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What Happens To An Aircraft’s Registration If The Corporation Or LLC Owner Is No Longer Qualified To Do Business?

by Greg Reigel 29. December 2017 14:47
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Many aircraft owners use a corporation or limited liability company to register and hold title to their aircraft. Oftentimes, the owners set up their legal entity and then forget about it. Unfortunately, many states require legal entities to file an annual renewal/registration or pay fees to stay “active.” If an entity does not perform the required filing, the entity could become “inactive”, “suspended”, “not in good standing”, or it could be “administratively dissolved.”

Fortunately, in most of those states the entity can be reactivated/reinstated, have the suspension removed, or be placed back in good standing by accomplishing the required filing (and usually paying an associated fee). But what happens to an aircraft’s registration if this happens to a business entity that holds title to that aircraft? Can the aircraft still be legally operated while the entity is “inactive” or “suspended”?

According to a recent Legal Interpretation issued by the FAA’s Office of the Chief Counsel, the short answer is “no.” But to understand why the answer is “no”, it is helpful to look at the regulations that govern registration of an aircraft by a business entity.

14 C.F.R. §47.3(a)(3) permits a corporation (or a limited liability company, which is also treated as a legal entity similar to a corporation) that otherwise meets the U.S. citizenship requirements, to register an aircraft with the FAA. 14 C.F.R. §47.43(a)(3) tells us that an aircraft’s registration is invalid if, at the time of that registration, the business entity applicant was not qualified to submit an application under 14 C.F.R. Part 47.

This means a business entity that did not have legal status at the time it submitted its registration application to the FAA would not have been qualified to submit the application. And by extension, according to the FAA, “a business entity that does not have or has lost legal status in the State in which it has been incorporated is neither eligible to register an aircraft nor operate that aircraft.”

However, whether a business entity has “lost legal status” will depend upon the facts of the situation and also the applicable state law. As a result, the applicable state law must be analyzed to determine the business entity’s true legal status if it is in this situation.

So, how does the FAA find out about an invalid registration? Well, since the FAA does not make determinations about the legal status of a business entity at the time of registration, or even while the aircraft is registered, this issue usually comes to light during an investigation or an enforcement action.

And if the FAA learns the business entity has lost its legal status and that the aircraft’s registration is therefore invalid, it could pursue enforcement action against anyone who operated the aircraft when the registration was invalid in violation of Section 47.3(b). It could also pursue the business entity owner for failing to return an invalid or ineffective registration certificate as required by Section 47.43(b).

The Moral of the Story: If you are going to use a corporation or limited liability company to own an aircraft, don't create the entity and forget it. Make sure you keep up with the required formalities and filings, including payment of fees etc., to ensure your business entity remains active and in good standing.

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Greg Reigel

Keeping the FAA Happy When Registering an Aircraft Owned by an LLC

by Greg Reigel 6. July 2015 11:46
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A Limited Liability Company ("LLC") provides personal liability protection to its owners, as well as the tax and management flexibility. Both of these advantages have resulted in the increased use of LLC's for aircraft ownership. However, in order for the FAA to accept an application for aircraft registration submitted by an LLC, the aircraft owner needs to comply with the registration requirements of 14 C.F.R. Part 47.

One of those requirements is that the LLC must meet the U.S. citizenship requirements of 14 C.F.R. § 47.3. One of the ways to prove to the FAA that the LLC does, in fact, satisfy those requirements is to submit a "Statement in Support of Registration by a Limited Liability Company" ("LLC statement"). Although this isn't the only way to prove citizenship to the FAA, it is one of the most common methods.

In the LLC statement, the LLC must identify its members and confirm whether each of its members is a U.S. citizen. However, if one of the members is another LLC, the FAA will require an additional LLC statement for that member LLC identifying its members and confirming that those members are also U.S. citizens. The idea is that the FAA wants to drill down to identify which of the individuals involved are U.S. citizens and then determine whether the LLC qualifies as a U.S. citizen under 14. C.F.R. § 47.2. If that second (or third, if necessary) LLC statement isn't filed, the FAA will not register the aircraft until it either receives the LLC statement(s) or it receives other proof (usually organizational documents for the LLC) showing the citizenship of the members.

