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Aircraft co-ownership offers flexibility in reducing costs amid economic challenges

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Aircraft co-ownership offers flexibility in reducing costs amid economic challenges
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Owners and potential aircraft buyers are increasingly interested in sharing ownership of an aircraft with at least one other person. This approach allows them to free up capital, reduce ownership costs, and share the risk of depreciation.

Before embarking on shared ownership, parties should agree on a suitable aircraft that meets their needs and ensure mutual trust. They must also model the economics individually and collectively to avoid surprises regarding the true cost of ownership.

Key issues such as tax planning and liability limitation should be addressed early, often by forming a limited liability company (LLC). Compliance with Federal Aviation Regulations (FARs) is essential, including confirming adequate insurance coverage.

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There are two basic arrangements for multiple-owner deals: co-ownership and joint ownership. Co-ownership involves buying and sharing responsibility for an aircraft, usually through an LLC. However, this structure cannot operate the aircraft without violating FAR rules unless it obtains specific certifications.

Joint ownership provides a limited exception under FAR Part 91, allowing one owner to provide crew services to others. This arrangement requires registering undivided interests with the FAA and entering into agreements specifying cost-sharing details.

Written agreements are crucial in both co-ownership and joint ownership structures to govern relationships and terms of sharing. These agreements cover budgeting, scheduling, management, leasing options, cost allocation, indemnification, sales processes, and conflict resolution.

David G. Mayer notes that while these structures can be complex due to regulatory requirements, they offer benefits like reduced costs and separate tax planning opportunities. In today's economic climate, shared ownership may appeal to new or experienced owners who might not pursue full ownership alone.

The information provided by Mayer is not legal advice but reflects his personal analysis as part of AIN Media Group's blog content.

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