Help Setting up a Flying Club

[ArnoldPalmer]

Rentals in the local area are hard to find. Fargojet wants a 160 or more an hour. Local airport has a 172 and they want 150 bucks an hour.

There are a good number of pilots around here who would like to fly, and some who'd probably like to get licensed. With this in mind, I think setting up a flying club would be a good idea.

Everybody would be equal shareholders and I think we would start out with 5-7 members and 1 plane. Initially limiting to licensed pilots only. Student pilots might bump up cost of insurance, I think. And I am not sure how we'd manage flight training, if we welcome instruction. Would that open us to 100 hour inspections? We are in the state of MN, so do we have to get the MnDOT involved?

Question is do we need to setup as an LLC or an INC?

Any advise and help on how/where to go about would be appreciated.

 

[AggieMike88]

AOPA has made a substantial push to create and promote flying clubs. So they have lots of resources available.

Visit their website and look under the "You Can Fly" section.

Contact the AOPA ambassador near you, https://youcanfly.aopa.org/ambassadors. They are tasked with promoting the You Can Fly initiative and can assist with some direction and local resources.

 

[NoHeat]

I believe 100 hour inspections are not required if only club members fly its planes. I'm not sure, but I think the argument is that club members are paying themselves when they rent from their club. In our state this same argument can also be used to avoid paying sales tax on the rental.

Clubs are a great idea. Good for you, for taking interest in starting one.

 

[KaiGywer]

Since you mention Fargo, where are you located? In FAR, or closeby?

 

[Clip4]

Rentals in the local area are hard to find. Fargojet wants a 160 or more an hour. Local airport has a 172 and they want 150 bucks an hour.

There are a good number of pilots around here who would like to fly, and some who'd probably like to get licensed. With this in mind, I think setting up a flying club would be a good idea.

Everybody would be equal shareholders and I think we would start out with 5-7 members and 1 plane. Initially limiting to licensed pilots only. Student pilots might bump up cost of insurance, I think. And I am not sure how we'd manage flight training, if we welcome instruction. Would that open us to 100 hour inspections? We are in the state of MN, so do we have to get the MnDOT involved?

Question is do we need to setup as an LLC or an INC?

Any advise and help on how/where to go about would be appreciated.

You want a not-for-profit inc. You need articles of incorporation and bylaws. Unless you are going to have 7 members tossing in $7-10K each, you need financing. No you don't need MN DOT involved. You do not need 100 hr inspections as long as you have owner members. Students have lower accident rates than private pilots. Forming a new flying club is not easy.

 

[Goofy]

AOPA has made a substantial push to create and promote flying clubs. So they have lots of resources available.

Visit their website and look under the "You Can Fly" section.

Contact the AOPA ambassador near you, https://youcanfly.aopa.org/ambassadors. They are tasked with promoting the You Can Fly initiative and can assist with some direction and local resources.

What he said ^^

 

[chartbundle]

"Generally" (insert lots of handwaving here) if the flying club provides the instructor then a 100 hour would be required. If, on the other hand the member provides the instructor then it wouldn't. You can still require the CFI to be a club member, but you wouldn't be able to do things like require specific instructors, all the financial arrangements must be between the CFI and student directly, etc.

Of course, the place I flew had a few planes with things like 100 hour Cessna seat rail ADs, so most of them just got a standard 100 hour even though it wasn't technically required.

 

[Sundancer]

I'm in a club that's been around since the 60's, flying a pretty well equipped 172 now. Wet, tach, is $85 per hour. Dues per month about the same. Buy in wasn't too expensive, either.

It can work very well, and as mentioned, we are a not-for-profit. No students on board now, but we don't forbid it. It can be good to have a CFI or two as members - maybe waive their dues?

A club has to cover expenses - a FBO has to make a profit, cover other overhead, etc.

 

[AggieMike88]

some of the experts to have on your list will include a lawyer who is both familiar with aviation law and business entity law, and a CPA who understands what your forming on the business entity side, and how you are operating.

The former is to get you set up as a legal entity within your state. And not every business attorney who could do LLC's, partnerships, and such in their sleep is the right choice. Having one also familiar with aviation law will assist you in advising about and forming the right entity for the way you wish to ru the club. Then help with filing the correct paperwork with the correct agencies.

The CPA is worth their fee to handle all of the IRS work.

 

[NoHeat]

A member's buy-in cost can vary according to whether the club uses debt financing.

If the club owns its plane outright the buy-in must be higher, and this could make it harder for a member to get out.

If it has a loan then the buyin will be less. The loan could be from a member. Of course loans make things more complicated and can cause trouble.

 

[Clip4]

"Generally" (insert lots of handwaving here) if the flying club provides the instructor then a 100 hour would be required. If, on the other hand the member provides the instructor then it wouldn't. You can still require the CFI to be a club member, but you wouldn't be able to do things like require specific instructors, all the financial arrangements must be between the CFI and student directly, etc.

Of course, the place I flew had a few planes with things like 100 hour Cessna seat rail ADs, so most of them just got a standard 100 hour even though it wasn't technically required.

https://www.aopa.org/news-and-media/all-news/2013/january/11/question-of-the-month

 

[bradg33]

https://www.aopa.org/news-and-media/all-news/2013/january/11/question-of-the-month

Note the requirement that Club members be permitted to use CFIs who are NOT club members. If the Club requires all instruction to be given by club members, a 100hr is required. There's a hard-to-find chief counsel opinion on this, but it's not in the online database. I've got a copy somewhere, I'll try to find and post.

edit: found it, attached. It's a copy that AOPA provided me with a few years ago.

