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Buying a private airplane is the pinnacle of your success. It should be easy and enjoyable, but it’s not. By the time you have built a team that usually includes an aircraft broker, aircraft insurance agent, aviation lawyer, aviation banker, aircraft manager, and crew, the process has already become a chore. Then you factor in other miscellaneous service providers like escrow agents, bookkeepers, accountants, owner trustees, hangar operators, etc. and the acquisition inevitably becomes more work than one would expect or want. Once you throw in the ownership and use structuring to accommodate for the Federal Aviation Regulations, federal and state tax considerations, risk management, and other legal issues the acquisition process and ownership experience becomes innately complicated.
One Stop Aviation solves this problem. We take the role of a general contractor for purchasing your plane. We assemble and retain a customized team of vendors drawing from our strategic relationships developed over 20 years and a deep connection to the industry. We quarterback the acquisition process and make acquiring your plane the way it should seem – easy. As part of our process, we provide a support network that manages your vendors, giving you a single point of contact. Additionally, we can employ your pilots (and other crew members) through our sister company, One Stop Pilots LLC, which can help resolve FAA and tax issues – not to mention keeping them off your payroll. When it comes time to sell your plane and purchase another, we will facilitate the process as well. Whether you already own an aircraft or are ready to buy a plane, we provide a one stop solution for your needs. |
All the Tools You Need to Succeed
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Why is buying a private aircraft so complicated?
And How Complicated Can it Really Be? |
This is longer than what we would usually put on our website, but by the time you are done reading it, you’ll likely see that itself makes the point. There is way more to buying a private aircraft than you probably think. The dirty little secret of our industry is buying a private aircraft is exhausting, complicated, and frankly a real pain. We’ve been asked “why is buying a private aircraft so complicated?” more times than we can count. It is usually preceded by something to the effect of, “I have bought entire companies, and buying this aircraft is as difficult.” This conversation had a lot to do with why we started OSA.
To start at the beginning, if you’re making smart choices, you will be assembling a team of vendors with aviation experience. The quality of the people in our field ranges from great to borderline criminal, and it can be very difficult to tell them apart. Some of the more eloquent people with the fanciest websites are the worst, and some of the best people aren’t fancy at all.
Drawing from our deep roots in the industry, we hire the team that we would want helping us if we were the buyer, which is customized for each type of buyer. Hiring an aircraft broker is a good example of this. There are many terrific aircraft brokers, and they look just like awful brokers. They both make their money building a relationship with someone sophisticated like you, so odds are they won’t come off as sketchy. Unfortunately, you won’t know the difference until something goes wrong.
Along with that, there is the tax and legal structuring, where you learn that the intersection among federal taxes, state taxes, and Federal Aviation Regulations makes structuring aircraft ownership and usage legitimately difficult and sometimes confusing. This makes the most tax efficient answer that complies with the FARs counterintuitive. For example, if you have an LLC that owns the plane and employs the pilots, you already have very big problem. To get this right (or fix it), you need to determine who will employ the pilots. Many aircraft buyers don’t want their pilots on their corporate or personal payroll for several reasons. On the other hand, most pilots want benefits. With the pilot shortage getting increasingly worse, this conversation is getting more difficult for aircraft owners.
By the time your tax and legal structuring is done, in most states you will have an LLC buy the plane and lease it back to its sole member. You will then make monthly sales tax payments on the lease payments in lieu of paying sales tax on the purchase price of the aircraft, which will reduce and defer your sales tax cost. This leaves you doing unexpected bookkeeping and tax filings. Few people are well equipped to take this on and fewer desire to have this done in-house.
Next, as you work through the legal agreements, you will find many “terms of art” – phrases that sound harmless but have very specific meanings in airplane deals. You need someone who knows the language.
More than in most industries, there are also many practices that are “customary in the industry.” The catch is that you hear something is custom in the industry all the time, but sometimes it is true and sometimes it isn’t. You need someone who knows the difference. Unfortunately, there are more traps for the unwary than most people would ever expect.
As if all this wasn’t enough, aircraft insurance is your first and last line of defense, and there are some critical differences between aviation insurance and general insurance that are easily missed by someone who doesn’t specialize in aviation - or even someone who does but doesn't understand your ownership and usage structure. Also, aircraft financing is often different than other financing. Additionally, choosing the wrong aircraft management company can cost you a fortune. And for good measure, you will either need an aviation accountant or someone to educate your accountant on aviation tax issues.
