One of the most
common traps that aircraft owners fall into is to
put the aircraft and the crew in a company which
is created solely for that purpose (a "sole
purpose company"). This might be done for
In some cases, a
Delaware corporation will be used in the mistaken
belief that this will enable the owner to avoid
sales and use taxes. [see The
Myth of the Tax-Exempt Delaware Company]
The use of a
"sole purpose company" can create
rules do not allow a "sole purpose
company" to operate an aircraft under Part
The insurance policy may not cover operations
which are not conducted under Part 91.
The Federal Transportation
Tax may apply.
Although there are
only a few cases where the FAA has imposed
sanctions on a "sole purpose company",
the official position of the FAA is that such a
company is illegal. Furthermore, there is no
guarantee that the position of the FAA will be as
forgiving if the aircraft is involved in a major
accident. Since many insurance policies do not
cover "commercial operations", this
means that the "sole purpose company"
might fail to provide protection at the very
instant when the protection is needed the most.
This does not mean
that the objectives are unattainable. In many
cases, operations can be still structured to meet
these objectives, without resort to a "sole
purpose company". In other cases, the only
good answer is to buy a lot of insurance. But,
even here, the advantage is that the owner is not
operating with the false sense of security and
the tax problems that a "sole purpose
company" might bring.