 

[flyingcheesehead]

There are a good number of pilots around here who would like to fly, and some who'd probably like to get licensed. With this in mind, I think setting up a flying club would be a good idea.

Sure sounds like it...

Everybody would be equal shareholders and I think we would start out with 5-7 members and 1 plane. Initially limiting to licensed pilots only. Student pilots might bump up cost of insurance, I think. And I am not sure how we'd manage flight training, if we welcome instruction. Would that open us to 100 hour inspections? We are in the state of MN, so do we have to get the MnDOT involved?

Question is do we need to setup as an LLC or an INC?

Any advise and help on how/where to go about would be appreciated.

Insurance: You'd be surprised. The extra cost is mostly on the instruction side. It'll be hard (and expensive) for you to find insurance to cover the instructors, but if you only cover the club members and let the instructors handle their own insurance, students might not cost you much extra. We allow primary students who have hit 25 hours and soloed, and that didn't make our insurance go up at all.

100 hour inspections: Keep the instruction completely separate from the club and you don't need them. That means that instructors may be members or may be non-members. One way of staying friendly with the local FBO is to use their instructors at least part of the time.

Staying friendly with the FBO is a good thing. If they have a 172 with a G1000, maybe you should get an Archer with steam gauges. Offer something different - Then, you're not competing with them as much, merely offering an alternative.

MNDOT: Nope. Aside from likely having to register your plane with them, there isn't anything you need to involve them for.

LLC vs. Inc: The IRS still doesn't recognize LLCs, it appears. So to them, you'll be a partnership unless you become a corporation. (Happy to be corrected here by someone who knows better - And I say this because I'm setting up an LLC right now.) Every lawyer I've talked to says partnership = bad... But again, this is where a business lawyer who practices in Minnesota is a good person to talk to. Do what they say, not what we say!

Also, you'll likely want to set the club as a 501(c)(7) nonprofit. (c)(7) is for social groups and isn't a charity (that's c3) so "donations" aren't tax-deductible, but the corporation itself also isn't taxed if you stay within the limitations.

Forming a new flying club is not easy.

True, but it's also not that hard. Find yourself a couple of enthusiastic people who are into the idea, a lawyer, and a CPA and get 'er done.

Financing will be the hardest part. Talk to AOPA about this, as they may have some options. However, most banks don't know much about aircraft loans, and those that do probably don't want to lend money to a new entity without someone giving a personal guarantee. Personal guarantees suck.

Another option for financing is to set up a second company to give the loan to the club. I know of some clubs that operate this way - They get a better rate than they otherwise would, while their members and anyone else who wants to join in can get an investment opportunity that pays much better than most forms of savings and isn't as risky as many other investments.

Good luck, and please feel free to post more questions here!

Kent (President, Capitol City Flyers, Inc.)

 

[ArnoldPalmer]

Sure sounds like it...



Insurance: You'd be surprised. The extra cost is mostly on the instruction side. It'll be hard (and expensive) for you to find insurance to cover the instructors, but if you only cover the club members and let the instructors handle their own insurance, students might not cost you much extra. We allow primary students who have hit 25 hours and soloed, and that didn't make our insurance go up at all.

100 hour inspections: Keep the instruction completely separate from the club and you don't need them. That means that instructors may be members or may be non-members. One way of staying friendly with the local FBO is to use their instructors at least part of the time.

Staying friendly with the FBO is a good thing. If they have a 172 with a G1000, maybe you should get an Archer with steam gauges. Offer something different - Then, you're not competing with them as much, merely offering an alternative.

MNDOT: Nope. Aside from likely having to register your plane with them, there isn't anything you need to involve them for.

LLC vs. Inc: The IRS still doesn't recognize LLCs, it appears. So to them, you'll be a partnership unless you become a corporation. (Happy to be corrected here by someone who knows better - And I say this because I'm setting up an LLC right now.) Every lawyer I've talked to says partnership = bad... But again, this is where a business lawyer who practices in Minnesota is a good person to talk to. Do what they say, not what we say!

Also, you'll likely want to set the club as a 501(c)(7) nonprofit. (c)(7) is for social groups and isn't a charity (that's c3) so "donations" aren't tax-deductible, but the corporation itself also isn't taxed if you stay within the limitations.



True, but it's also not that hard. Find yourself a couple of enthusiastic people who are into the idea, a lawyer, and a CPA and get 'er done.

Financing will be the hardest part. Talk to AOPA about this, as they may have some options. However, most banks don't know much about aircraft loans, and those that do probably don't want to lend money to a new entity without someone giving a personal guarantee. Personal guarantees suck.

Another option for financing is to set up a second company to give the loan to the club. I know of some clubs that operate this way - They get a better rate than they otherwise would, while their members and anyone else who wants to join in can get an investment opportunity that pays much better than most forms of savings and isn't as risky as many other investments.

Good luck, and please feel free to post more questions here!

Kent (President, Capitol City Flyers, Inc.)

AWESOME!

Thanks so much for the info.

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