pilot716 Posted January 22, 2011 Report Posted January 22, 2011 So it looks like its a go for me and a co-owner to buy a Mooney M20J, so in a nutshell, what is the best way to set this up? LLC? etc..what about bank accounts and paying for fixed and monthly costs? any other co-owners out there with suggestions to help start this up? thanks for the help. Quote
flyboy0681 Posted January 22, 2011 Report Posted January 22, 2011 I bought into an existing partnership three months ago with some great guys and can probably answer all of your questions. First, it's important that the plane be incorporated. There are several ways to do this but we have an LLC. Don't skimp on this as it serves to protect you from the unthinkable. If a plane is owned by a corporation, you can't be held personally liable for damages if someone else has a mishap - or worse. This is because shareholders of a corporation can't be sued, only the person operating the plane at the time. We have a bank account setup for the corporation and all expenses are paid for through it. The account is built up using reserve funds each month. We charge ourselves a fix hourly rate including fuel and anything left over is put into the account as a maintenance reserve. I would also add that you go for the bucks and sit down with an aviation lawyer. When I bought in I scheduled two hours with a local guy (the AOPA paid for the first hour as part of membership) and he really opened my eyes on a lot of issues that I didn't think of. Fixed monthly costs are equally divided among all partners and are invoiced monthly along with our tach time. It's important to buy a logbook for the plane and to fill it in with each flight otherwise you and your partner will be bickering over how many hours each flew that month. Finding a good partner is critical. In addition to fixed, variable and "surprise" costs, you'll need to agree on how maintenance and upgrades will be dealt with. Scheduling also needs to be discussed as well as finding an online scheduling site. There are a whole lot more issues to deal with so this is only a primer. Feel free to ask more questions. Quote
highplains Posted January 22, 2011 Report Posted January 22, 2011 Flyboy, It is not my intention to nitpick, so please take no offense. An LLC is NOT a corporation. Taxation and the structure of each are quite different, and of course vary from state to state. That said, an LLC is an excellent way to jointly own assets, and be provided relief from liability. I am not an accountant, nor an attorney. JV Quote
flyboy0681 Posted January 22, 2011 Report Posted January 22, 2011 No offense taken. All partners of our Mooney are members of the LLC and as such are personally protected with the possible exception of the funds used to purchase the actual membership. A simple Google search will render many articles but here's one from the AOPA. http://www.aopa.org/members/pic/answers/2010/1005answers.html Quote
peter Posted January 22, 2011 Report Posted January 22, 2011 My partner and I own the aircraft as co-owners outside an LLC or corp. When we consulted with our attorney when getting our operating agreement drafted (which I'm happy to share - PM me), we learned that the holding the aircraft in a separate entity *might* result in some liability protection, but probably not really. Any smart lawyer will sue the other co-owner for their role as the aircraft operator, and pull you into a lawsuit that way. For example, if I have an accident, my partner will be sued because of his role as the aircraft operator, making him jointly responsible with me for preserving the airworthiness of the aircraft. The smart plaintiff's lawyer will attribute the accident to negligence on the part of the aircraft operator *and* the pilot who was flying at the time of an accident. The best way to protect yourselves is with good insurance, and good mutual indemnification language in your aircraft operating agreement. I am not a lawyer, and this is not legal advice, just my personal experience. Quote
flyboy0681 Posted January 22, 2011 Report Posted January 22, 2011 Peter hit the nail on the head when he said: The smart plaintiff's lawyer will attribute the accident to negligence on the part of the aircraft operator *and* the pilot who was flying at the time of an accident. Once that happens, all bets are off and anything can happen. Quote
highplains Posted January 22, 2011 Report Posted January 22, 2011 Agreed. For a clever attorney, there is always a way to lay blame others. The solution is as follows: Do NOT share your airplane with anyone else! For many of us (hand raised) this is neither practical nor is it financially possible. I remember a few years back, there was a guy who piled up his new Cirrus in night MVFR. Somehow, it was the fault of Cirrus the guy was flying in MVFR conditions, at night, no instrument rating. I may have the details not exactly right on this memory, but the point is made I think. JV Quote
flyboy0681 Posted January 22, 2011 Report Posted January 22, 2011 Don't get me started, the American landscape is littered with judgments against 100% innocent people. Quote
laytonl Posted January 22, 2011 Report Posted January 22, 2011 I've been in a M20J partnership for about 4 years. We are set up as co-owners and didn't do the corporation route for the reasons mentioned above. We used AOPA's standard co-ownership agreement as a starting point. We charge ourselves a fixed monthly amount, plus a variable amount for hours flown. We started with a somewhat rigid scheduling calendar and quickly moved to just emailing plans for the next few weeks or a quick email saying we want to use the airplane tomorrow, etc. Our arrangement has worked very well, with practically no conflict. The other owner handles the financials and I'm the maintenance partner. Lee Quote