All of this doesn’t even get into trying to find the best technical representative to support the pre-purchase inspection or a qualified aviation escrow agent. You may also need specialty service providers like owner trustees, California State tax exemption consultants, attorneys for hangar purchases, etc.
Some clients try to handle the process themselves at first. Then they remember that they have jobs and/or better things to do once they realize this is eating up way too much time and they are in precariously unfamiliar territory, so they have their pilot, CFO, COO, etc. oversee all of this. Of course, these people have the best of intentions, but are frankly often set up to fail given the scope of the work that needs to be done and knowledge base required to do it well.
Others trust a usually well-meaning broker to handle everything; or they pay a lawyer to do it. There are a few consultants who coordinate different combinations of these services, and there are a choice few law firms who do it – much less who do it well.
Or you can hire One Stop Aviation and rest easy knowing that experts in the industry are handling the whole deal for you.
To start at the beginning, if you’re making smart choices, you will be assembling a team of vendors with aviation experience. The quality of the people in our field ranges from great to borderline criminal, and it can be very difficult to tell them apart. Some of the more eloquent people with the fanciest websites are the worst, and some of the best people aren’t fancy at all.
Drawing from our deep roots in the industry, we hire the team that we would want helping us if we were the buyer, which is customized for each type of buyer. Hiring an aircraft broker is a good example of this. There are many terrific aircraft brokers, and they look just like awful brokers. They both make their money building a relationship with someone sophisticated like you, so odds are they won’t come off as sketchy. Unfortunately, you won’t know the difference until something goes wrong.
Along with that, there is the tax and legal structuring, where you learn that the intersection among federal taxes, state taxes, and Federal Aviation Regulations makes structuring aircraft ownership and usage legitimately difficult and sometimes confusing. This makes the most tax efficient answer that complies with the FARs counterintuitive. For example, if you have an LLC that owns the plane and employs the pilots, you already have very big problem. To get this right (or fix it), you need to determine who will employ the pilots. Many aircraft buyers don’t want their pilots on their corporate or personal payroll for several reasons. On the other hand, most pilots want benefits. With the pilot shortage getting increasingly worse, this conversation is getting more difficult for aircraft owners.
By the time your tax and legal structuring is done, in most states you will have an LLC buy the plane and lease it back to its sole member. You will then make monthly sales tax payments on the lease payments in lieu of paying sales tax on the purchase price of the aircraft, which will reduce and defer your sales tax cost. This leaves you doing unexpected bookkeeping and tax filings. Few people are well equipped to take this on and fewer desire to have this done in-house.
Next, as you work through the legal agreements, you will find many “terms of art” – phrases that sound harmless but have very specific meanings in airplane deals. You need someone who knows the language.
More than in most industries, there are also many practices that are “customary in the industry.” The catch is that you hear something is custom in the industry all the time, but sometimes it is true and sometimes it isn’t. You need someone who knows the difference. Unfortunately, there are more traps for the unwary than most people would ever expect.
As if all this wasn’t enough, aircraft insurance is your first and last line of defense, and there are some critical differences between aviation insurance and general insurance that are easily missed by someone who doesn’t specialize in aviation - or even someone who does but doesn't understand your ownership and usage structure. Also, aircraft financing is often different than other financing. Additionally, choosing the wrong aircraft management company can cost you a fortune. And for good measure, you will either need an aviation accountant or someone to educate your accountant on aviation tax issues.
All of this doesn’t even get into trying to find the best technical representative to support the pre-purchase inspection or a qualified aviation escrow agent. You may also need specialty service providers like owner trustees, California State tax exemption consultants, attorneys for hangar purchases, etc.
Some clients try to handle the process themselves at first. Then they remember that they have jobs and/or better things to do once they realize this is eating up way too much time and they are in precariously unfamiliar territory, so they have their pilot, CFO, COO, etc. oversee all of this. Of course, these people have the best of intentions, but are frankly often set up to fail given the scope of the work that needs to be done and knowledge base required to do it well.
Others trust a usually well-meaning broker to handle everything; or they pay a lawyer to do it. There are a few consultants who coordinate different combinations of these services, and there are a choice few law firms who do it – much less who do it well.
Or you can hire One Stop Aviation and rest easy knowing that experts in the industry are handling the whole deal for you.
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