Renting out my sport plane?

Finally, a place for sport pilot instructors and/or wannabees to talk about instructing.

Moderator: drseti

User avatar
drseti
Posts: 5904
Joined: Sat Nov 28, 2009 6:42 pm
Location: Lock Haven PA
Contact:

Re: Renting out my sport plane?

Postby drseti » Thu Aug 02, 2018 8:06 pm

I guess that depends on the state. Under PA law, litigation against an LLC jeopardizes only that entity's assets.
The opinions posted are those of one CFI, and do not necessarily represent the FAA or its lawyers.
Prof H Paul Shuch
PhD CFII DPE LSRM-A/GL/WS/PPC iRMT
AvSport LLC, KLHV
fly@AvSport.org
AvSport.org
facebook.com/SportFlying
SportPilotExaminer.US

User avatar
ShawnM
Posts: 353
Joined: Sat Nov 11, 2017 9:59 pm
Location: Clearwater, FL / KZPH

Re: Renting out my sport plane?

Postby ShawnM » Thu Aug 02, 2018 8:34 pm

drseti wrote:.......And as far as my maintenance shop is concerned, it is part of the LLC, so the worst that can happen in the event of a lawsuit is that the plaintiffs might end up owning a flight school (which has limited market value without me to run it).


The flight school will also have limited market value with a smashed up airplane after the accident that started the lawsuit in the first place. :mrgreen:

User avatar
ShawnM
Posts: 353
Joined: Sat Nov 11, 2017 9:59 pm
Location: Clearwater, FL / KZPH

Re: Renting out my sport plane?

Postby ShawnM » Thu Aug 02, 2018 8:44 pm

drseti wrote:I guess that depends on the state. Under PA law, litigation against an LLC jeopardizes only that entity's assets.


My plane is in a Delaware LLC, here’s why: (as quoted from IncNow.com)

Unlike many other states, one key benefit of the Delaware LLC not available to corporations in any state is that the Delaware LLC also offers a second type of protection: the “reverse shield.” Choosing to form a Delaware LLC creates a two-way shield. Unlike the traditional shield, the reverse shield reciprocally protects creditors of the owner from controlling or liquidating the assets of the LLC. The Delaware LLC limits a creditor of an LLC’s member to a “charging order” being the creditor’s exclusive remedy at law. This limits a hostile creditor of a member to only a lien against the financial profits actually distributed to the debtor owner up until the lien is paid off without the right to vote, manage, or liquidate the LLC in the interim. Therefore, unlike in many other jurisdictions, a hostile creditor of a member cannot itself take over the ownership interest. The creditor of a member holding a charging order only receives an economic interest without voting rights.

One policy reason to support this result of additional limited liability protection under Delaware law is that the Delaware LLC Act clearly supports the maxim that owners should be able to “pick their partners,” because a hostile creditor would be an unwelcome LLC member and not part of the bargain the members agreed to when organizing the company. While some other states support this policy to a degree, Delaware even extends its charging order protection beyond multi-member LLCs to include single-member LLCs with no other partners. To many, this is astonishing that this protection also extends to LLCs with only one owner, provided it is formed in Delaware. This charging order remedy prevents even a single-member LLC owner’s hostile personal creditors from attempting to control or liquidate the LLC’s assets. Thus, the Delaware LLC provides the greatest protection by shielding personal creditors from either owning or controlling the LLC’s assets.

My plane is in a “single-member LLC” with a registered agent in Delaware.

TimTaylor
Posts: 1075
Joined: Tue Feb 21, 2017 7:17 pm

Re: Renting out my sport plane?

Postby TimTaylor » Thu Aug 02, 2018 8:54 pm

drseti wrote:I guess that depends on the state. Under PA law, litigation against an LLC jeopardizes only that entity's assets.

That's just not correct. In any state you can be held personally liable for negligence. A jury will decide.
Commercial Pilot Airplane Single & Multiengine Land; Instrument Airplane; Sport Endorsement Airplane Single Engine Sea; Flight Instructor Airplane Single And Multiengine; Ground Instructor Advanced Instrument

3Dreaming
Posts: 2421
Joined: Sun Jan 10, 2010 6:13 pm
Location: noble, IL USA

Re: Renting out my sport plane?

Postby 3Dreaming » Thu Aug 02, 2018 10:31 pm

Paul, even though your maintenance shop is covered by the LLC, it is you personally as a LSRM signing the maintenance records.

