Letting Others use my Plane/Starting a Club

[ilpilot]

Hello all,

Been reading this forum for a few years, first time posting. I was wondering if I can get some insight on the best way to go about this. Here's the situation.

I will be purchasing a tailwheel airplane within the next few months. Specifically, an Aeronca Champ. I have my PPL and tailwheel endorsement.

I have quite a few people in the local area interested in potentially using the plane to get their tailwheel endorsement in, and continue using it to stay proficient.

I would like to make the plane available to help defray some of the ownership costs and possibly even turn a small positive balance sheet to help offset my hourly cost of flying. Trying to figure out the best way to do this in terms of liability, insurance, etc.


Here is the current thought:
Put the plane into an LLC. Start a non-equity flying club. Charge a small monthly amount for dues and allow members use of the plane provided they also contribute an hourly rate as well to cover expenses associated with operation of the plane.

The idea here is to retain ownership of the plane myself. I will be flying it maybe one day out of the week. This will help keep it flying and allow others to stay tailwheel proficient in a much less expensive manner than what is currently available. I am in the military and will be moving in a few years, most likely will end up selling the plane as well. Many of the prospective members are military too and will be moving, hence the benefits of a non-equity club due to there not needing to be an exit strategy other than stop paying the monthly dues.

My main concern with this is where do I fall on the line of a non-equity club, or renting in the eyes of FAA, insurance companies, etc. I realize this is something for a legal professional but figured I'd get opinions. The LLC will NOT be a non-profit (as any surpluses, and when I sell the plane, I would like to return to my personal finances. From research this rules out a 501 organization).

Any advice here? The more I think about it it sounds like a rental operation which obviously comes with its own insurance and business stuff. On the other hand, I've heard second-hand of people doing what I am proposing as a non-equity club.

Any and all advice is appreciated. Thank you and happy holidays

 

[JScarry]

Insurance and LLC taxes are the biggest barriers to doing what you want to do.

If you open it up to lots of people, insurance can be expensive. In 2016 I had an open policy for renters on my $25,000 Cherokee and it cost $2,960. I converted it to a named insured policy with two of the students and three others on the policy in 2017 for a cost of $795—and everyone on the policy was a named insured without any right of subrogation by the insurance company. It’s only a few dollars more than just having myself on the policy. My understanding is that most insurance companies don’t have any problem with up to five named insureds.

If you are in California you will need to pay the state a $825 each year to maintain your LLC. Many states have no fee, but you would need to check with your state’s tax authorities. You will also need to submit a state and federal tax form. You may end up paying taxes on the “income” that you set aside for engine and airframe reserves. You can take depreciation on the plane to offset some of the income, but you’d end up paying taxes on the gain if you sold the plane for more than the depreciated value.

The airport may have hoops that you need to jump through as well.

 

[James331]

First off, good choice in airframes, I learned how to fly in a 7AC, that thing is a scalpel in the right hands.

Second, they don’t cost that much upkeep wise, next to nothing if you owner assist.

Which leads me into third, I don’t think this is a good idea, the club or lease back is a bad idea, especially in a tailwheel, it’s going to be more expense and headache than it will be worth.

You got a excellent little plane, very cheap upkeep if you don’t bend it, like less operational cost than a ski boat, I’d just enjoy it and forget this idea.


Also if you LLC it, I would shop states, CA would not be where I made the LLC if I were you. I’d also rent a hangar, which are useful for more than just planes, and NOT give ANYONE your N number, same with fuel pumps.

 

[ilpilot]

I appreciate both of your inputs. Thank you for taking the time to answer.

The state the LLC will be filed in has a $50 filing fee and a nominal yearly fee, so the expenses there should be negligible.

James I completely understand where you are coming from there and would certainly do that if I could. I am a student so the budget to purchase and maintain the plane outright is the challenge.

The goal here is to 1) own my own tailwheel plane, 2) allow a limited number of trusted others to use it, and 3) create a method for them to help contribute towards the expenses of the plane.

Not interested in an equity club for the simple reason that we will all be getting stationed in different locations at different times over the next several years, so the exit strategy gets complicated there. Open to any and all advice, thanks again!!

 

[Warlock]

Did this in April of this year and had a fatal accident father and six year old child in August....correctly insured and operated by the LLC...AOPA has a great system to put this in place...just let you know there can be a severe downside...contractually can’t make much more of a statement than that...damage alone was three times the policy limits and that was the maximum we could find.

 

[benyflyguy]

Did this in April of this year and had a fatal accident father and six year old child in August....correctly insured and operated by the LLC...AOPA has a great system to put this in place...just let you know there can be a severe downside...contractually can’t make much more of a statement than that...damage alone was three times the policy limits and that was the maximum we could find.

Wow that’s tough to be a part of. A real eye opener. God bless

 

[ilpilot]

Second what beny here said. I appreciate your input and openness here.