Purchase of an experimental aircraft

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GSXR69

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GSXR69
Hi All,

I am a low time (140hrs) pilot looking to buy a Velocity that is on consignment at the Velocity factory. This is the first time I will own an airplane, A few questions for the community:
1. I know I am not allowed to do my own annual but am I allowed to do any modifications / repairs down the road?
2. I live in California, what is the best way to register this from a Tax perspective? LLC in Delaware/montana or other?
3. The factory did a fresh annual on the plane, should I still have an AMP look at it? Any builders / owners in florida with recommendations?
4. Any other suggestions / recommendations for me.
 
GSXR69 said:
Hi All,

I am a low time (140hrs) pilot looking to buy a Velocity that is on consignment at the Velocity factory. This is the first time I will own an airplane, A few questions for the community:
1. I know I am not allowed to do my own annual but am I allowed to do any modifications / repairs down the road?
2. I live in California, what is the best way to register this from a Tax perspective? LLC in Delaware/montana or other?
3. The factory did a fresh annual on the plane, should I still have an AMP look at it? Any builders / owners in florida with recommendations?
4. Any other suggestions / recommendations for me.
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Congrats!
1. Yes
2. Dunno. if no one chimes in, best to ask someone familiar with California tax law.
3. Couldn‘t hurt, but there are Velocity owners here POA that will tell you the best option. @donjohnston @Velocity173
4. Take advantage of the transition training offered by Velocity and then fly the heck out of it! Also try and make the pilgrimage to Osh if you can at some point.
 
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You can do your own repairs or modifications. However, if a modification rises to the level of a "major change" (one which would have an "appreciable effect on the weight, balance, structural strength, reliability, operational characteristics, or other characteristics affecting the airworthiness of the product"), you will have to notify the FSDO and put the plane back in the limited area phase 1 test for a period of time (usually 5 hours). The precise requirement varies depending on the operating limitations that form a part of the experimental airworthiness certificate.

I would hope that an annual condition inspection by the factory would be thorough and adequate. But you will want to develop a relationship with a local A&P who is familiar with the fiberglass construction of the Velocity (many are not). Also contact the Velocity Owners Association.
 
If the plane resides in California, it will be subject to California/county property tax and use tax.
 
Always liked the velocity aircraft,good luck.
 
1) You can do anything you want other that the annual condition inspection. That requires and A&P (IA not required).
2) Out of state LLC will gain you nothing other than more paperwork/cost.
3) If the factory did the annual, that would be good enough for me. When they do one for a plane that's for sale, they are usually very vigilant. Do you have a local A&P that will do the annual? If not, look into that.
4) Get an insurance quote BEFORE you commit. If it's an RG, you may be in for a surprise. Even if it's a XL-FG, you may be in for a surprise.
 
Thank you for all the information. Few follow up questions:
2.1. Any recommendations for insurance companies?
2.2. I don't plan to use this for any commercial use, lease backs or a partnership. Does a LLC make sense from a liability standpoint?
2.3. When I buy the airplane how long do I have before it needs to be registered / taxes paid?
2.4. Does the airplane get registered with the FAA or my local state?

Thanks in advance and appreciate everyone's time
 
GSXR69 said:
Thank you for all the information. Few follow up questions:
2.1. Any recommendations for insurance companies?
2.2. I don't plan to use this for any commercial use, lease backs or a partnership. Does a LLC make sense from a liability standpoint?
2.3. When I buy the airplane how long do I have before it needs to be registered / taxes paid?
2.4. Does the airplane get registered with the FAA or my local state?

Thanks in advance and appreciate everyone's time
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2.1 There's been a recent industry shakeup with 2 brokers (AIR and Falcon) being recently acquired by Acrisure. A couple of other potential options are Gallagher Aviation (popular in the Van's RV community) and AVEMCO. Most likely it won't be cheap no matter who you go with since you're low time and no IR, although anecdotally age seems to be the primary factor vs experience as far as cost goes. However with one exception: if it's the retract version you're' looking at, you might be uninsurable with no retract time.
2.2 I'm no expert, but I'm of the opinion that an LLC really won't do much for you for liability protection if push comes to shove
2.3 Dunno, but you should submit the registration application AC Form 8050-1 to the FAA immediately along with the bill of sale AC Form 8050-2. The signed registration application acts as your temp registration until the application is processed. Part47 governs registration requirements. I'm sure Velocity can help you navigate the paperwork. No idea on taxes as that's a locality issue.
2.4 Maybe both. With the FAA for sure and California may require it as well (some States do, some don't).
 
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GSXR69 said:
2.2. I don't plan to use this for any commercial use, lease backs or a partnership. Does a LLC make sense from a liability standpoint?
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What kind of liability? Yours if you cause an accident? No.

LLC 101: Corporations and limited liability companies do not shield anyone from their own actions that cause damage to others. Not you. Not the FedEx driver who plows into a schoolyard. They are not designed to do that. They are designed so that those who choose to do business with the company can only look to the company when the contract goes bad.

On the rest? Sounds like a consult with a professional is in order.
 
