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EppyGA

EppyGA

Touchdown! Greaser!
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Let's Fly
I have a four partner setup for our Warrior. Two of the partners want out. One of them has been contacted by a guy that would buy either one or both guys out.

Apparently he wants to become a CFI and quit his current full time job to do training. I have more than one objection to doing this but also want to be sure that I can speak about the regulatory areas correctly.

While I would like to see the plane fly more I do not want the plane to become a primary trainer and be beat to death.

If we let him buy in does this not make us have to do 100 hour insrections at that point? What other areas am I missing?

Thanks folks.
 
Not enough information. Does he just want to get his ratings in the Warrior or does he want to eventually give dual in it? If it is the former, I see no real difference from what you have now. If it is the latter, then you would have some issues.

I would think you and the remaining partner would have some say in how the airplane was used. If you don't want it used for flight training, then don't allow it. If you haven't checked already, the insurance costs will probably quadruple.
 
If this guy quits his job to instruct full time, will he have the money for his fixed costs each month. Sometimes being a CFI you can have a slow month.
 
EppyGA said:
Apparently he wants to become a CFI and quit his current full time job to do training. I have more than one objection to doing this but also want to be sure that I can speak about the regulatory areas correctly.
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If this fool quit his day job thinking he is going to make a living as a CFI he is nobody I'd want around my airplane.

Having said that, the rule is that it needs a 100 hour IF the CFI is also the owner (or part owner) of the aircraft. Simply renting an airplane from person A who owns the airplane for flight instruction from person B does not trigger the 100 hour rule.

The buy-in agreement must have an iron-clad clause IN BIG RED BOLD LETTERS that says that GIVING flight instruction by a partner is not allowed. TAKING flight instruction is something all of you do every two years anyway, so taking it more often than that will not trigger any more FAA requirements than you have right now. Insurance may be another matter depending on what representations you made about the use of the airplane in your declarations page.

One last thought ... if this fellow buys out BOTH of your other partners, then (s)he is half-owner and that may give him some legal rights that you may not want. An hour with an attorney may be worth its weight in unicorn dung if that is the contemplation.



 
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If he wants to give instruction, I think it should be a big 'NO' to allowing him to join. For sheeps and giggles, ask your insurance provider what the premiums will jump to if your club decided to start giving instruction to student pilots. $5000-$7000/year wouldn't surprise me. The flight school claims for hull damages over the years have forced the few insurers out there who still write policies to cover them.

Once you tell the prospective member that he's on the hook for the additional premiums, he may change his tune all together....
 
EppyGA said:
I have a four partner setup for our Warrior. Two of the partners want out. One of them has been contacted by a guy that would buy either one or both guys out.

Apparently he wants to become a CFI and quit his current full time job to do training. I have more than one objection to doing this but also want to be sure that I can speak about the regulatory areas correctly.

While I would like to see the plane fly more I do not want the plane to become a primary trainer and be beat to death.

If we let him buy in does this not make us have to do 100 hour insrections at that point? What other areas am I missing?

Thanks folks.
Click to expand...

If he has enough money to buy half of the shares, and has a viable business model in mind already (and most CFI's aren't that great at business, they just want to fly) then why doesn't he buy his own aircraft that he can pay off in 4-8 years? What are y'all going to do if he wants to let some student solo it? Will students respect your aircraft, or trash it like so many flight school birds?
 
weirdjim said:
Having said that, the rule is that it needs a 100 hour IF the CFI is also the owner (or part owner) of the aircraft.
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Close, but not quite.

If the CFI provides the aircraft, the 100h rule applies.

Now, where that gets murky is clubs...where the CFI and the Student are both members...then no 100h needed.
 
EppyGA said:
I have a four partner setup for our Warrior. Two of the partners want out. One of them has been contacted by a guy that would buy either one or both guys out.

Apparently he wants to become a CFI and quit his current full time job to do training. I have more than one objection to doing this but also want to be sure that I can speak about the regulatory areas correctly.

While I would like to see the plane fly more I do not want the plane to become a primary trainer and be beat to death.

If we let him buy in does this not make us have to do 100 hour insrections at that point? What other areas am I missing?