When all of the LLC's individual or entity members are U.S. citizens, then the LLC will be considered a U.S. citizen. If all of the individuals or entity members are not U.S. citizens, in order for the LLC to be satisfy the citizenship requirement, 2/3 of its officers/managers satisfy U.S. citizenship AND whether 75% of the voting interest of the LLC is controlled by individuals or entities meeting U.S. citizenship requirements.

Another item on the LLC statement indicates whether the LLC is managed by its members or managers. Whatever answer is provided, that information needs to match the information provided by the LLC on the application for registration. For example, if the LLC statement indicates that the LLC is managed by its members, then the individual who signs the application for registration should indicate his or her title as "member" or "managing member." On the other hand, if the LLC statement indicates that the LLC is managed by managers, then the individual signing the application should indicate his or her title as "manager" or some variant that includes the word manager (e.g. chief manager, chief financial manager etc.). If the LLC statement and the application for registration do not match, the FAA will reject the application.

Additionally, although an LLC may also be managed by officers, if the individual signs the application for registration as an officer (e.g. president, vice-president, treasurer etc.) the LLC statement will not be sufficient for the FAA to determine whether that individual has the appropriate authority. In that case, the FAA will reject the application unless it also receives the LLC's operating agreement or some other documentation evidencing the officer's authority to sign on behalf of the LLC.

Applying for registration of an aircraft with the FAA on behalf of an LLC can be tricky. The aircraft owner(s) using an LLC to own an aircraft need to carefully dot the "i's" and cross the "t's" to ensure that the FAA will accept the LLC's application and register the aircraft. Understanding the LLC statement and the FAA's requirements can help you avoid some of the "gotcha's" that can cause problems for an aircraft owner trying to register an aircraft with the FAA using an LLC.

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Greg Reigel

Vital Information regarding your FAA Registered Aircraft

by Jeremy Cox 4. August 2010 16:45
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I am writing to inform you of a new Federal Aviation Administration (FAA) rule that establishes a ‘three-year life-limit’ for an Aircraft Registration. This means that starting in October of this year, you will be required to renew your aircraft registration every three years.  It is estimated that one third of the 357,000 aircraft registrations in the FAA’s database are inaccurate, therefore the FAA’s goal is to increase its accuracy to over 95%. This information is then going to be more useful to safety and security agencies throughout the U.S. government, and of course individual U.S. States, that will get a windfall from new-found State Tax Evaders.

 

To implement the rule, the FAA has established a schedule according to which Aircraft Registrations issued prior to October 1, 2010, will expire no later than December 31, 2013.  You should receive a notice in the mail from the FAA six months prior to the expiration of your current registration notifying you of when you should submit an application to re-register your airplane.  That notice will be sent to the address in the FAA database.  You may wish to verify that the address is correct by looking up your N# for free on Globalair.com here
 

If there are no changes required to your contact information, there will be an online process available to comply with the rule.  Unfortunately, the FAA has not made this online process available yet and it has not released the application form required to re-register your airplane.

 

I will monitor developments as the FAA’s new rule is implemented and I would of course be very happy to provide you with any additional information or assistance to comply with this rule.

 

Okay let’s review what this rule is actually all-about (sorry for repeating myself, but this is Vital Information regarding your FAA Registered Aircraft.)

 

My great friend, and colleague, Tim Keeney, wrote the following piece that explains this rule, very nicely indeed, and will be printed in the JetBrokers Market Up-Date Newsletter, which is in-work as you read this.. All credit for the brevity of this nice piece, goes to him:

 

All N#’s Set to Expire by December 31, 2013

 

Your aircraft Registration (your N#) will expire in the next three years; possibly as early as March 31, 2011.  The FAA has issued a final rule that will take effect on October 1, 2010, that requires you to renew your registration by December 31, 2013 and then re-register every three years thereafter.  The purpose of the rule is to maintain an accurate aircraft registry database; a goal not achieved by the Triennial Aircraft Registration Report.  The FAA estimates that one third of the 357,000 aircraft registrations currently on file are inaccurate.  The FAA uses the database for ownership determination and response to an overdue flight or downed aircraft report.  Law enforcement and other government agencies use the database for their own purposes.  The Federal Register’s summary of the rule mentions inclusion of registry information and status on a display depicting each flight operating on a flight plan in the National Airspace System.

