited to add more restrictions to them.

Latest version is 8130.2F Change 2 can be found at:
http://www.airweb.faa.gov/Regulatory_and_Guidance_Library/rgOrders.nsf/0/18b1d64bc8f90136862571d40072d8e1/$FILE/Order%208130F%20with%20chg%202%20incorporated.pdf

I know many people that fly personal airplanes on business trips for transporation to get to the business meeting but get RECREATION out of flying their airplane to and from the business meeting.

This sounds like something that if it went to court, an OPINION of an "aviation expert" would be used to determine if something was done against the regulations. In my opinion, two different experts may have different opinions.

If I am called as the "Aviation Expert", you see how I will testify.

John Phillips has the BEST advice for these matters.
 
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Education and recreation?

Does anyone know where this "education and recreation" wording came from? I can not find it in 8130.2F as required or even suggested. There is language that allows an inspector some leeway in writing the Operating Limitations however. My Ops Limitations do not contain the wording. Mine states "No person may operate this aircraft for carrying persons or property for compensation or hire." Simple enough, you can use the airplane for business travel, you just can't charge anyone for a ride.

John Clark, ATP CFI
RV8 N18U
KSBA
 
Here's the language -

153. ISSUANCE OF EXPERIMENTAL AMATEUR-BUILT OPERATING LIMITATIONS.
a. Operating limitations must be designed to fit the specific situation encountered. The ASI may
impose any additional limitations deemed necessary in the interest of safety. The ASI and/or designee
must review each imposed operating limitation with the applicant to ensure that the operating limitations
are understood by the applicant.
b. The following operating limitations shall be prescribed to experimental amateur-built aircraft:
(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 must 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(i). These operating *
limitations are a part of Form 8130-7, and are to be carried in the aircraft at all times and be available to
the pilot in command of the aircraft.
 
Ownership

RV6_flyer said:
Gil:

ANYONE can get a copy of the operating limitations for ANY registered airplane for $10 if you know the N number and Serial Number.

http://162.58.35.241/e.gov/ND/airrecordsND.asp

The operating limitations are public records.

.....

I know many people that fly personal airplanes on business trips for transporation to get to the business meeting but get RECREATION out of flying their airplane to and from the business meeting.

This sounds like something that if it went to court, an OPINION of an "aviation expert" would be used to determine if something was done against the regulations. In my opinion, two different experts may have different opinions.

If I am called as the "Aviation Expert", you see how I will testify.

John Phillips has the BEST advice for these matters.
Click to expand...

Gary... thanks for the response, I had forgotten about the FAA $10 records thing... even though I did it for my Tiger... It was interesting to see all of the previous ownership via the old registration records.

Occasional use to get to a business meeting could easily be seen as recreation, but isn't this a big step from the original question which was for a company to own the Amateur Built Experimental, when the actual company business has a purpose other than ownership?

Not a lawyer... but if too many folks push this, we can all lose our quite liberal rules on building and flying our own planes.... :(

gil in Tucson
 
Education and recreation...

John,
Thanks for the reference. A little digging revealed that my Operating Limitations were written before 8130.2F was published in 2004. The "education and recreation" line appeared in the 2005 change.

John Clark ATP CFI
RV8 N18U
KSBA
 
John Clark said:
John,
Thanks for the reference. A little digging revealed that my Operating Limitations were written before 8130.2F was published in 2004. The "education and recreation" line appeared in the 2005 change.

John Clark ATP CFI
RV8 N18U
KSBA
Click to expand...
Not so! I've been certifying amateur-builts since 1999 and looked up my original operating limitations issued in 1993. As far as I can tell, it's always been there. If your op lims don't include those words, they were issued in error.
 
Ownership vs operation

I am not a lawyer and don't play one on TV, but I make up for that by having opinions in massive abundance. So here's mine:

Who (or what) owns the plane (in this case) has no bearing on whether it is operated at all times only for recreation or education. I know of corporations that paid for swimming pools, pool tables, pinball machines, and other recreational equipment. All valid employee benefits (though not always fiscally sensible). I see no reason why a plane would be any different. If it happens to be used in the course of business, it is (in most cases) going to be incidental, since presumably the person could get to the same place via other transport.

The above opinions are void where prohibited by law.
 
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