Register plane in my name or business?

MtnMarcus

MtnMarcus

Pre-takeoff checklist
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I will be purchasing a 182 in the next 2-3 months that will be used 50% personal and 50% for business for a company I own (S corporation). Would it be best to put the title/registration in the business's name OR my name since I will obviously be writing off what I can when it is being used for business.

This will be my first venture into plane ownership. Thanks in advance
 
unless your business' tax attorney posts here, you are asking in the wrong place
 
Concur with Jeff -- this is a question which can only be answered reliably by an aviation-knowledgeable tax/legal professional with complete information on your situation.
 
Tax wise no difference. Liability wise, you may have an advantage if you face plant your plane into a middle school but the corporate shield protection probably won't kick in unless your doing Part 135 ops which you aren't.

No expert here but I was in your shoes before. I just said **** it and did my own thing. .
 
My pal discovered that if he had used his personal name instead of his business he would not have been on the hook for $8K in sales tax. He is in Texas and this was about 5 years ago. I am sure there are many other factors to consider than just sales tax but it is something to look at.
 
If your employee flys the plane then a corporate shell might help with liability. If you are flying the plane then you're on the liability hook, notwithstanding any corporate entity named on the airplane title.

Here in Texas this may affect the requirement to pay sales tax, as others have mentioned.

John Yodice covered this issue in detail at the last AOPA summit.
 
I'm not sure about sales tax differences between personal and business ownership. Businesses are supposed to pay sales tax on just about everything except goods for resale, although I know many folks who think they don't have to pay sales tax on anything bought for the business. That's my state, yours may be different. There may also be personal property tax issues, which businesses in Texas are supposed to pay, but individuals don't. And I think you recognize the federal tax issues, such as a business's ability to deduct depreciation, that that might affect the decision.

If your primary concerns are financial/tax related, a tax accountant is likely a better resource than an attorney, unless he's a tax attorney.
 
Texas has a sales tax if purchased by a dealer in Texas or a Use tax if purchased out of state from a dealer. Personal planes are exempt from annual property tax, but business planes are not.
 
I recall now my friend was told by the Comptroller's Office that because his biz had a Tx Sales Tax Certificate, the airplane being in the biz name, was taxable.
If he had put it in his name, then it was a casual sale and exempt.
I think the tendency is to put it in the biz name hoping to make it a depreciable asset but people forget about the sales tax thingy. And it has to pass some tests before it can be an IRS deduction anyway.
 
Sac Arrow said:
Tax wise no difference. Liability wise, you may have an advantage if you face plant your plane into a middle school but the corporate shield protection probably won't kick in unless your doing Part 135 ops which you aren't.

No expert here but I was in your shoes before. I just said **** it and did my own thing. .
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I created an LLC to help shield myself from any possible litigation. If I use plane personally I reimburse my LLC for the hours flown. Likewise if I use it for business, like flying to Oklahoma where I have some property, my LLC for the property reimburses it.

I couldn't justify using it for more than 50% business. There were absolutely no tax reasons for myself personally had I kept it personally or created J and K aviation LLC.
 
Thanks everyone. All good information. I am definitely planning on talking to an attorney and/or my accountant but want to have as much info as possible before doing so.
 
Jthamilton said:
I created an LLC to help shield myself from any possible litigation. If I use plane personally I reimburse my LLC for the hours flown. Likewise if I use it for business, like flying to Oklahoma where I have some property, my LLC for the property reimburses it.
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Whether you fly it for business or personal use, your LLC will provide no shield at all for you from litigation other than debts of the LLC. It will not provide any protection at all from liability for anything that happens while you are flying your plane. Consult your attorney for details.
 
Ron

I discovered the same thing. It's sounds like a novel idea, but the LLC does nothing to protect the individual from liability.
 
If you form an llc owned by the s corp, you can have the llc buy the aircraft, then you have to pay the llc for your personal use of the plane. Personal use includes training. I was advised to not put anything related to planes or aviation in the llc name, but planes are an audit magnet regardless.