 

So, how will you know when your registration expires, when to re-register your airplane and how to do it?  For aircraft registered before October 1, 2010, consult the following chart for your scheduled expiration:

 

If the certificate was issued in:                   The certificate expires on:               Application window:

March of any year                                      March 31, 2011                               11/1/2010 – 1/31/2011

April of any year                                         June 30, 2011                                   2/1/2011 – 4/30/2011

May of any year                                         September 30, 2011                         5/1/2011 – 7/31/2011

June of any year                                          December 31, 2011                          8/1/2011 – 10/31/2011

July of any year                                           March 31, 2012                                11/1/2011 – 1/31/2012

August of any year                                      June 30, 2012                                   2/1/2012 – 4/30/2012

September of any year                                September 30, 2012                        5/1/2012 – 7/31/2012

October of any year                                    December 31, 2012                          8/1/2012 – 10/31/2012

November of any year                                March 31, 2013                                11/1/2012 – 1/31/2013

December of any year                                 June 30, 2013                                    2/1/2013 – 4/30/2013

January of any year                                    September 30, 2013                          5/1/2013 – 7/31/2013

February of any year                                  December 31, 2013                           8/1/2013 – 10/31/2013

 

Aircraft registered after October 1, 2010, will have an expiration date on their registration document.   Also, the FAA will mail you an expiration reminder six months prior to your current registration’s expiration so it would behove you to check that the FAA has your correct address.  You may do this by looking up your N# for free on Globalair.com here
You must submit an application form (coming to the FAA.gov web site soon) during the proper filing window to ensure that your new registration arrives prior to the expiration of your current document which would result in your airplane being grounded.  Re-registrations that do not require changing information (i.e. names, addresses) may be completed online via a system not yet implemented.  The cost identified in the rule is $5.00 but there is concern among some groups that there is nothing to prevent the FAA increasing the renewal fee to raise revenue for the agency.  Finally, be advised that obtaining a replacement registration does not satisfy the requirement to re-register your airplane.

 

Tim Keeney, VP-Sales, JetBrokers, Inc.

tkeeney@jetbrokers.com

 

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Jeremy Cox

Understanding The FAA's New Aircraft Re-Registration And Renewal Requirements

by Greg Reigel 30. July 2010 15:09
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On July 20, 2010 the FAA published a Final Rule amending the FAA's regulations regarding aircraft registration. As a result, if you own an aircraft that is registered with the FAA's Aircraft Registry (the "Registry") you are going to have to renew the registration for your aircraft.

Background

The Registry is responsible for developing and maintaining the system of registration for United States civil aircraft. One of the Registry's primary responsibilities is to maintain an electronic database for all U.S. registered aircraft. The database identifies each registered aircraft by its registration number (N- number), its complete description, and the name and address of its registered owner.

According to the FAA, "approximately one-third of the 357,000 registered aircraft records it maintains are inaccurate and that many aircraft associated with those records are likely ineligible for United States registration." Although the current regulations require aircraft owners to report the sale of an aircraft, the scrapping or destruction of an aircraft, or a change in the aircraft owner's mailing address, apparently many aircraft owners have not complied with these requirements. As a result, the FAA has implemented its Final Rule to improve the currency and accuracy of the Registry's database.

The Final Rule requires re-registration of all U.S. civil aircraft over a 3 year period in order to update the Registry's database and to enable the Registry to cancel the registrations of those aircraft that are not re-registered. Thereafter, aircraft owners will need to renew their aircraft registrations every 3 years.

The Re-Registration/Renewal Process

Under the Final Rule, aircraft registrations will now be limited to a 3-year period. At the end of each 3-year interval, an aircraft's registration will expire and the aircraft will need to be re-registered. This rule establishes the expiration of registration for all aircraft registered before October 1, 2010, and provides for the re- registration of all aircraft over a 3-year period according a schedule contained in the rule.

For aircraft registered on or after October 1, 2010, the aircraft registration's expiration date will be printed on the registration certificate and will be 3 years from the last day of the month in which registration or re-registration occurred. Once renewed, an aircraft's registration will expire 3 years from the previous expiration date. Replacement registration certificates issued on or after October 1, 2010, will display the same expiration date that was shown on the replaced registration certificate. If the replaced registration certificate did not display an expiration date, the replacement certificate will display an expiration date from the above-schedule based on the month of issue of the replaced registration certificate.

