Sport Pilot Talk

After returning from Sebring, a local flying club representative wants to make an LSA recommendation to his board of directors. He likes the SportCruiser/PiperSport but has never flown in one. He called me yesterday to ask if I could give him a ride. I'm delighted to show off my plane, but want to give him an honest assessment. Any cautions I should highlight while praising the virtues?

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Dave

Good morning, Dave. Nice to see you on.

For any LSA, remind them that, though a Private Pilot or above can legally just hop in and fly, some transition training is strongly advised -- especially if the pilot has never before flown something with really light wing loading.

For any Rotax-powered LSA, there's the usual caution that not all A&P mechanics are qualified to maintain the engine (even though legally allowed to). Make sure they know to find somebody in the local area who's Rotax certified.

For the SportCruiser in particular, I'd warn them that the pitch sensitivity is greater than the roll sensitivity. Not a problem if their members are aware of it (and properly trained), but porpoising can be an issue for pilots not experienced in type.

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The opinions expressed in this post are those of one CFI, and do not necessarily represent the position of the FAA or its lawyers.
Prof. H. Paul Shuch, Ph.D., CFII, LSRM-A/GL/WS
AvSport of Lock Haven
http://AvSport.org fly@AvSport.org

Good morning Paul & Dave,

This thread would be a good place to reiterate my questions about forming a flying club with LSA aircraft. Basically I'd like to own a LSA wholely myself, not have a formal partnership, but have 2 or 3 other pilots use the aircraft for a monthly fee. What would be the simplest way to structure such an arrangement yet also be in compliance with regulations, insurance & liability issues, etc?

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Richard, Student Sport Pilot
Magazine Quality Photography and Imaging
http://www.agreatimage.com

Richard, if you don't want to consider fractional ownership, I believe the only way you can accomplish your goal is to form a flying club. There's a bit of information on the AOPA website about club formation and operation -- you'll have to use their search function to find it.

Good luck!

_________________
The opinions expressed in this post are those of one CFI, and do not necessarily represent the position of the FAA or its lawyers.
Prof. H. Paul Shuch, Ph.D., CFII, LSRM-A/GL/WS
AvSport of Lock Haven
http://AvSport.org fly@AvSport.org

Hello, Richard...and you too, Paul.

You are considering a Non-Equity Partnership arrangement. The term refers to the sharing of costs re: using one owner’s plane with one or more partners who hold no ownership interest in the a/c whatsoever. Here's one person's summary (from a recent Grumman owners' message list):

"I've done this many times in the past, and I contacted a local
aviation lawyer and AOPA Legal Services in advance to ask about doing it again. Bottom line: as long as you're only asking for a pro-rata
reimbursement of the expenses to cover the airplane used (including a
reasonable amount for engine and airframe time used), and you're not
making a "profit" (and assuming they're using it for recreation and
not any kind of commercial operation), the FAA doesn't give a crap. As
far as they're concerned, it's no different than if you loaned the
airplane to a buddy. As for your insurer, all you need to do is have that person added to your policy as a "named insured pilot". There may be additional expense for that, depending on the pilot's experience level. Suggest you contact AOPA Legal Services if you have any detailed questions."

This post was followed by affirming comments from a number of other message list members who've done something similar. And since LSA's are not permitted to be used for commercial purposes, it's "almost" as tho' the arrangement you are considering was intended for LSAs. <s>

So Robert, let's look at your specific statement of intent:
"Basically I'd like to own a LSA wholely myself, not have a formal partnership, but have 2 or 3 other pilots use the aircraft for a monthly fee."

I would suggest altering what you seek slightly, as a 'fee' suggests a fixed amount regardless of amount of use by a non-equity partner. As an alternative, would you be satisfied with an arrangement where 2 or 3 N/E partners would share equally in the 'fixed and hourly operational costs' of the a/c, with 'fuel replaced by each N/E partner as it is used'? That seems to fit the experiences of the folks commenting on this arrangement. And yes, if it were me in your shoes, I would pass this by the Technical Counselors at AOPA (which comes with AOPA membership) and a Legal Services rep (if you subscribe to that service). However, I think your preference to not have this structured in a formal way (e.g. 'N/E Partnership Agreement') is a mistake. There are many details that need to be defined and formally agreed to for a partnership (of any kind) to succeed long-term. Look at AOPA's co-ownership agreement and you'll see what I mean.

