Business Aspect of being a CFI

[NKTFlyer]

I am a newly minted CFI/CFII (with MEI forthcoming) and am looking at working at the local flight school (about a dozen planes give or take). This isn't super duper bread winning for me, but I really enjoy teaching and somebody else is paying so that's a win.

My questions are regarding the business aspects. I found some really good threads on liability insurance here, but which is the best?

Next, can I freelance outside of my place of employment without owner-students having to go through the flight school? Would this be dependent on whether I was working as a contract (1099) employee or on the actual payroll (W-2)? If I were a 1099 guy, would it be best to set up my own business and just look at it as if my business were providing a service to the flight school instead of them employing me? LLC or sole proprietorship?

Would my flying in pursuit of more endorsements and add-ons be tax deductible?

 

[unsafervguy]

what is best insurance is a personal matter. what do you have to loose? if you have nothing, then there is not a lot to be gained by having insurance. if you have deep pockets, then you need to have insurance to protect those assets. that question is best answered by your lawyer and accountant.

as to freelancing, that is up to you and the flight school. some allow it, some don't. legally, if you are a contractor they do not have much say unless you have signed a contract stating that you cannot. however, if they don't like it they do not have to continue to use your services.

as to a LLC or a sole proprietorship, that would be best answered by your accountant. in most cases, the llc does not give you much protection, because you are the sole member of the corporation, but again, that is best answered by an accountant and lawyer licensed to practice in your state.

generally, adding a CFII and a MEI is tax deductable, as are refresher courses if your teaching is not just a hobby.

bob

 

[Katamarino]

Is the addition of the initial CFI tax deductible?

 

[James331]

As a CFI, often free lance, I didn't pay for insurance, I ether was covered on the students policy, or had him sign a waiver, I also have decent judgement and OK skills, so I wasn't too worried about being the cause of damage and chaos.

As for taxes, not a CPA, but I've written everything aviation related off since I've been a CPL, ratings to hangars to avgas, now for me I put food on my table with aviation, I'm not a dentist with a CPL who never made a buck flying, that said I've never had a CPA balk at those write offs, not have I ever heard from the IRS on the matter.

I wouldn't bother with a LLC unless you're going to be bringing aircraft and other expensive stuff into the mix.

Again, not a insurance sales person, nor a CPA, just what's worked for me for years. YMMV


As for freelancing, doesn't matter if you're W2 or 1099, that's the "free" part, go toss up some cards, post some adds and see what comes in, what you do outside of your working schedule, as long as you don't use their resources, is none of the flight schools business.

I would also hold off on all these extra CFI ratings till you start making money and start seeing a need for them.

 

[Vance Breese]

I am a newly minted CFI/CFII (with MEI forthcoming) and am looking at working at the local flight school (about a dozen planes give or take). This isn't super duper bread winning for me, but I really enjoy teaching and somebody else is paying so that's a win.

Next, can I freelance outside of my place of employment without owner-students having to go through the flight school? Would this be dependent on whether I was working as a contract (1099) employee or on the actual payroll (W-2)? If I were a 1099 guy, would it be best to set up my own business and just look at it as if my business were providing a service to the flight school instead of them employing me? LLC or sole proprietorship?

Would my flying in pursuit of more endorsements and add-ons be tax deductible?

In my opinion the problem with freelancing when you are working for a flight school is the flight school has spent money on marketing your services and hopes to get a return on those marketing dollars.

It you are training nearby it is likely the schools perception would be that you are doing parasitic marketing diminishing the value of their marketing dollars.

Ask the school for some guidelines on freelancing while you are working for them. I feel it is better to resolve the issues up front as part of the negotiations before going to work for them.

I feel you should speak with a tax professional on the best ways to handle the accounting.
In my experience the answer is seldom simple or logical.

 

[dell30rb]

regarding tax deductible for training

I am adding a multi rating to my commercial certificate. Not my primary employment, but I am going to do some paid gigs on the weekends and such and having the multi is a necessity for the jobs. Tax deductible?

 

[Vance Breese]

regarding tax deductible for training

I am adding a multi rating to my commercial certificate. Not my primary employment, but I am going to do some paid gigs on the weekends and such and having the multi is a necessity for the jobs. Tax deductible?

In my opinion it is tax deductible.

I recommend talking to a tax professional because it needs to fit into your overall tax planning and there are often peculiar record keeping issues.

A business that doesn’t make money may be considered a hobby and it is one of the red flags that may trigger an audit.

Finding out that you didn’t do something properly during an audit often launches further inquiries and the IRS agent often just begins inventing things leading to penalties and interest charges.

 

[James331]

In my opinion it is tax deductible.

I recommend talking to a tax professional because it needs to fit into your overall tax planning and there are often peculiar record keeping issues.

A business that doesn’t make money may be considered a hobby and it is one of the red flags that may trigger an audit.

Finding out that you didn’t do something properly during an audit often launches further inquiries and the IRS agent often just begins inventing things leading to penalties and interest charges.

Lots of hobby banks and car makers, guess the entire government is a hobby too.

It's not that bad, but if you're straight trying to pull one over, ie you got a PPL, don't even travel long distances for work, work in a complety non aviation sector, and are trying to write off a Bo, yeah no Bueno.

Don't talk to a CPA, talk to a aviation CPA, ask around the airport, you don't want to pay someone to learn on your tab and provide half arse advise, been there done that, non aviation CPAs arnt worth having in aviation related biz.

 

[flyingron]

There's no such thing as a "1099 employee." You're either an employee or an independent contractor. If you are the latter and make more than $600 from one source, they should 1099 you. Note that in my opinion, many flight school CFIs are mischaracterized as independent contractors. They aren't independent at all if the flight school exerts the typical level of control that they do.

Unless you've signed some sort of contract with the flight school prohibiting freelancing, you are not prohibited from doing so. Of course, anything that looks like you're raiding the school for customers or otherwise abusing their proprietary information may get you in trouble with them. Best to let them know of your intentions at the outset.

LLC isn't likely you to provide you any benefit in a one-man training operation. You're still going to have 100% liability for your actions. As far as the taxman is concerned, your LLC is going to be a disregarded entity (i.e., the same as if you just treated the business as a sole proprietorship).

As for deductible expenses, anything training required to keep your existing job (FIRC, for example), things that improve or maintain skills (getting your II, MEI, adding type specific training, etc...), is also fair game. Things that qualify you for another job (like getting your ATP) are arguably not deductible. If your money from self-employment, you just take these expenses off the top on your Schedule C. If you are an employee, you may deduct them on Schedule A.

As for liability insurance, you'd like some, I'm sure. My problem is that there are NO policies available that would provide sufficient coverage for the risk. If you have a smaller net worth, you may find some. Note the premiums are also deductible as the training above.

Of course, if your deductions outstep your income, you better be able to show a business motive lest the IRS limit them as "hobby losses.