Understanding the Difference Between Equity and Non-Equity Flying Clubs
At AOPA, we often receive questions from members about the difference between equity and non-equity flying clubs. In fact, many members are surprised to learn there are two distinct ways to structure a flying club. This month’s Question of the Month dives into the key differences between these models, including the advantages and potential challenges of each.
Regulatory Note: Flying Clubs Must Be Nonprofit
First, it’s important to clarify that a for-profit flying club does not meet the FAA’s definition of a flying club. To remain in compliance with FAA Order 5190.6B Change 3, a flying club must operate as a nonprofit entity and be organized solely for the purpose of providing its members with access to aircraft for personal use and enjoyment.
AOPA generally recommends forming your club as a nonprofit within your state and then applying for 501(c)(7) status with the IRS. This approach aligns best with FAA requirements and ensures your club operates within the proper legal and regulatory framework.
Equity Flying Clubs
In an equity flying club, members jointly own the aircraft and other club assets. Each member holds an ownership share, which comes with voting rights and a say in decisions regarding aircraft upgrades, maintenance, and overall club management.
When members leave the club, they are responsible for selling their share, often with assistance from the club’s board. One of the main challenges with this structure is the high initial buy-in, which can create a barrier to entry. For example, if a club is purchasing a $100,000 Cessna 172, and has ten members, each member would typically contribute $10,000.
While this can limit accessibility, it also promotes a stronger sense of ownership. Members are financially invested in the aircraft, which often results in better care and greater accountability. Equity clubs are a great fit for dedicated aviation enthusiasts who are looking for long-term involvement and shared responsibility.
Non-Equity Flying Clubs
In contrast, non-equity clubs tend to have a much lower buy-in—often around $1,000—which makes them more attractive to a broader range of pilots. This lower cost reduces the financial barrier for new members and allows greater flexibility. Members can usually leave the club at any time without needing to sell a share. However, it’s generally advised that clubs do not refund the initial membership fee upon a member’s departure.
Non-equity clubs lease the club aircraft rather than own them outright. This lease can come from a member or a non-member and benefits both the aircraft owner and the flying club. The flying club will pay an agreed upon lease fee to the owner of the aircraft and generally a percentage of each hour flown so that the owner can build their own maintenance reserve.
That said, non-equity clubs do face potential drawbacks, including higher insurance premiums, and less committed club members.
Choosing the Right Model
Both equity and non-equity flying clubs offer distinct benefits and challenges. Equity clubs promote a strong sense of ownership and community, while non-equity clubs provide greater affordability and flexibility. The right choice depends on your club’s goals, member preferences, and available resources.
Also, a club can be both equity and non-equity. Many clubs own an aircraft and lease another aircraft from an individual. This “hybrid” model is quite common though can be more complicated to structure appropriately.
If you need guidance on which model is best for your group—or assistance getting started—our AOPA Flying Club team is here to help. Don’t hesitate to reach out!
