Aircraft Ownership in an LLC

wilkersk

wilkersk

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Can anyone recommend a resource for learning how to structure an LLC for the purpose of owning an aircraft?
-How to form the LLC. any special considerations for FAA compliance?
-How to place the aircraft in the LLC
-Ongoing considerations to remain in compliance with FAA and other state/federal regulations
 
Pretty easy to open one and put the plane in it (just like any other aircraft sale in terms of the FAA forms required). Just contact your secretary of states office; they will tell you what simple forms are required to open an llc in that state. The bigger question is what benefit do you expect from owning the plane in a llc. An llc has ongoing cost so there is definitely a "con"; in some cases there is a "pro". Perhaps your use case has a pro, perhaps not. Be aware that if you choose to put a plane you already own into or out of an llc your state may charge you sales tax on that sale based on current market value of the asset; I know my state does.
 
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wilkersk said:
Can anyone recommend a resource for learning how to structure an LLC for the purpose of owning an aircraft?
-How to form the LLC. any special considerations for FAA compliance?
-How to place the aircraft in the LLC
-Ongoing considerations to remain in compliance with FAA and other state/federal regulations
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You are way over thinking this.

The FAA doesn’t have any special rules for LLCs because they don’t regulate LLCs. The exception is foreign nationals may not hold more than 25% of the voting interest.
Once an LLC in your state in properly formed, the aircraft is registered to the LLC.
The LLC must comply with state and federal laws the same as if the LLC did not own an airplane.
 
wilkersk said:
Ongoing considerations to remain in compliance with FAA and other state/federal regulations
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The only item the FAA is concerned about is the registration chain of ownership. They also provide the specific guidance to use when moving between different types of owner entities, which if you dont follow the guidance will get your reg application kicked back until you follow the guidance.
 
Mainly I thought to shield liability?
Our 20 something plane flight school has each on a separate LLC. N number LLC. Leaseback I presumed.
 
bonefishpete said:
Mainly I thought to shield liability?
Our 20 something plane flight school has each on a separate LLC. N number LLC. Leaseback I presumed.
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If it's leaseback, then it's the owners who are choosing the LLC. Generally a good idea in that situation since there is some protection for the LLC owners unless they are the ones flying the airplane. Even without a leaseback, I can see a flight school which owns aircraft doing (overdoing?) that as a way to protect the aircraft from the school's liability.

But if you are thinking that there is some mechanism for protecting me from liability for an accident I cause, an LLC is not designed to do that.
 
I get that an LLC doesn't shield me from liability for an accident that I cause. That's what my insurance is for. But and LLC could shield me from being liable if someone else caused an accident with my airplane (not that I'd ever let someone else fly it while I'm still able to).

My primary reasons for wanting to own the aircraft through an LLC is 1) Privacy. Not perfect, but it shields me from the lookie-loos. 2) avoid probate. This makes it easier for my son to inherit the aircraft and do with it as he sees fit without probate. I was also considering asking the port to change my lease to reflect the LLC as the tenant so that my son could also take or dispose of its contents without waiting for the estate to settle. Not having to pay rent on a hangar full of crap that nobody is able to use would make my wife happy. My son could either get rid of all the crap and move out or make the rent payments himself.

As far as continuing costs, what I was thinking was book keeping and tax filing, that sort of thing. Doesn't an LLC have to have an EIN? Do they have to file taxes even if they have no income or employees?

Also, wasn't there something about running afoul of FAA? I heard something about if it wasn't done correctly for an EAB, the FAA might consider you in violation of 91.319.
 
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wilkersk said:
As far as continuing costs, what I was thinking was book keeping and tax filing, that sort of thing. Doesn't an LLC have to have an EIN? Do they have to file taxes even if they have no income or employees?

Also, wasn't there something about running afoul of FAA? I heard something about if it wasn't done correctly for an EAB, the FAA might consider you in violation of 91.319.
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An LLC doesn't have to have an EIN. A single member LLC may use your own SSN as its tax ID and is a non-entity in the eyes of the IRS. No separate tax return would be required in that case.
It looks like WA state LLC fees are much lower that some locations. You would likely incur a sales tax upon transferring ownership from your name to the LLC. You would have annual LLC fees and forms to complete.