On a positive note, I've read that they may bring back the immediate 100% depreciation of used aircraft purchases under $500k. That was a good deal!
 
Depreciation expense is a major concern, not just liability.

So too, are expensing off the other expenses associated with ownership. (Hangars, tie downs, insurance, maintained.)
 
Ron Levy said:
Whether you fly it for business or personal use, your LLC will provide no shield at all for you from litigation other than debts of the LLC. It will not provide any protection at all from liability for anything that happens while you are flying your plane. Consult your attorney for details.
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As a physician it was recommended by counsel, I'm aware that it is not a guarantee but instead just another fence one would have to get over. My accountant who has master in taxation...yawn could have cared less how I handled the last couple purchases but said she favored the LLC.

It all runs down hill to me anyway in the long run.
 
Jthamilton said:
As a physician it was recommended by counsel, I'm aware that it is not a guarantee but instead just another fence one would have to get over. My accountant who has master in taxation...yawn could have cared less how I handled the last couple purchases but said she favored the LLC.

It all runs down hill to me anyway in the long run.
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I think Ron's point was that if you're flying the plane when something goes wrong, you will be sued individually as the pilot. Whether the LLC is also sued (probably) and whether any judgment against the LLC can be collected from you is irrelevant. But there are also other, more plebeian liability concerns like who's responsible for the rent or the damage to the hanger if your plane spontaneously combusts, and even who's liable when someone else is flying the plane.
 
I think the bottom line is that if you're the only pilot involved, and you're the one with final say over maintenance issues, there is nothing you can do to protect yourself from liability over any passenger or third party injuries or property damage claims. All you can do is get good insurance coverage and then operate as safely as possible, get good training, and maintain the plane as best it can be done. That said, there are any number of possible tax advantages to various ownership structures, and a tax specialist is the best choice for advice on that.
 
Lindberg said:
I think Ron's point was that if you're flying the plane when something goes wrong, you will be sued individually as the pilot. Whether the LLC is also sued (probably) and whether any judgment against the LLC can be collected from you is irrelevant. But there are also other, more plebeian liability concerns like who's responsible for the rent or the damage to the hanger if your plane spontaneously combusts, and even who's liable when someone else is flying the plane.
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I agree, sorry I intend to focus on protecting all my assets from risks of my primary employment. I'm still involved in litigation which my medical liability insurance saw fit to fight till the end. Since it was one of my employed providers the suing party wants all he can get out of my old business.

Any endeavor I've taken up since throwing out my shingle has been set up in LLC.

I agree nothing will protect me from my actions in my plane, best to maintain excellent insurance coverage and have a good agent. I'm not really thrilled about sharing a plane or creating a partnership since I can't control what happens the rest of the time. I know there are several good partnerships out there, just not my thing.
 
Jthamilton said:
I agree, sorry I intend to focus on protecting all my assets from risks of my primary employment.
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You can check this with an attorney, but as I understand things, putting your airplane in an LLC or other corporate structure will not do that if you own the company that owns your plane. As I understand the law, your personal ownership stake in the aircraft's parent company would still be an attachable personal asset which could be taken in any finding of liability on your own personal part while on the job. While most states protect certain personal assets necessary to live and work (like your primary residence, the vehicle you drive to work, the clothes you wear to work, the tools of your job, etc) from a finding of liability, I don't think they protect your ownership of a personal-use airplane.
 
I'm sure people more knowledgeable than I can say whether I'm way off base here, but assuming the OP is a commercial pilot, isn't there also a significant difference in business ops allowed under the FARs?

That is, if the company buys the plane, and hires the OP as a commercial pilot, he could occasionally carry passengers and property for the business, subject to staying in the part 91 realm etc.

If the OP buys the plane himself, he can fly himself to business meetings and the like, but can't be paid by the company to fly passengers or property without entering the 135 world.

