Very Light Jet Magazine

There are important legal considerations for the individual VLJ owner; fractional share owner; VLJ fleet owner; and the VLJ block-hour card owner. We are not in the business of law at Very Light Jet Magazine so we enlisted the services of J. Christopher Robbins, Esq., senior partner of Robbins Law Firm, P.A., to guide us through the maze. Part I will deal with some of the legal considerations for the individual VLJ owner.

Chris is a lawyer, a private pilot, an NBAA member, and an aircraft owner. He serves as counsel to many companies in the aviation sector, including air charter companies, aircraft brokers, FBOs, corporate flight departments, and aircraft manufacturers. In addition to handling transactions and legal compliance, Chris' firm has defended air-crash litigation. Chris is also a published author and he frequently lectures on aviation law and entrepreneurship.

VLJM: Chris, tell us about the legal structure of VLJ ownership as it applies to the Individual VLJ owner. Should the jet be titled to a corporation?
CHRIS ROBBINS: Regrettably, there is no easy answer to the question of how one should structure the ownership of a new VLJ. Thanks to conflicting government regulations and a policy battle between the FAA and the IRS, this remains a touchy subject for many aircraft owners.

When confronted with this issue, most corporate attorneys will have a knee-jerk reaction and advise you to title an aircraft in the name of a single-asset or "pass-through" entity. That is a company that will own the aircraft and likely nothing else, a strategy to minimize your exposure in the event of a loss. This corporation or LLC, they would further urge, will then provide the aircraft to you or your core business as needed.

And your lawyer and accountant will probably further advise you to run the new aircraft-holding company business as if it were an earnest for-profit venture, so that you may satisfy current IRS regulations that stand between you and the fruits of depreciation. This is incomplete advice and a trap for the unwary.

As it turns out, government, like turbojet aircraft, sometimes follows Sir Isaac Newton's Third Law of Motion. For every force there is an equal and opposite force. In this case, the force of the IRS is opposed by that exerted by the FAA.

In stark contrast to the IRS regulations are tough FAA rules. Under these rules, a corporation, LLC, or other entity cannot operate an aircraft for hire unless it first obtains a commercial operating certificate under parts 121 or 135.

At first blush, you would not be out of line to wonder how you are providing aircraft "for hire" when you are piloting or riding in your own jet. Indeed, the regulations at issue once focused only on bona fide commercial operators like airlines and air taxi services.