Jaybird180
Final Approach
Johnny is such a nice fellow. When he was a young chap he started a lemonade stand in his neighborhood. Little did he know that little lemonade stand would make him a small fortune and he would be able to employ the other kids in his neighborhood.
So Johnny kept the business growing and one day a lawyer said that he needed to incorporate, hire a payroll and tax department and pay himself a W-2 salary, and so he did. Sourface, Inc. is what he called it.
When he was 17, he decided to take flying lessons, and so he did. After 40 training hours he got a Private Pilot license, Airplane Single Engine Land.
When he was 18, he moved out of his parents house and bought the big one down the block so he can continue to run his lemonade empire.
He realized that he needed a bank account now, so he got one with the same bank that keeps his money for the lemonade empire. Since he now has a bank account, his accountant told him that it would be easier and more cost effective to pay his salary by direct deposit instead of a paper check that he'd take to the local bank once per month.
One day he was thinking about expanding and he needed to scout some territory for expansion and maybe visit the lemon suppliers and the sugar suppliers and the water filtration guy. He thought about using an airplane to do it in.
Being the smart, frugal young man he is, he decided to go to the bank and get an aircraft loan, seeing that they advertised them at 0% for $200,000 so he can get something nice and shiny. The banker asked to see the revenues for Sourface, Inc and upon seeing the revenues, promptly recommended that he setup a child LLC that will own the airplane and a 3rd account where the loan proceeds would be placed. But Johnny was smarter than the banker. He knew that airplanes also required maintenance, fuel and that sometimes they break. So he setup a savings account attached to the LLC account.
Johnny realized as he was shopping that he was out of currency and that he should stay that way from now on. He found the perfect airplane and wrote a check for $200,000 smackers on the nose and the plane was his...er...owned by Airplane, LLC. Payment to the bank was $5,000/ month. So Johnny setup a monthly transfer from Sourface, Inc to Airplane, LLC to take care of that.
After some number crunching he arrived at the operating expense of $100/hr to operate the airplane, which included a maintenance reserve and fuel expenses.
Johnny being the simple young man he is, decided that 4 hours per month should be enough to maintain proficiency. So he included that in an agreement document that Sourface, Inc will pay minimum $400/mo for proficiency training and any "fun flying" hours, Johnny will pay out of his personal account. Any trips to see suppliers or scout new territory, of course Sourface, Inc will pay to Airplane, LLC at the rate of $100/hr. Sourface owns an insurance policy on the aircraft and Johnny is the named pilot.
Johnny, the Private Pilot hasn't gone anywhere yet in 6 months of having this aircraft as an asset and the accountant is asking about the $5400/month transfers from Sourface, Inc to Airplane, LLC which only $5000 he can account for because he has a $200,000 aircraft on the other side of the balance sheet that he diligently depreciates at tax time.
Is everything Kosher with the FAAs Private Pilot rules and limitations?
So Johnny kept the business growing and one day a lawyer said that he needed to incorporate, hire a payroll and tax department and pay himself a W-2 salary, and so he did. Sourface, Inc. is what he called it.
When he was 17, he decided to take flying lessons, and so he did. After 40 training hours he got a Private Pilot license, Airplane Single Engine Land.
When he was 18, he moved out of his parents house and bought the big one down the block so he can continue to run his lemonade empire.
He realized that he needed a bank account now, so he got one with the same bank that keeps his money for the lemonade empire. Since he now has a bank account, his accountant told him that it would be easier and more cost effective to pay his salary by direct deposit instead of a paper check that he'd take to the local bank once per month.
One day he was thinking about expanding and he needed to scout some territory for expansion and maybe visit the lemon suppliers and the sugar suppliers and the water filtration guy. He thought about using an airplane to do it in.
Being the smart, frugal young man he is, he decided to go to the bank and get an aircraft loan, seeing that they advertised them at 0% for $200,000 so he can get something nice and shiny. The banker asked to see the revenues for Sourface, Inc and upon seeing the revenues, promptly recommended that he setup a child LLC that will own the airplane and a 3rd account where the loan proceeds would be placed. But Johnny was smarter than the banker. He knew that airplanes also required maintenance, fuel and that sometimes they break. So he setup a savings account attached to the LLC account.
Johnny realized as he was shopping that he was out of currency and that he should stay that way from now on. He found the perfect airplane and wrote a check for $200,000 smackers on the nose and the plane was his...er...owned by Airplane, LLC. Payment to the bank was $5,000/ month. So Johnny setup a monthly transfer from Sourface, Inc to Airplane, LLC to take care of that.
After some number crunching he arrived at the operating expense of $100/hr to operate the airplane, which included a maintenance reserve and fuel expenses.
Johnny being the simple young man he is, decided that 4 hours per month should be enough to maintain proficiency. So he included that in an agreement document that Sourface, Inc will pay minimum $400/mo for proficiency training and any "fun flying" hours, Johnny will pay out of his personal account. Any trips to see suppliers or scout new territory, of course Sourface, Inc will pay to Airplane, LLC at the rate of $100/hr. Sourface owns an insurance policy on the aircraft and Johnny is the named pilot.
Johnny, the Private Pilot hasn't gone anywhere yet in 6 months of having this aircraft as an asset and the accountant is asking about the $5400/month transfers from Sourface, Inc to Airplane, LLC which only $5000 he can account for because he has a $200,000 aircraft on the other side of the balance sheet that he diligently depreciates at tax time.
Is everything Kosher with the FAAs Private Pilot rules and limitations?
The corrected version is in bold italics above.