I've read occasional concerns about running afoul of FAA but never firsthand reports. Unless you're doing something that draws attention, leasing your EAB to others, I doubt owning it in a LLC would cause you any heartache.

I've had a couple LLC's. It's easy to complete the forms yourself to form the entity. I would research the tax implications of putting the plane into an LLC. It will cost ($ & time) to do so compared to simply leaving the plane in your own name. While you're at it you might research trusts as well. I have no idea if that would be another option to accomplish what you're looking to do.
 
bonefishpete said:
Mainly I thought to shield liability?
Our 20 something plane flight school has each on a separate LLC. N number LLC. Leaseback I presumed.
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Not necessarily, many real estate investors have each property in a separate LLC.
 
wilkersk said:
I get that an LLC doesn't shield me from liability for an accident that I cause. That's what my insurance is for. But and LLC could shield me from being liable if someone else caused an accident with my airplane (not that I'd ever let someone else fly it while I'm still able to).

My primary reasons for wanting to own the aircraft through an LLC is 1) Privacy. Not perfect, but it shields me from the lookie-loos. 2) avoid probate. This makes it easier for my son to inherit the aircraft and do with it as he sees fit without probate. I was also considering asking the port to change my lease to reflect the LLC as the tenant so that my son could also take or dispose of its contents without waiting for the estate to settle. Not having to pay rent on a hangar full of crap that nobody is able to use would make my wife happy. My son could either get rid of all the crap and move out or make the rent payments himself.

As far as continuing costs, what I was thinking was book keeping and tax filing, that sort of thing. Doesn't an LLC have to have an EIN? Do they have to file taxes even if they have no income or employees?

Also, wasn't there something about running afoul of FAA? I heard something about if it wasn't done correctly for an EAB, the FAA might consider you in violation of 91.319.
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You really need to speak to an attorney in WA. Personally I see zero advantage to having a single owner airplane in an LLC and most attorneys can pierce a single member LLC as it not a partnership.
 
FORANE said:
Pretty easy to open one and put the plane in it (just like any other aircraft sale in terms of the FAA forms required). Just contact your secretary of states office; they will tell you what simple forms are required to open an llc in that state. The bigger question is what benefit do you expect from owning the plane in a llc. An llc has ongoing cost so there is definitely a "con"; in some cases there is a "pro". Perhaps your use case has a pro, perhaps not. Be aware that if you choose to put a plane you already own into or out of an llc your state may charge you sales tax on that sale based on current market value of the asset; I know my state does.
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Illinois as well. Dad was doing some estate planning and was thinking of transferring the airplane to an LLC with me as an additional member. Since he's pushing 70 we thought insurance would be easier for me in the not so distant future. Apparently he'd rather pay the insurance company more than pay the government.
 
As a private owner of one aircraft, there's not much gain in an LLC. Wife and I looked into getting one, but didn't give us any benefits.
As far as estate planning, probate, etc. you're better off getting that settled out with an attorney for all your assets, including the plane. BTW - hope that all isn't needed anytime soon.
 
FORANE said:
I've read occasional concerns about running afoul of FAA but never firsthand reports. Unless you're doing something that draws attention, leasing your EAB to others, I doubt owning it in a LLC would cause you any heartache
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That would be an interesting read. I’m having difficulty picturing how having an LLC can cause one to run afoul of the FAA.
 
midlifeflyer said:
That would be an interesting read. I’m having difficulty picturing how having an LLC can cause one to run afoul of the FAA.
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Specifically it was regarding an EAB owned by a LLC and leased to the owner or owners of the llc. The question was, is that a prohibited commercial use of an EAB?
 
wilkersk said:
My primary reasons for wanting to own the aircraft through an LLC is 1) Privacy. Not perfect, but it shields me from the lookie-loos. 2) avoid probate. This makes it easier for my son to inherit the aircraft and do with it as he sees fit without probate. I was also considering asking the port to change my lease to reflect the LLC as the tenant so that my son could also take or dispose of its contents without waiting for the estate to settle. Not having to pay rent on a hangar full of crap that nobody is able to use would make my wife happy. My son could either get rid of all the crap and move out or make the rent payments himself
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A lot of that depends on state law. AFAIK, Washington is a state in which the annual report lists the members of an LLC. If they have the name of the LLC, that’s about a 1 minute search by a lookup-loo, so not much privacy there unless you start creating nested companies. The FAA is helping a bit by being able to hide ownership information, but I’m not sure if the LLC itself does much to enhance that.