FYI: When I sought to create a new partnership, I found it very easy to locate other pilots in my area who wanted to be a partner in a co-ownership. I found it all but impossible to consummate the partnership when it got down to money. So don't underestimate the task of finding some 'real' partners. My suggestion, if you need the partners to make the plan 'work' financially, is to find the partners first and then jointly select the a/c. Good luck to you.

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Jack
RAF Florida State Liaison
Please visit www.theraf.org

Paul thank you. Here are the links that I found at AOPA:

Public Link:
http://www.aopa.org/letsgoflying/ready/time/clubs.html

Members Only Link:
http://www.aopa.org/members/pic/ac/flyi ... index.html

Jack..
Your post provided many answers to "red tape" issues that I did not find elsewhere.
Thank you!

I would probably opt to purchase the aircraft myself or under a LLC, but would choose a Non-Equity arrangement for other "users" of the aircraft for several reasons.
1) I want the control of being sole owner, and will accept the ultimate responsibility of that.
2) It's easier to find others to share the aircraft with if you are not asking for equity capital, or formal long-term binding contracts.
3) Simplicity... these are the rules, this is the deal, the users level of commitment is low, as long as everyone is happy then great! If anyone is for some reason not happy then it's easy to move on.

Calling it a flight club would probably not be accurate, as flight club generally implies other services (CFI on staff for training, social events, etc.).
It might be more appropriate to offer it as a "Non-Equity Share Arrangement". Insuring the aircraft declaring "shared use" and details of persons sharing.

Thoughts?

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Richard, Student Sport Pilot
Magazine Quality Photography and Imaging
http://www.agreatimage.com

So a LSA Flying Club or Non-Equity Share Arrangement is NOT permitted to make a profit under FAA LSA "non-commercial" use rules?

That's my understanding. The only two commercial (profit-making, whether actual or wishful thinking) activities specifically allowed for LSAs under the FARs are flight instruction and glider towing. Now, if you become a CFI, and offer instruction and rental, that's fine, and you can make a profit (good luck accomplishing that!) Otherwise, you have to intend to lose money, not merely accomplish same.

_________________
The opinions expressed in this post are those of one CFI, and do not necessarily represent the position of the FAA or its lawyers.
Prof. H. Paul Shuch, Ph.D., CFII, LSRM-A/GL/WS
AvSport of Lock Haven
http://AvSport.org fly@AvSport.org

Richard, the research I did indicated that any co-ownership arrangement (the term lawyers and AOPA prefer, over 'partnership') or N/E partnership arrangement can only cover the actual costs of owning and operating the a/c. For the intent you describe, either one would be acceptable from a legal standpoint and not run afoul of FAA rules. But to repeat, I'd encourage you to talk with a Tech Counselor at AOPA (who will mostly respond to your Q's from a regulatory standpoint) and utilize their Legal Services group to get the 'lawlerly' side of things (a mix of liability, regulatory and state law-related issues).

IMO using the term Flight Club clouds your intent and introduces issues that are superfluous to what you are trying to accomplish. I think it also extends your liability in some ways.

FWIW I think the reasons you offered just above for setting up a N/E partnership are very valid and also practical. In your shoes, what I would spend some time thinking about (and discussing with others who are doing something similar) is how you make your partners feel invested in the proper operation and care of the (i.e. 'your') a/c once they begin using it. To some extent (see AOPA's co-ownership agreement for good examples) you can build this into an agreement - e.g. restrictions on the minimum length and/or surface of any runway being used, how 'away from home base' repairs should be handled, etc. But we all know the abuse that a rental car sees and the 'sharing' design you are considering isn't much different from that scenario. One thing you have working for you is that most LSAs are pretty simple. But how do you make the N/E partner *want* to put in a fuel additive when filling with 100LL fuel, for example? Folks like Paul, who rents out his plane when its not being used for instruction, might also have some useful input on this issue.