User avatar
drseti
Posts: 5904
Joined: Sat Nov 28, 2009 6:42 pm
Location: Lock Haven PA
Contact:

Re: Renting out my sport plane?

Postby drseti » Fri Aug 03, 2018 11:32 am

TimTaylor wrote: In any state you can be held personally liable for negligence. A jury will decide.


It's true that, in the US (land of opportunity for attorneys), anyone can sue anybody for anything, with or without merit. Most judges will dismiss frivolous cases, but not before the defendant has had to spend bug bux on an attorney of his or her own.

The good news is that plaintiffs' attorneys tend to take only cases that they consider winable, and only those against deep-pocket entities, so they can pocket 40% of the judgment collected. Which means small FBOs like mine are not particularly attractive targets.
The opinions posted are those of one CFI, and do not necessarily represent the FAA or its lawyers.
Prof H Paul Shuch
PhD CFII DPE LSRM-A/GL/WS/PPC iRMT
AvSport LLC, KLHV
fly@AvSport.org
AvSport.org
facebook.com/SportFlying
SportPilotExaminer.US

TimTaylor
Posts: 1075
Joined: Tue Feb 21, 2017 7:17 pm

Re: Renting out my sport plane?

Postby TimTaylor » Fri Aug 03, 2018 11:43 am

drseti wrote:
TimTaylor wrote: In any state you can be held personally liable for negligence. A jury will decide.


It's true that, in the US (land of opportunity for attorneys), anyone can sue anybody for anything, with or without merit. Most judges will dismiss frivolous cases, but not before the defendant has had to spend bug bux on an attorney of his or her own.

The good news is that plaintiffs' attorneys tend to take only cases that they consider winable, and only those against deep-pocket entities, so they can pocket 40% of the judgment collected. Which means small FBOs like mine are not particularly attractive targets.

The obvious risk in renting an airplane is some student or renter will crash and burn. Then, the widow and her lawyer will try to prove it's your fault for not teaching him something or not maintaining the airplane properly. That's the risk the OP needs to consider. They WILL come after you and all your assets and insurance.
Commercial Pilot Airplane Single & Multiengine Land; Instrument Airplane; Sport Endorsement Airplane Single Engine Sea; Flight Instructor Airplane Single And Multiengine; Ground Instructor Advanced Instrument

User avatar
Hambone
Posts: 183
Joined: Fri Jan 07, 2011 8:19 am
Location: Tucson, AZ

Re: Renting out my sport plane?

Postby Hambone » Sat Aug 04, 2018 3:33 pm

Thanks again for the info.

I'm now fairly certain that the risk massively outweighs the potential financial gains, not to mention the stress of a possible lawsuit.

TimTaylor
Posts: 1075
Joined: Tue Feb 21, 2017 7:17 pm

Re: Renting out my sport plane?

Postby TimTaylor » Sat Aug 04, 2018 4:43 pm

Something I've learned in my 70 years here is that low stress outweighs most everything else, at least for me. Of course, that doesn't mean zero stress, or I would never get out of bed.
Commercial Pilot Airplane Single & Multiengine Land; Instrument Airplane; Sport Endorsement Airplane Single Engine Sea; Flight Instructor Airplane Single And Multiengine; Ground Instructor Advanced Instrument

Warmi
Posts: 656
Joined: Sun Oct 16, 2016 5:35 pm
Location: Frankfort, IL

Re: Renting out my sport plane?

Postby Warmi » Sat Aug 04, 2018 5:58 pm

Hambone wrote:
...the risk massively outweighs the potential financial gains, not to mention the stress of a possible lawsuit.


Sounds very much like the first rule of aviation ....
Flying Sting S4 ( N184WA ) out of Illinois

User avatar
Hambone
Posts: 183
Joined: Fri Jan 07, 2011 8:19 am
Location: Tucson, AZ

Re: Renting out my sport plane?

Postby Hambone » Mon Aug 06, 2018 4:50 pm

Warmi wrote:
Hambone wrote:
...the risk massively outweighs the potential financial gains, not to mention the stress of a possible lawsuit.


Sounds very much like the first rule of aviation ....

Yep. Time for the CT to go!


Return to “Instructors' Corner”

Who is online

Users browsing this forum: No registered users and 4 guests