It is often assumed that there is one best way to share ownership of a business jet, but there are several structure options each of which should be evaluated when considering shared ownership.
Joint Ownership
The FAA permits an aircraft to be owned and operated pursuant to a “joint ownership agreement,” provided that certain requirements are met. The aircraft must be a large airplane, a turbojet-powered multiengine airplane, or the owners must make use of the NBAA Small Aircraft Exemption. The owners of the aircraft must each be listed on the aircraft registration, meet U.S. citizenship requirements, be an entity (not an individual), and have a major enterprise unrelated to the ownership and operation of the aircraft. Under a joint ownership structure one of the owners can serve as the managing joint owner, employ the crew, and bill the other joint owners for their share of expenses.
Registered Co-Ownership
Although not specifically defined in the Federal Aviation Regulations, the FAA does permit a group of individuals and/or entities, each of which meet the U.S. citizenship requirements, to co-own an aircraft. This structure option provides benefits similar to joint ownership, in that each owner directly owns their interest in the aircraft and is listed on the aircraft registration. It is also available to individuals and entities that are not eligible to own an interest under a joint ownership model (provided each owner has a compliant operational structure).
However, the concept of using a managing joint owner is not available in a co-ownership structure, so additional planning is necessary to address the source of management services.
Multiple Members in an LLC that Owns the Aircraft
Prospective owners of an aircraft can form an entity that will own the aircraft, and list each owner as a member or shareholder of that entity. In this structure the newly created entity is the only owner listed on the aircraft registration, and typically the newly created entity will need to dry lease the aircraft to each member or shareholder in order to have a compliant operational structure.
Issues to Consider to Share Ownership of a Business Jet
When selecting one of the available structure options there are many issues to consider, with the primary issues being:
- Can the prospective owners meet the FAA requirements for the selected structure option?
- Does the selected structure option alight with the proposed business arrangement?
- Does the selected structure option alight with the tax goals of each owner?
Sharing ownership of an aircraft can be a great option to offset costs, especially for underutilized aircraft. Just keep in mind that there is no one-size-fits-all model, and advanced planning is critical to ensuring the best outcome for all parties.
Please contact Jetstream Aviation Law for legal assistance with the structure of the ownership and operation of your aircraft.
Lori N. McGee is a partner with the law firm of Jetstream Aviation Law and counsels clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.