Probate avoidance also depends. Is your son going to be a member of the LLC with language automatically vesting membership in the survivor? If not, your membership interest is likely probatable. If yes, would joint ownership with right of survivorship registration accomplish the same thing without an LLC?

That’s not legal advice. Just pointing out that these kinds of decisions tend to be part of an overall estate/financial planning strategy that should be the subject of consultation with a professional.
 
FORANE said:
Specifically it was regarding an EAB owned by a LLC and leased to the owner or owners of the llc. The question was, is that a prohibited commercial use of an EAB?
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Gotcha. It's not something I've ever looked into, but I can see a potential issue there. Not so much "commercial use," but a direct prohibition on leasing in 91.319(f).

The FAA does have a history of taking a position that comes down to:
You chose to put the aircraft into an entity that is legally separate from yourself. We respect that choice, but it comes with certain legal consequences.​

It's been applied to separate entity corporate flight departments - they need a 135 certificate even though a single-member LLC where the parent company is the single member. It's also been applied to a company aircraft transporting the sole member of the LLC on personal business. I can see it being applied here: the company owns the airplane; the pilot is renting it.
 
Note, that if you're in certain states like California, registering it to a another state's LLC doesn't get you out of the franchise tax if they find out about it. Best to look at the rules for the state you intend to base in.

Frankly, the taxing in my state is more adventageous if I keep it in personal ownership.
 
wilkersk said:
Can anyone recommend a resource for learning how to structure an LLC for the purpose of owning an aircraft?
-How to form the LLC. any special considerations for FAA compliance?
-How to place the aircraft in the LLC
-Ongoing considerations to remain in compliance with FAA and other state/federal regulations
Click to expand...
I used Legal Zoom
 
It's pretty trivial to form an LLC in most states. I have one for a business venture. You'll need a registered agent: i.e., someone who is around during business hours in the state involved to accept legal process. There are companies that do this.

The FAA will want you to precisely match the name of the LLC in your ownership transfer. The good news is that the Aircraft Registry guys do provide assistance if you email them. For example, my LLC is exactly "Sensor Systems, LC" (the LC is part of the name officially). They'll want to know that the LLC is controlled by US citizens/LPRs but I've never heard of them making a deal about this for small aircraft. You will have to file the transfer from whomever owns the plane now to the LLC.

Again, every state is different about the LLC requirements. Some will require just a nominal fee (mine is $50 / yr). Others will want a report to be filed annually. Some have a non-trivial tax (California wants $800 for the "franchise tax" minimum).
 
Datadriver said:
I used Legal Zoom
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If you are actually interested in the legal protections of an LLC, it’s not just about the paperwork you file in some state. For that, I’d use a legal professional.

OTOH, if it’s only about some perceived privacy benefit, I guess filing is all you care about.
 
You might want to consider a trust. A LLC is pretty easy to pierce, and it avoids the probate process in the event of death.
 
rockyfatcat said:
You might want to consider a trust. A LLC is pretty easy to pierce,
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They are not that easy to pierce ... unless the member(s) make it easy to pierce. That usually involves the member(s) disregarding the separate "personhood" of the LLC. After all, if the member doesn't treat it as a separate entity, why should anyone else?
 
rockyfatcat said:
You might want to consider a trust. A LLC is pretty easy to pierce, and it avoids the probate process in the event of death.
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If probate is your only concern, the revocable trust is probably the answer.
 
In addition to the precise LLC naming on FAA paperwork, if you're doing this yourself, pay attention to manager-managed vs member-managed and sign with the correct title.
 
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