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Discussion in 'Hangar Talk' started by stevenhmiller, Sep 12, 2014.
Thanks for all the posts. I'm going to consult an attorney on this.
I would also check with the state sales tax people as well, many states have different laws and it's only YOUR state law that matters.
But that wasn't an individual, you were forming a partnership, so it was consider a sale and also if you handle the plane use by leasing/renting to yourselfs a use tax would apply as well. So, yes, in that situation...big time taxes...the OP is doing the smart thing and talking to a local lawyer, subtle differences can cause big $.
Many states will treat a transfer of an LLC as the transfer of the assets therein, and try to collect sales or use taxes.
In addition (and this can be a biggie), many taxing jurisdictions treat the act of holding an aircraft in an LLC or other corporate entity as creating the presumption that the asset is a business asset - and thus, subject to property taxation as a productive business asset.
Be vewy, vewy careful, here.
Let us know what they tell you. Just curious.
If you've already bought the plane and its in your name, and just you are going to own it and fly it, don't bother putting it in an LLC.
It costs money to create an LLC and it costs a little each year to keep it registered, usually.
I'm talking about state-level department of revenue. I would have done the same (mostly from a privacy standpoint) but PA will send a bill to the LLC for use tax (6%).
I would have set uP the llc before I bought it. This is beneficial in certain states for mitigating sales tax if you want partners, or sell in the future. Consult your CPA and an attorney to see if there are any benefits left for you.
Does anyone have an aircraft llc operating agreement they are willing to share; redacted would be fine. And how are aircraft llcs typically named? Examples would be nice. Has anyone incorporated in states other than CA? Thank you.
Do you have a partner in the aircraft? If not, why an LLC?
Some folks form a sole member LLC to depreciate the aircraft against their income, of course the plane must work into the business somehow for this.
It's also nice not having a name pop up if someone runs your N number.
Generally for income tax purposes, but income taxes are not the only kind of taxes out there. Some states will impose a sales tax on the value of the aircraft when you transfer it. So if you bought it in your own name, and then re-register it to the LLC, that might, in some states, result in a taxable event.
Again, federal income tax isn't the only kind of tax out there. States like to impose sales taxes on transfers.
Of course, if they get a judgment against you personally, they can just take your ownership interest in the various LLCs to satisfy the judgment.
I don't think you have to have it in an LLC to depreciate the aircraft as long as it figures into your business. I depreciate mine, though it is in my name. The LLC would only help me if others were flying my plane, then there might be some liability protection. As I am the only one flying her, it would do me nothing except cost me $800 in taxes. This being California and all.
I would think that just good liability insurance that specifically covers flying activities would pay out like a shot which is what you want, and an LLC will be sued and tied up in court before you lose. And you most likely will lose.
Instead of gallons per hour, think dollars per hour to possibly two lawyers. If you lose, you generally pay the opposing attorney fee's as well.
The corporate veil for 'liability evasion' type LLC's is apparent and easily breached by everyone and their dog in court. LLC's are meant to be business incorporations, not a car or a truck or a plane.
#1 you do not want to be sued and go to court. Let your insurance company pay and fight if they must. In court, the jurors would see a parade of friends and see the widow of the guy you killed or maybe his kid crying and carrying on, and they will side against the 'rich pilot' that crashed and burned everyone alive every time.
You can definitely check LLC annual fees per state. Some states are thousands per year (California, probably New York too), some are just $25 per year. Many states allow transferring assets from your personal name to an LLC without it raising a taxable event, but you need to check as it definitely depends on the area and the attitude of the city workers you encounter.
Some states have more privacy on the owner of the LLC as well, so putting an airplane into an LLC could provide a great deal of privacy.
Transferring to family seems easy enough, probably could be done with a simple one page document signed. Buying a LLC may avoid sales tax as well, but again if their is any outstanding liability on the company that would transfer over.
I don’t think anyone here is asking how to form an LLC so you don’t have to have insurance. Insurance is there to protect you, LLCs are there to give you privacy.
My current CFI was my business's CPA and my personal accountant for 25 years. He owns three planes. When I was looking to buy a plane we talked about ownership strategies a lot....bottom line...don't bother. You can't protect your personal assets any more effectively than with a good liability policy. And by the way...your $2 million liability umbrella isn't valid for aircraft-related claims.
Actually, I have seen some people's liability umbrella that did not exclude aviation. One I believe was from Geico, though that was a couple or three years ago.
My policy from Electric insurance would cover me except I have the plane in a LLC with 4 partners so it's excluded. If I was sole owner it would be covered
What about using an LLC for anonymity? I would like to register my plane under an LLC just so you don’t see my home address when you enter my N number on the FAA website. I don’t understand why aviation YouTubers don’t do this.
What address would you use for the LLC?
Just get a PO Box.
I believe some states like Wyoming and South Dakota have fairly inexpensive LLC annual costs. I think their under $100 each. Then you gotta get a mailing address there which is also affordable.
