I am trying to locate a sample joint ownership agreement for four guys purchasing a cirrus together. Does anyone have a good sample agreement?
Thanks
It you want a partnership agreement there is one on the AOPA web site. FWIW My partner and I ended up forming a LLC to own our SR20. I was unwilling to be bankrupt if he did something bad with a passenger in the plane and visa-versa. Since I have no control over who he has in the plane and we only have $100K passenger liability the risk is real.
In reply to:
FWIW My partner and I ended up forming a LLC to own our SR20. I was unwilling to be bankrupt if he did something bad with a passenger in the plane and visa-versa.
That is an extremely important point. I would not advise entering into a straight partnership.
Does this require 100 hour maintainance service (essentially an annual service) on the aircraft? Might I assume you each pay $XX.00 per hour to the corporation to use the airplane, and if so, does it become a “rental” to the LLC shareholder and subject to diferent FAR’s?
Just wonderin’ - considering a partnership/LLC’ship for my '20.
Randy
I’ll second the recommendations to set up an LLC to own your Cirrus.
Another advantage comes when one of the members of the LLC decides to sell their share. If it’s a partnership, that means a change in title and (in most states) the new partner must pay sales tax on his/her purchase; if it’s an LLC, there are no such requirements.
If you’re an Aviation Consumer subscriber, you can read an article about LLCs versus partnerships by clicking here.
Anybody know of an actual test of the LLC corporate veil? I’d like to believe they actually work (being a member in more than one) and it would be nice to see if they would actually stand up, and if not, why. From what I understand, at least in California, LLCs are relatively recent animals.
You can bet that the plaintiff’s attorneys will be attempting to punch holes in the veil in all kinds of creative ways.
The concept of veil peircing of an LLC is not yet well developed but likely will follow the general guidelines of when it is allowed for a traditional corporation.
The following quote is from a 2001 California court of appeals decision (Peinado v. Barnett). Keep in mind this is only the courts comment, not hard and fast law.
"In California, a limited liability company is formed when one or more members file articles of organization with the Secretary of State. The formation of an LLC generally shields its members from personal liability for acts of the company. But under certain circumstances, the LLC’s members may be held personally liable for the company’s acts under the theory of alter ego liability. ‘The essence of the alter ego doctrine is that justice be done.’ Thus, the protective veil of an LLC may be pierced when ‘in the particular case presented and for the purposes of such case justice and equity can best be accomplished . . . .’ In order to pierce the veil, two general requirements must be met: ‘(1) that there be such unity of interest and ownership that the separate personalities of the [LLC] and the individual no longer exist and (2) that, if the acts are treated as those of the [LLC] alone, an inequitable result will follow.’ Relevant factors to consider in determining whether to apply the alter ego doctrine include the disregard of legal formalities, the failure to maintain adequate LLC records, ownership by a single person, the domination or control of the LLC by a single person, the use of a single address for the individual and the LLC and the use of the LLC as a ‘mere conduit’ for an individual’s [*4] business.
Other potential factors include inadequate capitalization of the LLC, meaning if the court finds that the LLC does not have sufficient assets to pay “expected” debts they could decide to come after the shareholders individually.
Just my 2 cents.
Stuart
FWIW, I’m not an attorney (I am a CPA), so my views are not tainted by self interest.
Simply getting such an agreement form from somebody will not do the job for you. As Stuart notes, this is a complex area of the law with “T’s” to be crossed and “I’s” to be dotted, and it would be foolhardy not to hire a knowledgeable and experienced attorney to get the best possible advice and guidance on how to proceed.
Sure, the legal advice will cost you some dough, but the amount involved (especially split four ways) is peanuts compared to what you have invested in the aircraft and what an adverse legal determination will cost you.
So be smart about it … get a good lawyer.
Pete
Here in Australia, the answer to this is quite clear. Our regs state amongst other things:
In reply to:
(7A) An aircraft that carries persons on a flight, otherwise than in
accordance with a fixed schedule between terminals, is employed in a
private operation if:
(a) public notice of the flight has not been given by any form of
public advertisement or announcement; and
(b) the number of persons on the flight, including the operating crew,
does not exceed 6; and
(c) no payment is made for the services of the operating crew; and
(d) the persons on the flight, including the operating crew, share
equally in the costs of the flight; and
(e) no payment is required for a person on the flight other than a
payment under paragraph (d).
The requirement for a 100 hour inspection does not apply to aircraft engaged in private operations. In the US, the language is not quite so specific - FAR 91.409(b) says amongst other things:
In reply to:
no person may operate an aircraft carrying any person (other than a crewmember) for hire, and no person may give flight instruction for hire in an aircraft which that person provides, unless within the preceding 100 hours of time in service the aircraft has received an annual or 100-hour inspection
I’m not sure where or how “for hire” is defined. Perhaps someone more versed in the FARs than I can elaborate.
Randy,
FAR 91.409(b) requires a 100-hour inspection if:
-
The aircraft is operated for the purpose of carrying a person, other than a crewmember, for hire; OR,
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The person (e.g. the CFI) providing the aircraft is giving flight instruction, for hire, in that aircraft.
If neither condition exists, then the 100-hour inspection is not required.
This is not to say you can take your friends to the beach and “charge” them for the flight. That would be an illegal part 135 operation. They can split the cost of the flight with you for fuel, oil, landing/parking fees, etc.
If you are a CFI and using your aircraft for instruction (you are providing the aircraft for instruction), then it would require a 100 hr inspection.
Just to be clear, renting doesn’t necessarily imply the need for a 100 hr inspection. It is ONLY required as stated in the regulations above.