The FAA will issue replacement certificates after an address update, an N-number change, or when a certificate is reported as lost or mutilated. However, it is important to note that a replacement registration certificate will not constitute re-registration or renewal. Similarly, the replacement certificate will not change the registration expiration date applicable to the aircraft at the time the replacement registration certificate is issued.

When an aircraft's registration is approaching expiration, the Registry will send an aircraft owner two reminder notices. The first reminder notice will be sent 180 days before an aircraft's registration is scheduled to expire. This notice will identify the aircraft, its expiration date, and the 3-month filing window during which a registration or renewal application should be submitted. It will also provide instructions for completing the registration or renewal process.

In order to receive a new registration certificate before the old certificate expires, an aircraft owner will need to file the re-registration or renewal application within the assigned window. However, once an aircraft has completed re-registration and is approaching a required renewal, the aircraft owner may submit the required renewal information as soon as the first reminder notice is received.

The Registry will send a second reminder notice at the end of the 3-month filing window if the aircraft owner has not yet re-registered or renewed the aircraft's registration. The 3- month filing window will close 2 months prior to the scheduled expiration date for the aircraft's registration to allow the Registry sufficient time to process the application and mail the new certificate. If an aircraft owner files an applications after the filing window has closed, the application will still be processed; however, the new certificate may not arrive until after the current certificate has expired.

To avoid confusion between the normal registration process and the re-registration process, the Aircraft Registration Application, AC Form 8050-1, will not be used for re-registration. The Registry has created a separate application form that will be available online, here. Aircraft owners should be aware that the re-registration/renewal application does not grant any temporary authority for operation of an aircraft, unlike that provided by retaining the pink copy of Form 8050-1. As a result, if a re-registration/renewal application is filed late and a new registration certificate is not received by the time the current registration certificate expires, the aircraft owner would not be able to operate the aircraft between the time when the current certificate expires and when the new certificate is received.

The Final Rule provides for both online re-registration and renewal when no changes are required. However, if changes to the registration are required (e.g. address change, etc.), then the re-registration/renewal application may not be submitted online and must be mailed to the Registry. According to the Final Rule, the Registry will post information on its website identifying aircraft as they move through the various stages of re-registration and renewal so aircraft owners and other interested parties can track the process.

Aircraft owners will need to pay $5.00 to re-register their aircraft and then another $5.00 each time the aircraft's registration is renewed. (Although this doesn't seem like a lot of money, unfortunately the registration and administrative fees may increase over time, depending upon whether the latest version of the FAA reauthorization bill passes. Under that bill, the FAA would be required to increase fees to $130 for initial registration and $45 for renewals.)

Consequences For Failure To Re-Register/Renew

If an aircraft owner fails to re-register or renew an aircraft's registration, the registration will not end immediately. Rather, the Registry will wait 30 days to ensure that any late filed requests from the aircraft owner have been processed. In the absence of such requests, and assuming the Registry has a good address on file for the aircraft owner, the Registry will then send a letter to the aircraft owner providing notice of the pending cancellation of the aircraft's registration. The aircraft owner will then have 60 days within which to reserve the N-number or register the aircraft. If the Registry does not receive a reply within 60 days, the aircraft's registration will then be cancelled. If the Registry does not have a good address for the aircraft owner, cancellation of the aircraft's registration will be scheduled for no sooner than 90 days from the date of expiration. Once an aircraft's registration is cancelled, the N-number will be unavailable for assignment for a period of 5 years.

Conclusion

The Final Rule is effective October 1, 2010. Thus, all aircraft owners will need to comply. How can you minimize the hassle associated with the Final Rule? First, since the re-registration notice will be sent to the address on file with the Registry, verify now that your address in the Registry is correct. If you need to update the information, you can do that directly with the Registry or through an aviation attorney. Second, submit your application as early as possible once you receive your first reminder notice to allow the Registry time to process and mail your new registration.