(I have very little idea what I'm talking about, so by all means jump on me if I'm wrong.) I also don't know whether the rules change when the CP-employee is also a corp owner?
 
MtnMarcus said:
I will be purchasing a 182 in the next 2-3 months that will be used 50% personal and 50% for business for a company I own (S corporation). Would it be best to put the title/registration in the business's name OR my name since I will obviously be writing off what I can when it is being used for business.

This will be my first venture into plane ownership. Thanks in advance
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What are the annual costs to maintain a corp in Idaho? If you purchase the plane and register it to a corp, it is owned by the corp. Say you want to get away from the costs of maintaining the corp. If down the road you decide to transfer title into your own name, that would be a taxable event and you may find yourself paying a sales tax again.
 
FORANE said:
What are the annual costs to maintain a corp in Idaho? If you purchase the plane and register it to a corp, it is owned by the corp. Say you want to get away from the costs of maintaining the corp. If down the road you decide to transfer title into your own name, that would be a taxable event and you may find yourself paying a sales tax again.
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Further, if the plane is fully depreciated, any sale is considered capital gains unless rolled into a like-purchase.

I still think it was well worth taking the full depreciation in one year (a program which ended last year). I was able to reduce my taxes by an amount equal to three years worth of operating expenses. I have a legit business reason for 90% of my flying.
 
I've been down this path before, for a similar reason. I purchased a Cherokee years back and leased it back to a flight school. I setup an S Corp to own it, and funnel all operating expenses and rental revenue. The flight school managed the maintenance (and billed me).

The tax benefits were good. I didn't have to pay the PA sales/use tax because it was purchased as equipment to generate revenue for the business. I was able to take the section 179 deduction on it and any avionics and other improvements, which offset the revenues/profits from me experiencing a big number on the business income (from K-1 form) line of my personal 1040.

In theory, I was shielded from liability if a student/renter crashed it into someone's house (thankfully, that never happened) because it was structured as a bonafide business. There are numerous things a corporation must do annually to hold up to the corporate sniff test, which I did. In hindsight, I could have probably set it up as an LLC and avoided some of the operational/administrative headaches of maintaining a single person S-Corp.

If I flew the plane myself, I paid the flight shcool an hourly rental, at a discount rate. Like a "frequent flyer" discount, if you will.

In the end that money basically went into the overhaul/maintenance fund anyway. If I, however, were to get in an accident that caused injury or property damage, there's absolutely no question that I would be on the hook for it. Every possible lawyer involved would start with me and then sue everyone down to the tire manufacturer. No court in this country was going to let the corporate veil protect me from my own negligence (even if the accident wasn't my fault).

So, if you want to put a plane into a business structure to protect yourself and assets, then you're doing it for the wrong reasons. As Ron said, get enough insurance that you feel comfortable with to protect you in the unfortunate incident that requires it. Because when the you-know-what hits the fan, you're going to be in court for years to come. The LLC or corporate formation papers will be worth as much as the paper they're written on. Your insurance policy will be your savior (hopefully).

If you want to gain some possible tax benefits, then absolutely stop listening to anyone here and consult an accountant who has aviation experience, along with a lawyer for the corporate/LLC setup. There may or may not be good reasons to do it, and everyone's mileage will vary.
 
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mcmanigle said:
I'm sure people more knowledgeable than I can say whether I'm way off base here, but assuming the OP is a commercial pilot, isn't there also a significant difference in business ops allowed under the FARs?

That is, if the company buys the plane, and hires the OP as a commercial pilot, he could occasionally carry passengers and property for the business, subject to staying in the part 91 realm etc.

If the OP buys the plane himself, he can fly himself to business meetings and the like, but can't be paid by the company to fly passengers or property without entering the 135 world.
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That is pretty much correct.

(I have very little idea what I'm talking about, so by all means jump on me if I'm wrong.) I also don't know whether the rules change when the CP-employee is also a corp owner?
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Ownership stake in the company doesn't change anything.
 
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