"I would probably opt to purchase the aircraft myself or under a LLC..."
As you will find when researching ownership on AOPA's website, there are two schools of thought about LLC ownership. Laymen tend to think that, if LLC owned, then only the LLC assets are at risk. The lawyer will point out two things: First, the LLC can be successfully challenged as nothing more than a paper shield unless it really operates like an LLC. Since ownership may not 'fit' the LLC intent, it can be easily impeached...OR one is burdened to do things to suit the LLC definition that are otherwise unnecessary. And if impeached, this in turn makes the a/c owner look like s/he was just trying to escape liability rather than being a responsible a/c owner. Another common observation is that, unless the damage/injury caused by an incident is the direct result of the a/c owner's actions (e.g. no annual inspection having been conducted), the likely party that will successfully be held liable is the PIC. And if you're the PIC involved in an incident, the existence of an LLC for ownership purposes isn't going to help you. This is another area where some thoughtful research is warranted, and I'd trust legal advice from someone who's familiar with tort law and the state where the a/c will be principally flown far more than posters (like me) on forums. <s>

_________________
Jack
RAF Florida State Liaison
Please visit www.theraf.org

In my case, I only rent to folks I have personally trained (either as primary students, or if already licensed, in my three day transition course). And, I have all renters (and students, for that matter) sign a detailed rental agreement, which you can see at http://avsport.org/docs/rental.pdf, as well as a Liability Waiver and Hold-Harmless Agreement: http://avsport.org/docs/waiver.pdf. Bear in mind that, in the event of an accident, there will be lawsuits. These agreements may or may not stand up in court, but they may serve to demonstrate intent, and informed consent.

_________________
The opinions expressed in this post are those of one CFI, and do not necessarily represent the position of the FAA or its lawyers.
Prof. H. Paul Shuch, Ph.D., CFII, LSRM-A/GL/WS
AvSport of Lock Haven
http://AvSport.org fly@AvSport.org

Paul, I think you are taking things a little to far. As a dealer or individual I can sell a LSA for a profit. I can charge to put the airplane on static display. There are no restrictions to non flying uses of the aircraft. As for the flying club if the person flying the airplane does not have a stake in the airplane then he would be paying to rent it and you would be OK, even if you charge a monthly membership fee. The bigest problem you will have to sort out is insurance, and what kind of rate you will have to pay.

Well, yes, Tom, of course. What I should have said is:



(emphasis added.)



I'm pretty sure you'd need a commercial insurance policy to rent out any plane (LSA or otherwise) for profit. I doubt that a standard owner's policy, stating uses as "business and personal transportation," would cut it. And my experience with insurance companies is that to get a commercial policy, you have to be able to show that you're operating as some sort of a business entity. A flying club might possibly work for this purpose, if it's properly set up. There are also IRS implications, of course -- but I'm not an accountant, so I won't speculate on those.

_________________
The opinions expressed in this post are those of one CFI, and do not necessarily represent the position of the FAA or its lawyers.
Prof. H. Paul Shuch, Ph.D., CFII, LSRM-A/GL/WS
AvSport of Lock Haven
http://AvSport.org fly@AvSport.org

If you go back to the original post I quoted you said the LSA flying club or non-equity share aggreement couldn't make a profit. I see no reason it couldn't make a profit because of the regs. The flying club making a profit and how the airplane is used are two totally different things.

Actually, that statement was in Jack's reposting of a post from the Grumman list:



It's possible the FAA doesn't give a crap even if you are making a profit. But the IRS and the insurance companies surely do.

_________________
The opinions expressed in this post are those of one CFI, and do not necessarily represent the position of the FAA or its lawyers.
Prof. H. Paul Shuch, Ph.D., CFII, LSRM-A/GL/WS
AvSport of Lock Haven
http://AvSport.org fly@AvSport.org