If you follow these steps, hopefully the re-registration/renewal process will be nothing more than a minor inconvenience. And, as always, if you have problems contact an aviation attorney for help.

Off-Shore Aircraft Registration

by Jeremy Cox 1. March 2010 00:00
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In the maritime world, a ship is said to be "flying a flag of convenience" if it is registered in a foreign country "for purposes of reducing operating costs or avoiding government regulations." The country of registration determines the laws under which the ship is required to operate under and also that which are to be applied in any relevant maritime legal cases that might come about.

In aviation there are a multitude of reasons why you might choose to register your aircraft off-shore under the flag of a foreign country. Some of these include:

Complete Anonymity, i.e. if you suffer from celebrity notoriety; or you are a powerful corporate leader who relies on discreet and untracked movement within the territory of your competitors; or simply for personal reasons requiring anonymity. When your aircraft has been registered off-shore your privacy protection begins. If a journalist, corporate competitor or other interested party seeks the registered owner of your aircraft; their search will end with the contact details of your registered agent or trustee, and not with you.

Sales Tax or other Tax Avoidance, i.e. generally speaking, it is fairly simple for you to avoid a multitude of forms of taxation that are normally associated with the ownership and operation of a private or business aircraft, by registering it off-shore. Neutral Nationality Registration, i.e. this issue has become very prominent since we have moved into the new age of terrorism and unrest. By registering off-shore, you can fly internationally without instant recognition as being from the U.S.A.

Most foreign registries require that the registrant be a citizen of that country. The United States is the same: A U.S. citizen by definition of 14 Code of Federal Regulations (CFR) section 47.2 can be an individual, or partnership where each individual is a U.S. citizen, or a corporation organized under the laws of the United States, state, territory, or possession of the United States of which the president and at least two-thirds of the board of directors are U.S. citizens and 75 percent of the voting interest is owned or controlled by U.S. citizens. A resident alien is considered to be a corporation other than classified as a U.S. citizen, lawfully organized and doing business under the laws of the United States or of any state thereof, if the aircraft is based and used primarily in the United States; or a government entity (federal, state, or local). How then do these off-shore registries allow a foreigner to register with them? This is allowed by the employment of a native 'Trustee' or 'Agent' who acts on-behalf for the foreign ownership entity, under the auspices of a formal 'Trust Agreement.' In all cases there are annual fees that are payable to the agent. The U.S.A. aircraft registration branch is the only authority that I know of, that does not charge any annual registration fees.

Internationally, the most popular off-shore countries of registration are Bermuda, the United States of America, and now the relatively new player: the Isle of Mann. The "M" Registration was first introduced in 2007 by the government of this small island tax-haven which is located in the North Sea between England and Northern Ireland; it is probably better known for its T.T. motorcycle racing history rather than for its aviation industry.

Even though the aircraft eligible for entry onto the "M" or "Manx" registration must all be Type Certificated by the European Aviation Safety Agency (EASA), the Isle of Mann has chosen to more closely mimic the Federal Aviation Regulations of the United States rather than the bureaucratic tangles and inconsistencies that are normally found within the rules established by the European Aviation Authorities. Interestingly though, no non-resident islander can register any aircraft that is non-turbine powered and below 12,500 lbs MGTOW, or in the case of Helicopters, a non-twin-turbine powered machine.

Since a convenient loophole in the Value Added Tax (VAT) Regulations was recently exorcised by the European Union from the Danish Ministry of Taxations' rolls, whereby a 'flat-tax' was charged for an aircraft run through their tax-registration system, instead of the normal 25% or so, being charged like everyone else. The Isle of Man registry has quickly taken the lead largely because of its zero tax ratings for both corporations and inheritances, and depending on an aircraft owner's tax domicile, the Manx government provides a pathway for owners to either significantly reduce or even eliminate the VAT charge on their aircraft purchase.

By the beginning of November, 2009 almost 180 business jets and turbo-props had already been enrolled onto the Manx aircraft register. I am certain that this number shall continue climbing at a high rate. How do you or your company handle the Registration of you aircraft? Please click on the link below which states "Reply to this Article", your thoughts and comments would be very much appreciated. Be funny, be inspired, but most importantly of all, please be nice.

Have you had any experience with this topic? If so, Discuss it with us by clicking "Reply"



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