The insurance broker that many Velocity owners use is Lima Bravo Aviation Insurance. Lee Blankenship knows about getting Velocity's insured.

As previously stated, other than spending money for no good reason, an LLC offers no benefits to private aircraft operation... Unless you don't want someone to get your home address from the N-number. When I had my 182 on leaseback I had in a Delaware S-Corp. It would have taken a lot of work and time for someone to get my address from the N-number. And then it would have been a PMB address at that. So I guess that is a benefit to an LLC. :dunno:
 
Am I wrong about this? I am no lawyer......
I thought one reason to do an LLC is in the scenario
you lend the plane to someone..a friend takes it for a flight
or say you get someone to ferry it for you.

they do some boneheaded rookie pilot stuff and cause damage...or even if they do everything right but something fails and say they take out a bunch of crops putting it down on some farmer's field...
a) the victims, if the plane is registered to you personally, can go after your friend but also after you...your house, your other assets.
b) but if the plane is registered to an LLC, then the victims can go after the pilot and after the LLC's insurance (or any other assets in that LLC.... but not after your personal assets not registered to that LLC
 
Brad W said:
Am I wrong about this? I am no lawyer......
I thought one reason to do an LLC is in the scenario
you lend the plane to someone..a friend takes it for a flight
or say you get someone to ferry it for you.

they do some boneheaded rookie pilot stuff and cause damage...or even if they do everything right but something fails and say they take out a bunch of crops putting it down on some farmer's field...
a) the victims, if the plane is registered to you personally, can go after your friend but also after you...your house, your other assets.
b) but if the plane is registered to an LLC, then the victims can go after the pilot and after the LLC's insurance (or any other assets in that LLC.... but not after your personal assets not registered to that LLC
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Maybe, but even if it were, I don't think that's sufficient enough reason for the OP to pursue an LLC. I mean, I've never even remotely entertained the thought of loaning my plane out and if I did the first thing on my list would be having that person named on my insurance. My guess is the OP would be reluctant to loan their plane out as well.
 
tsts4 said:
Maybe, but even if it were, I don't think that's sufficient enough reason for the OP to pursue an LLC. I mean, I've never even remotely entertained the thought of loaning my plane out and if I did the first thing on my list would be having that person named on my insurance. My guess is the OP would be reluctant to loan their plane out as well.
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yeah, I suppose most folks ...myself included...would not be inclined to "loan it out".... but I can imagine scenarios where it might happen. Really close friends or relatives, unusual circumstances, ferry flights, maintenance test flights maybe...or even a maintenance taxi operation.
 
Brad W said:
Am I wrong about this? I am no lawyer......
I thought one reason to do an LLC is in the scenario
you lend the plane to someone..a friend takes it for a flight
or say you get someone to ferry it for you.

they do some boneheaded rookie pilot stuff and cause damage...or even if they do everything right but something fails and say they take out a bunch of crops putting it down on some farmer's field...
a) the victims, if the plane is registered to you personally, can go after your friend but also after you...your house, your other assets.
b) but if the plane is registered to an LLC, then the victims can go after the pilot and after the LLC's insurance (or any other assets in that LLC.... but not after your personal assets not registered to that LLC
Click to expand...
It is relatively easy for an attorney to pierce the protection that most people think a corporate veil provides.
 
donjohnston said:
It is relatively easy for an attorney to pierce the protection that most people think a corporate veil provides.
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Especially when it's a single owner LLC that was obviously set up for that sole purpose.
 
The minor protection that an LLC provides is to dissuade someone not knowledgeable about such things from initiating a lawsuit. Who knows if this ever happens.
"ooo they are a Limited Liability Corporation, I must not try to sue them - no hope there"
 
Perfect, this answers my questions. I called a few accounts and lawyers and came to the same conclusion that a LLC does not make any sense in my scenario. Thanks!
 
As I understand it, the most compelling reason to form an LLC is so that you can take on (or remove) different partners or even sell the entire LLC without having to pay sales/use tax (again).
You're selling a business entity, not an airplane.

I'm not a tax attorney, nor have I stayed in a Holiday Inn
 
aftCG said:
As I understand it, the most compelling reason to form an LLC is so that you can take on (or remove) different partners or even sell the entire LLC without having to pay sales/use tax (again).
You're selling a business entity, not an airplane.

I'm not a tax attorney, nor have I stayed in a Holiday Inn
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Ding ding ding. That’s a winner.
 
Thank you, The good news is the seller has it in a LLC, Will check with him to see if he is willing to sell that. Any recommendations on a person/company that can help with the transaction?
 
GSXR69 said:
I live in California, what is the best way to register this from a Tax perspective? LLC in Delaware/montana or other?
Click to expand...

Just an FYI regarding having a LLC. You're going to be paying $800 per year for the privilege of living in California.
 
The insurance on fiberglass experimental was high enough to make me look at other options. Great airplanes but you may want to check with insurance given your TT.
 
If you're interested in doing any of your own maintenance, you might consider joining your local EAA chapter. As well as being able to give you advice about that stuff, they might have valuable experience of buying experimental aircraft.
 
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