Limit your liability

[Doug Riley]

John and Leigh:

You need to refine your corporate structure a bit. Item #2 in John's list won't work legally.

If the LLC blows out its assets to insiders at a time when it is under threat of a claim, without receiving the fair market value of the assets back from them in cash, the transfer is known as a "fraudulent conveyance." Most states' courts, and the Federal bankruptcy courts, have the power to undo such transactions and get the distributed assets back.

Two ways to make this result less likely are (1) finance the aircraft so that there is no net equity in the assets (the financing parties, as secured creditors, come ahead of tort creditors), and/or (2) put each aircraft in a separate corporate or LLC entity.

[Resasi]

Thanks for the feedback Doug.

The ability to get keen and knowledgeable eyes on, as one can here is invaluable.

John will no doubt be back shortly, then hone the document some more.

[okikuma]

Unfortunately, this is the wave of the future of ownership here in the US.

I knew a physician who created an LLC for his Canadair T-33. It was a wise move because back in 2003, he fatally crashed his T-33 not far from my house. His surviving family assets were protected.



http://www.ntsb.gov/aviationquery/br...04LA034&akey=1

Wayne

[All_In]

Originally Posted by Doug Riley

John and Leigh:

You need to refine your corporate structure a bit. Item #2 in John's list won't work legally.

If the LLC blows out its assets to insiders at a time when it is under threat of a claim, without receiving the fair market value of the assets back from them in cash, the transfer is known as a "fraudulent conveyance." Most states' courts, and the Federal bankruptcy courts, have the power to undo such transactions and get the distributed assets back.

Two ways to make this result less likely are (1) finance the aircraft so that there is no net equity in the assets (the financing parties, as secured creditors, come ahead of tort creditors), and/or (2) put each aircraft in a separate corporate or LLC entity.

Hi buddy!!! I better do some research... I love this site!!

Timing is everything regarding under threat of a claim!
When a accident first happens or before the divorce and any lawyer has even been contacted there is a window of "No one knows if there will be a law suite or divorce or not"

Also a holding company is different as it has no other business activity other than holding assets at it members discretion and all of the members of the LLC HOLDING Co have the right to withdraw their assets at any time for any reason such as worried that the company might be sued or they just don't like the company any more.

As a CPA for over 14 years I've handled many bankruptcies for clients 100's maybe and none of them were LLC holding co also.

We either created debt with FRIENDS as CREDITORS before the lawsuit was filed or sold the assets at a lost to FRIENDS (like 21 airplanes so the wife did not get any of the money from the divorce) I feel the friends may have never collected on the loan and may have even sold the assets for them and given the money back to them as a gift?

The court saw all of the paper trail and never did anything on any of those and that was in California which has the least protection for the LLC unlike Nevada.

My real life experience of always getting away with it is why I'm not as worried and why I felt I could even post it in public as I know many private companies and OJ Simpson 's types do this.
The family won the law suite but got almost nothing out of OJ as he just moved is assets to a state that protected is assets before the trial started and the court knew this during the trial.

However, I need to check if a holding company as the right not to return their members assets just because there was an accident and they might be sued.

Thank you if the attorney can find a precedents (in Nevada) then we will go the loan route and transfer it to a new holding company too.

At the power point presentation today at ROTR Doug Backer suggested that we setup two LLC's one with NO assets waiting for the day an accident occurs so it could be transferred on the same day.

I've got 5 attorneys that owe me money. I'll offer them to pay me some of it by researching this and compare their answers.

PS:
Sorry for the delayed response but I was at ROTR's and it was a non-stop party with learning!!! My favorite kind!

[All_In]

Originally Posted by okikuma

Unfortunately, this is the wave of the future of ownership here in the US.

I knew a physician who created an LLC for his Canadair T-33. It was a wise move because back in 2003, he fatally crashed his T-33 not far from my house. His surviving family assets were protected.



http://www.ntsb.gov/aviationquery/br...04LA034&akey=1

Wayne

Hi Buddy!!!

Well you know what Californian do with waves???

Were ride them.

[All_In]

What I need to learn is how the court will interrupt this article on the day of an accident.

Article 2 – Asset withdrawals
It is agreed that with mutual consent of the investor/ members in the asset that the members may withdrawal the asset at any time at their sole discretion.

PS:
Just a heads up for those that do not know:
LLC's have members not stockholders however when you read member they are the stockholders of the LLC.

[All_In]

Good morning.

As only the ROTR boys have seen the presentation explaining how all this works I thought I might post a slide that explains how we are charging the usage fee based on the loans made by the investor members.

This not only allows us to charge a hourly usage fee but as the loans are recorded with the FAA the member/investors have first position as creditors so they will be paid back first.

The fact that there is no money to be won in a lawsuit will reduce the number of attorneys that will take the case certainly non will take it on retainer as there is no payday for them.


The loans we are paying back are recorded with the FAA so the investor/members are protected as the 1st creditors for the full amount of the gyroplane.

[Doug Riley]

John: What you can get away with is a matter of statistics, I suppose. All of us break the speed limit in our cars every day. We nearly always get away with it if we're not too blatant.

Formally speaking, however, none of the stratagems you've mentioned will survive a fraudulent-conveyance challenge, nor will a bylaws (or LLC operating agreement) provision allowing the return of all the assets to the members. Whether you'll ever actually face such a challenge will depend on how dogged the person trying to collect is.

GENUINE secured debt (not the wink-wink kind) that uses up all the equity in the aircraft, and/or a separate LLC for each aircraft, will hold up better under stress.

You can instead play the odds, of course (heck, it IS Nevada). I'd be sure to let any buyer-investor know that's what you're doing, though.

[All_In]

Originally Posted by Doug Riley

John: What you can get away with is a matter of statistics, I suppose. All of us break the speed limit in our cars every day. We nearly always get away with it if we're not too blatant.

Formally speaking, however, none of the stratagems you've mentioned will survive a fraudulent-conveyance challenge, nor will a bylaws (or LLC operating agreement) provision allowing the return of all the assets to the members. Whether you'll ever actually face such a challenge will depend on how dogged the person trying to collect is.

GENUINE secured debt (not the wink-wink kind) that uses up all the equity in the aircraft, and/or a separate LLC for each aircraft, will hold up better under stress.

You can instead play the odds, of course (heck, it IS Nevada). I'd be sure to let any buyer-investor know that's what you're doing, though.

Hi Doug

The loans are not a wink winks loans. They are real all investors really do expect and want to be paid back for real. So that is not an issue.

However it would be safer with each in there own LLC and anyone with the very small amount of money could afford the $325.00 fees (if a resident of Nevada to $925.00 if you have a online service do it all for you except filing tax returns.

If the investors have deep pockets then they can easily afford this annual fee and they need the protection of a separate LLC for each aircraft.

Many of our members are too poor to afford a separate LLC and as they have no assets to go after in a law suit there is no pay day.

Rotorcraft Partners then can provide the same protection and more importantly the ability to have co-owned leaseback type aircraft to the poor and reduce the cost of the annual fees by sharing a single LLC divided by the number of aircraft in the LLC.

Rotorcraft Partners will be available for those who cannot afford it on there own and where they have too few assets to go after by any attorney that wants to be paid.

[Resasi]

Doug, you mean along the lines of 'Hey guys we're rolling the dice a bit on this one.'

As long as they are all gyro pilots, that should work.