Thanks folks.
Click to expand...
No 100 hr is required for any instruction the owner receives, but is required for any instruction he gives.
 
deltaindia said:
If he wants to give instruction, I think it should be a big 'NO' to allowing him to join. For sheeps and giggles, ask your insurance provider what the premiums will jump to if your club decided to start giving instruction to student pilots. $5000-$7000/year wouldn't surprise me. The flight school claims for hull damages over the years have forced the few insurers out there who still write policies to cover them.

Once you tell the prospective member that he's on the hook for the additional premiums, he may change his tune all together....
Click to expand...


That better scare s(he) off..... Don't forget to add into the new contract that s(he) is on the hook for ANY additional maintenance caused from training........

Bottom line..... S(he) needs his own plane...:yes:
 
JeffDG said:
Close, but not quite.

If the CFI provides the aircraft, the 100h rule applies.

Now, where that gets murky is clubs...where the CFI and the Student are both members...then no 100h needed.
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How can (s)he provide it if (s)he has no ownership interest?

I agree with the "club" comment. Played that game with the San Diego FSDO about 40 years ago.

Can't remember what we called FSDOs if they didn't have 121 airline responsibility in those days. It was a *SDO of some stripe but not FSDO.

Jim
 
What puzzles me is this: why would he want to buy two shares and not one?

Would he get any benefit for paying double for insurance, hangar rent, and other fixed costs?
 
NoHeat said:
What puzzles me is this: why would he want to buy two shares and not one?

Would he get any benefit for paying double for insurance, hangar rent, and other fixed costs?
Click to expand...

Google on "controlling interest" and see what pops up.

Jim
 
Controlling interest would require 51% right? So what advantage is there for two stakes he would have?
 
Flymeariver said:
Controlling interest would require 51% right? So what advantage is there for two stakes he would have?
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A 50% interest would give someone a veto over activities (ie. other partners could not outvote the 50% shareholder). But such an interest could not change anything without the consent of at least one other member (the 50% share could not outvote the other partners should they remain united).
 
JeffDG said:
A 50% interest would give someone a veto over activities (ie. other partners could not outvote the 50% shareholder).).
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Prime reason to not allow more than one share per person. In my opinion the guy should buy his own aircraft and partner with other likeminded people who want a training operation.
 
EppyGA said:
If we let him buy in does this not make us have to do 100 hour insrections at that point?
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Not at the point of buy-in, just when he starts giving training in that airplane to anyone other than the co-owners.
What other areas am I missing?
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Insurance rates, which will go up a bunch, maybe two or three times as much.
 
I can't even imagine being the buyer proposing this idea. For starters, it's seems rude to me. Is he going to pick up all the extra costs associated with his operation? Plus, it seems like a scheduling nightmare. How do you currently split the plane with your partners? It doesn't seem realistic for him to think he can make a living only having access to the plane 15 days a month.


Sent from my iPad using Tapatalk
 
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TommyG said:
If this guy quits his job to instruct full time, will he have the money for his fixed costs each month. Sometimes being a CFI you can have a slow month.
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No kidding. I only instructed about 15 hours this month.
 
My proposal to him would have been that he would have been responsible for all additional costs incurred by the training activity which I suspect would have driven him away.

Turns out a new candidate to buy the share has emerged so we won't have to deal with this at all. We met the person tonight and I'll go flying with him Thursday and work from there.

Thanks for all of the info guys.
 
This just occurred to me. Maybe wants two shares so he can temporarily sell one to a student. Thus no 100 hr inspections and a more favorable insurance rate.
 
Clip4 said:
This just occurred to me. Maybe wants two shares so he can temporarily sell one to a student. Thus no 100 hr inspections and a more favorable insurance rate.
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That kind of thing may start quacking if the FSDO were to ever get wind of it...
 
Clip4 said:
This just occurred to me. Maybe wants two shares so he can temporarily sell one to a student. Thus no 100 hr inspections and a more favorable insurance rate.
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Not without the other partners okay though.
 
If he comes back sell him the whole plane and it will be the second happiest day of your life.
 
