Legal Implications of Jet Ownership

A private jet can be a significant asset for a business. Check out this post for more information why private jet ownership make perfect business sense. The availability of fast and secure transportation for a company’s key personnel is critical. Often this convenience saves on overall executive costs, by providing efficient services when they are critically needed.

Methods of Aircraft Charter Ownership

The following are several methods of aircraft charter ownership:

  • Common ownership structures are used to acquire a charter aircraft. The owner can be a private individual, company or trust.
  • Outright ownership is rare, since private jets are expensive to purchase and to keep maintained properly. Buying an aircraft in a company name may not be advised. Owning an aircraft has certain inherent risks associated with ownership and operation. This asset’s risks need to be separated from other company assets.
  • Liability incurred during a total loss of a jet can be held by an operator and not by a jet owner. Negligence exhibited by an operator may not be the responsibility of a company. This legal structure is an important part of aircraft ownership, if this is the type of purchase structure that your company selects. Pilots often structure their aircraft operations in this manner, in order to protect their assets from any operational liabilities.
  • Limited liability can be used as a method of asset protection. A limited liability company structure can be used for the special purpose of owning an aircraft. This is a form of ring-fencing of any liability attached to an aircraft. An aircraft accident will use a limited claim cap to protect a company, in the event of an aircraft accident.
  • A trust can be used as an ownership structure for an aircraft. A trust is an agreement between one person and another person. An aircraft is held in a trust and can be held by citizens from other jurisdictions. A trustee can sell or mortgage an aircraft that is held in a trust.
  • Group ownership is another option for jet ownership. One or two of the owners in a group will need to be chosen as trustees on an application. Members of a group can leave without having to register the aircraft again and incur any additional registration fees. A trustee will need to be chosen, and the powers given to this individual will need to be decided. Cost sharing will need to be determined for the group members.

Private Jet Charter Financing

Private jet charter financing involves two options, including the following:

  • Straight loan financing is one option, and leasing is a second method of financing an aircraft.
  • Straight loan financing means that a bank finances the purchase of an aircraft with a loan. The money is granted to a buyer, and the buyer purchases a jet with the loan proceeds. A buyer becomes a full legal owner, and the lender is granted security in the form of an aircraft mortgage. A loan default means that the bank will move in to take over its security. A bank will need to apply to the courts to repossess an aircraft and sell it to recoup any losses.
  • A leasing arrangement for an aircraft means that a bank buys an aircraft from a seller, and the bank leases the aircraft to a buyer. The buyer never becomes a legal owner of the aircraft. A bank can enforce its security by recovering possession of the aircraft with the lease agreement. An operating lease is the most common type of lease. Operating expenses are the responsibility of the lessee.

Taxation implications include paying ownership taxes for any aircraft that is owned outright. Leasing expenses for an aircraft can be used as tax deductions, during the years of operation or can be amortized over a number of years.