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Are You Using A Limited Liability Company To Own An Aircraft And Fly The Company’s Members/Guests? Be Careful.

by Greg Reigel 27. October 2017 08:16
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Aircraft owners regularly use limited liability companies (an “LLC”) to hold legal title to an aircraft. An LLC can help limit an owner’s personal liability, and it may also assist an owner with his or her tax planning. But using an LLC to hold title to an aircraft may also create problems for the aircraft owner if he or she does not structure the ownership appropriately.

In order to understand the potential risks of using an LLC to own an aircraft, a brief explanation of how an LLC is viewed and organized under the law is in order. First, an LLC is a type of business entity that has distinct legal personality from its owners/members and managers. An LLC is treated as a separate “person” in the eyes of the law with an independent existence from its members. Thus, if the owner/member of an LLC dies, the entity continues to exist (although an LLC needs to specifically elect to have this continuity of existence).

Next, LLC members each hold a membership interest in the LLC that is represented by the members’ capital accounts. The LLC members have full ownership and control of, and sole possessory interest in, their membership interests of the LLC, and not the individual assets owned by the LLC. Similar to a corporation, the LLC has managers to handle the day-to-day business of the LLC who are oftentimes also the members of the LLC. Additionally, the laws governing LLC’s require that certain formalities be observed (e.g. annual meetings, separate checking accounts, maintaining corporate/company books and records etc.). LLCs should not be construed to be alter egos of their members, even when they are structured as closely held companies.

Thus, when an LLC owns an aircraft, the LLC’s members do not actually own an interest in the aircraft. Rather, the aircraft is an asset of the LLC and is managed by the managers of the LLC, on behalf and in the best interest of the LLC. So, while the LLC members may own the LLC, they do not have a direct interest in the aircraft that is owned by the LLC. This is an important distinction that is often misunderstood by LLC members.

You might be wondering then whether an LLC may be operated under 14 C.F.R. § 91.501(b)(4) for the personal transportation of its members and their guests. Under Section 14 C.F.R. § 91.501(b)(4), the operator of an aircraft may conduct flights “for his personal transportation, or the transportation of his guests when no charge, assessment, or fee is made for the transportation.”

However, in the context of this regulation the FAA views the term “operator” as applying to the personal use of an individual or his or her guests, the term “operator” would not apply to an LLC that is a business entity existing for “business purposes” rather than “personal purposes.” Additionally, even if the LLC does not directly charge the members or guests for the flight(s), if the members make capital contributions to the LLC to pay the cost of ownership and operation of the aircraft, that would constitute “compensation” (in the FAA’s broad interpretation of that word) for the personal transportation of the member and its guests. As a result, Section 14 C.F.R. § 91.501(b)(4) would not be available to the members of the LLC.

Rather, in these situations the FAA takes the position that the LLC is the actual operator of the aircraft. The FAA would consider the LLC to be a “flight-department company” that is conducting commercial operations requiring an air carrier certificate under 14 C.F.R. Part 119. As such, any operation of the aircraft by the LLC on behalf of the members or their guests without an air carrier certificate could subject the pilot(s) actually flying the aircraft to an FAA enforcement action and subject the LLC that owns and operates the aircraft to a civil penalty action. The Internal Revenue Service could also view the LLC’s operation of the aircraft as a commercial operation requiring the collection and payment of Federal Excise Tax on any flights performed on behalf of the LLC’s members or guests.

Does this mean you can’t use an LLC to own your aircraft? No, not at all. However, each situation is unique and must be analyzed to confirm that the aircraft owner will actually receive the benefits expected and that the ownership arrangement will comply with the regulatory requirements anticipated by the aircraft buyer for operations under 14 C.F.R. Part 91.

With the appropriate use of a dry lease or use agreement, and pilot agency and service agreement, it is possible to structure the ownership and operation of your aircraft to comply with the regulations, and to also satisfy the FAA’s operational control and other concerns. If you want to use an LLC to own and hold title to an aircraft, contact us and we will work with you to ensure that the transaction is structured appropriately to meet the regulatory requirements applicable to your particular situation.

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Greg Reigel

Leading Edge Aviation Solutions - Teams up to provide key benefits to clients

by GlobalAir.com 16. October 2017 13:19
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KEY PLAYERS IN THE AVIATION INDUSTRY COLLABORATE WITH BROKER/DEALER LEADING EDGE AVIATION SOLUTIONS TO PROVIDE BENEFITS TO LEADING EDGE CLIENTS

Some of the most prestigious aviation firms in our industry--Argus, FlightSafety International, Marsh, and MedAire—together with broker/dealer Leading Edge Aviation Solutions announced at the National Business Aviation Association Exhibition and Convention in Las Vegas on Wednesday, October 11, 2017 that they have collaborated with Leading Edge Aviation Solutions in an exclusive benefits program. All were present at MedAire’s booth at the NBAA convention to make the announcement.