peter Posted January 22, 2011 Report Posted January 22, 2011 Quote: laytonl I've been in a M20J partnership for about 4 years. We are set up as co-owners and didn't do the corporation route for the reasons mentioned above. We used AOPA's standard co-ownership agreement as a starting point. We charge ourselves a fixed monthly amount, plus a variable amount for hours flown. We started with a somewhat rigid scheduling calendar and quickly moved to just emailing plans for the next few weeks or a quick email saying we want to use the airplane tomorrow, etc. Our arrangement has worked very well, with practically no conflict. The other owner handles the financials and I'm the maintenance partner. Lee Quote
N6784N Posted January 22, 2011 Report Posted January 22, 2011 I like the idea of partnership except 1 problem. What if a partner flew the airplane 200 hours and the other flew say 50 in a given year. ofcourse the 200 hour pilot is putting more wear on the plane so how is that split to make it fair for both and nobody feels cheated? Quote
peter Posted January 22, 2011 Report Posted January 22, 2011 Quote: N6784N I like the idea of partnership except 1 problem. What if a partner flew the airplane 200 hours and the other flew say 50 in a given year. ofcourse the 200 hour pilot is putting more wear on the plane so how is that split to make it fair for both and nobody feels cheated? Quote
flyboy0681 Posted January 23, 2011 Report Posted January 23, 2011 Our agreement is the same as Peter's. As I stated earlier, we all pay a fixed hourly rate based on tach time. Although as owners we would like to think we just have to pay the fixed expenses each month and be off the hook except for direct costs like gas, the reality is that reserves must be built up or the unexpected as well as expected. Quote
pilot716 Posted January 23, 2011 Author Report Posted January 23, 2011 Peter thanks for the co-owner agreement, we will have our atty look it over, it seems the same as AOPA. great advice guys, we hope to be moving forward and look at an M20J next week in FL. I am hopeful to be a Mooniac soon! Quote
flyboy0681 Posted January 23, 2011 Report Posted January 23, 2011 Pilot716, if you are looking at a plane in South Florida and need an A&P for a pre-buy, let me know. Quote
pilot716 Posted January 23, 2011 Author Report Posted January 23, 2011 flyboy thanks, will PM you. Quote
KLRDMD Posted January 23, 2011 Report Posted January 23, 2011 Quote: N6784N I like the idea of partnership except 1 problem. What if a partner flew the airplane 200 hours and the other flew say 50 in a given year. ofcourse the 200 hour pilot is putting more wear on the plane so how is that split to make it fair for both and nobody feels cheated? Quote
pilot716 Posted January 23, 2011 Author Report Posted January 23, 2011 Just curious on the start-up, If you charge an hourly tach rate, and lets say $50 of the X-amount hourly fee goes to fuel. if I fill up the tanks of 60gal at $5/gal thats $300. if I fly 2 hours at 10gal/hr. I would be paying $100 into the "fund". the bill comes in.....do you use the other portion of the hourly funds to cover it or do you start off with $$ in the account? silly question? Quote
74657 Posted January 24, 2011 Report Posted January 24, 2011 Quote: pilot716 Just curious on the start-up, If you charge an hourly tach rate, and lets say $50 of the X-amount hourly fee goes to fuel. if I fill up the tanks of 60gal at $5/gal thats $300. if I fly 2 hours at 10gal/hr. I would be paying $100 into the "fund". the bill comes in.....do you use the other portion of the hourly funds to cover it or do you start off with $$ in the account? silly question? Quote
flyboy0681 Posted January 24, 2011 Report Posted January 24, 2011 From my experience, it all comes out in the wash. If you fill up but don't fly enough that month to recoup the amount you laid out for the fuel, a credit will be carried over to your next months invoice. Quote
N33GG Posted January 24, 2011 Report Posted January 24, 2011 Sometimes partnerships help get you where you want to go...I get that. Sometimes it is necessary. But, just a comment regarding a previous co-ownership I was involved with... At first, it looked like a great deal for both of us on paper; shared expenses, split expenses, and shared use of a great plane. Problem in our case was, that neither of us needed/wanted the plane that often, but it was amazing how we seemed to only want the plane on the exact same day/weekend/whatever. Plane could sit in the hanger for a few weeks unused, but when I wanted it, so did the other party. Not my fault nor his, it just worked out that way. It was very frustrating. Just food for thought... Quote
rbridges Posted January 24, 2011 Report Posted January 24, 2011 Quote: N6719N Sometimes partnerships help get you where you want to go...I get that. Sometimes it is necessary. But, just a comment regarding a previous co-ownership I was involved with... At first, it looked like a great deal for both of us on paper; shared expenses, split expenses, and shared use of a great plane. Problem in our case was, that neither of us needed/wanted the plane that often, but it was amazing how we seemed to only want the plane on the exact same day/weekend/whatever. Plane could sit in the hanger for a few weeks unused, but when I wanted it, so did the other party. Not my fault nor his, it just worked out that way. It was very frustrating. Just food for thought... Quote
flyboy0681 Posted January 24, 2011 Report Posted January 24, 2011 I'm one of 3 active pilots in my partnership and don't have an IR yet, so I fit into the same category. However, scheduling has not been an issue at all so I guess it's just the luck of the draw. The weather where you live also plays a huge factor. Quote
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