I thought about the PO Box route but it would still have my name and it’s fairly easy to get a home address on the internet using someone’s name.
Sorry, but the last few posts are incorrect. A PO BOX isn't sufficient. An LLC in nearly any state (including the two mentioned) requires a designation of an actual PHYSICAL address that is accessible for service of process. While there are companies that can provide this "registered agent" service with some amount of anonymity to you a PO BOX or PMB is NOT going to meet the requirements.
Further, while you might appease the FAA with a foreign LLC (i.e., one not in the state that the activity is taking place with), many states will insist on you also registering there and opening yourself up to taxation and filing requirements.
Form the LLC to register the plane. That way you can hide your home address when people look up the tail number.
Kristin, you mentioned that single member LLCs do not offer personal liability protection for plane ownership and operation. I am a non litigator that has formed many LLCs over my career, typically for real estate holdings, so you have sparked my interest. My assumption is that the plaintiff lawyers are claiming negligence on the part of the pilot individually and naming them as a co-defendant along with the LLC to get personal liability?
In the tort arena, the human tortfeasor is always liable for his or her own actions. The LLC will provide members some tort protection for the acts of others, but not for their own. To give an example, assuming to basis to pierce the liability veil due to failure to treat as separate, if there are three Members and Member B crashes and injures someone, the LLC will have owner liability, Member B will have personal liability, but Members A and C probably will not.
There are, of course, liability protections available in a single-member LLC, but those are primarily contractual.
When we talk very generally in aviation groups about the lack of personal liability protection for a single-member LLC, we're talking about the liability which most concerns pilots. And we are keeping it simple. So, do you think pilots are concerned more about:
Personal liability for crashing the airplane; or
Personal liability for payment of an order for a case of oil placed with Aircraft Spruce in the name of the company.
I was going to mention the huge loan for the upgraded avionics suite but, as you know, unless that company has a huge positive credit history and major assets, the lender is going to require personal guaranties from the members.
That said, no one should create or forego creating an LLC because of things said in an online forum. There may well be reasons beyond personal liability for personal torts to create a single member LLC. That's personalized legal advice.
Thanks for telling me what I already know. Seriously are you even a lawyer because you are trying way too hard here. Did you miss the part where I said I have formed numerous LLCs for clients in the real estate area?? I have practiced law for over 20 years and essentially answered my own question but wanted clarification from a peer who has actual litigation experience in the matter, not another POA know-it-all that actually knows less than the person that asked the question.
[Edit: Original comment deleted and replaced with]
I don't personally know Kristin (but did look up her qualifications), but I do know midlifeflyer. As well as others here on POA that are knowledgeable in this area, some have even passed the bar in this area. Legal issues in real estate are primarily local (state, county, etc) where aviation issues may additionally involve Federal complications.
Actually, the state rules on the liability of LLC members have very little to do with aviation law. Even drivers are liable for their own actions no matter who owns the car. But yes, you do manage to pick up a few things in 40+ years as a member of the bar as both a commercial litigator and transactional lawyer
My long answer was because non-lawyers are reading this and it is a common area of misunderstanding. It was not intended as a reflection on the state of his knowledge, although he apparently took enough offense to decline to insults.
And I do know Kristin.
I live in NC and have owned three airplanes. My first plane was a C152 that I had on leaseback at a flight school. I had it in an S Corporation, but only because I was not the only one who flew it and there was some liability. Plus my lawyer wife insisted on it. Renter and Student pilots sometimes do stupid things in airplanes. My current airplanes are only flown by me, so there is no value in paying $200 per year to have an LLC or an S corporation. Plus they are both tailwheel airplanes, so my aviation insurance company (as well as me) is very particular about who flies them. One is pretty simple ('46 J3C) but still tricky for anyone without much tailwheel experience. The other is an Aviat Husky A1-B, which is not difficult to fly, but landings and takeoffs require a fair amount of practice to maintain currency, especially for night and IFR flying. My understanding is that liability is not reduced by registering it in an LLC or other form of corporation for a pilot who owns an airplane and flies it exclusively. It took me a couple of years to realize that and I re-registered it and now save $200 per year in annual corporation registration fees. Mark's description is better than mine.
An S Corp is not a type of entity, but a tax status that can be applied to LLCs or corporation. Your plane was in a corporation.
My partner and I have an LLC that our airplane is owned by. I know nothing is perfect, but if either one of us runs into a kindergarten filled with babies, there might be a little bit of protection for the other member.
The registered agents address.
FYI: The preferred method to maintain anonymity when registering an aircraft is through the use of an aircraft or owner trust. While the FAA has access to the identity of the trust beneficiary, all public data for that registration only lists the trustee's information. This is the same method used by foreign citizens to apply for an N registration on their aircraft.
A trust predominantly controlled by foreign citizens isn't eligible for registration either.