This program will offer discounts or other benefits for certain of their products or services to Leading Edge Aviation Solutions’ clients who are buying or selling their aircraft through Leading Edge and/or utilizing Leading Edge technical or consulting services in the buy/sell process. Leading Edge calls this benefits opportunity for their clients “THE EDGE – Benefits”

Leading Edge Aviation Solutions

THE EDGE® is Leading Edge Aviation Solutions’ complete suite of services for buying, selling, technical services, and consulting for aviation. We couldn’t be prouder to now include “THE EDGE-Benefits” in our service offering.

Joe Carfagna, Jr., President of Leading Edge Aviation Solutions said, “We are proud of THE EDGE-Benefits program for our clients, and most especially we are delighted and privileged to work with some of our industry’s key players in effecting and maintaining the program.“

“MedAire is excited to offer industry-leading travel safety solutions to THE EDGE--Benefits program,” said Vice President Strategic Partnerships, Jeffrey Dickey. MedAire has over 30 years of expertise providing medical and security advisory services, medical kits, and first responder training to give you the resources to take the best possible care of passengers and crew members — wherever you travel, whatever may happen."

“ARGUS is proud to be part of this exciting program”, said Joe Moeggenberg, President & CEO of ARGUS International. “THE EDGE--Benefits will continue to provide value added products and services to Leading Edge clients long after the transaction is completed.”

Dave Davenport, Executive Vice President, Commercial said “FlightSafety International is pleased to serve as the preferred training provider for THE EDGE--Benefits program . We look forward to providing Leading Edge customers with the highest quality training, outstanding service, and value they deserve and expect from FlightSafety.”

Joseph Braunstein, General Aviation Practice Leader, for Marsh, said: “Marsh is proud to be the preferred insurance broker for Leading Edge and assist its clients in the placement and servicing of their aircraft hull and liability insurance.”

Leading Edge Aviation Solutions is one of the aviation industry’s premier private aviation broker/dealers with over 28 years of experience in the aviation marketplace. Leading Edge is a leading expert in the sale, purchase and valuation of corporate, business and private aircraft with over $10 billion in total aircraft sales,acquisitions and new aircraft deliveries and acceptances in that period. We also offer consulting and technical services where we advise some of the world’s most successful people and companies in various aspects of private aviation.

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Aircraft For Sale | Press Release

What is a Missionary Pilot?

by Tori Williams 1. October 2017 08:30
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Missionary Pilots go through years of training to make a huge impact on the world. Image via Mission Aviation Training Academy.

A few days ago, a friend of mine announced that he was accepted to an internship with the Mission Aviation Fellowship (MAF). He will be spending a summer in Lesotho, Africa working closely with their flight operations to transport medicine, supplies, and pastors into remote villages on the mountains. Of all the internships my friends have announced lately, this one really blew me away. To travel into a completely foreign land to utilize your skills in aviation with the sole purpose of spreading goodwill and the Gospel is truly brave!

When I heard this, I began to wonder just how people ended up becoming missionary pilots. It is certainly not a career field they advertise at flight university. It may get a mention here or there, but it is rare to find someone who has an end goal of becoming one. Why is that? Clearly there is a need to use the modern technologies and capabilities we have to help those who are unable to unable to access important things without them. However, as I have learned, it is not as simple as putting a pilot in a plane with some supplies and taking off.

At the heart of the need for missionary pilots is the fact that some people in the world live in extremely remote and impoverished areas. Most of these people have never seen an airplane, let alone had the thought to build a working airport. Because of this, missionary pilots often have to land on whatever semi-suitable ground they can find. This may very well be a particularly long strip of dirt nestled in a mountain range. These pilots expertly land at these dangerous locations and bring in anything that the villages may need, such as doctors, pastors, or even groceries.

Missionary pilots who fly missions into remote locations have to be ready for anything that could possibly go wrong. They are required to have advanced pilot certifications, as well as advanced mechanic certifications. There is no “typical day” in the life of a missionary pilot, so they must be well prepared for all possibilities. Many missionary pilot hopefuls choose to prepare for their futures by doing apprenticeships with established training institutions. For example, The Missionary Maintenance Services (MMS) Apprenticeship program is an intense, thirty month, full-time aviation maintenance ministry that prepares students for the life of mission work.

Another interesting fact about missionary pilots is that they have to raise their own financial support for missions. They do this through connections with churches and individuals. Sometimes it can take years to raise the money required to do the mission where they are needed. Thankfully most missionary organizations have a network of support that the pilots and mechanics can become a part of.

It may seem crazy to go through all of this training just to have to raise your own funds to even go on a mission. The reality is, that doesn’t matter to those who feel they have been called to serve the Lord in this way. They delight in the process to ultimately share their expertise with those in need. They are able to make a real, tangible change in the world for the better. In the end, I do not think you could find a missionary pilot that did not think it was worth it.

Are you interested in helping a missionary pilot make positive changes in the world? Check out the MAF website for more information on sponsoring them!

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