I agree with Greg about FAA interest (or lack thereof), but I see it as being a real pain for the other co-owners as you have to redo all the ownership paperwork each time someone else sells out/buys in. Depending on the type of co-ownership structure and the state of location, that could even involve re-registering the aircraft and paying sales tax.
 
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Ron Levy said:
I agree with Greg about FAA interest (or lack thereof), but I see it as being a real pain for the other co-owners as you have to redo all the ownership paperwork each time someone else sells out/buys in. Depending on the type of co-ownership structure and the state of location, that could even involve re-registering the aircraft and paying sales tax.
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LLC owns the airplane, we're just partners in the LLC
 
NoHeat said:
An LP has partners. But an LLC has members. Right?
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An LLC is a company. Somebody owns the company. Whether you call those people "owners" or "members" is pretty much up to you, but either way, they invest money in the LLC to capitalize it. The big difference between a partnership and an LLC is that the general partners in a partnership have no financial liability protection from the structure (i.e., everything they own can be taken to pay the partnership's debt), while the financial liability of the owners of an LLC is limited to their investment in the LLC.
 
If this new partner is always PIC and does not advertise, then I don't see much of a practical problem other than scheduling.

Of course if the airplane is dinged enough to come to the attention of the FSO, or if a student is injured in any way then I can see a number of uncomfortable legal issues.

If he wants to solo his students, and/or if he's going to 'hold out' by engaging in any sort of advertising, then you no longer have a partnership, you have a flight school.

Sounds like a nightmare to me.
 
while the financial liability of the owners of an LLC is limited to their investment in the LLC
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Unless the member/partner/owner is flying the airplane. Then there is no personal liability protection afforded by any sort of corporate legal fiction.
 
JimNtexas said:
Unless the member/partner/owner is flying the airplane. Then there is no personal liability protection afforded by any sort of corporate legal fiction.
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That applies to any direct involvement in the aircraft's operation or maintenance. For example, if there's a maintenance-related accident, anyone who turned a wrench on the plane or directed the maintenance (i.e., the designated maintenance officer) could also be personally liable.
 
We hold title in our aircraft as "co-owners" individually. We discussed forming an LLC, but the aviation lawyer I talked to basically said "I'll take your money if you want, but I'd suggest you don't bother".

His suggested solution to liability worries was "as much insurance as you can afford"
 
dans2992 said:
We hold title in our aircraft as "co-owners" individually. We discussed forming an LLC, but the aviation lawyer I talked to basically said "I'll take your money if you want, but I'd suggest you don't bother".

His suggested solution to liability worries was "as much insurance as you can afford"
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You might want a second legal opinion. Generally speaking, as a "co-owner", if your partner crashes and hurts someone (either in or outside the plane), you could be held liable for any injuries to those third parties even if you had nothing to do with the flight. If the plane is in an LLC, and you personally had nothing to do with the accident, the LLC should protect you personally (although nothing can protect your stake in the airplane other than insurance).
 
dans2992 said:
We hold title in our aircraft as "co-owners" individually. We discussed forming an LLC, but the aviation lawyer I talked to basically said "I'll take your money if you want, but I'd suggest you don't bother".

His suggested solution to liability worries was "as much insurance as you can afford"
Click to expand...

I would not pretend to tell you how to do your own deal. My only question would be do you like have to go through the registration process every time a partner changes?
 
EppyGA said:
I would not pretend to tell you how to do your own deal. My only question would be do you like have to go through the registration process every time a partner changes?
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There's only three of us, and it's never changed since I've been in. Didn't seem like a lot of paperwork. I'd imagine there's also paperwork to buy/sell shares in an LLC, correct?
 
Ron Levy said:
You might want a second legal opinion. Generally speaking, as a "co-owner", if your partner crashes and hurts someone (either in or outside the plane), you could be held liable for any injuries to those third parties even if you had nothing to do with the flight. If the plane is in an LLC, and you personally had nothing to do with the accident, the LLC should protect you personally (although nothing can protect your stake in the airplane other than insurance).
Click to expand...


Does that depend on state laws as well?

Do you know of an example where that's happened? Not trying to contradict you, just figure out what our exposure is.
 
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