business side of being a instructor

\__[Ô]__/

\__[Ô]__/

Pre-takeoff checklist
Joined
Jul 4, 2012
Messages
496
Location
Ames, IA
Display Name
Display name:
david
Some questions for the instructors (especially those working independently) out there... I'm interested in how you handle the financial side of instructing.
How are you set up from a tax/business standpoint? Are you offering services in your name, or do you have some sort of business set up? Does money go right into your main bank account or do you have a separate account? Any things I need to watch out for? etc...

Basically I'm trying to find out what I need to know about being a part-time, independent instructor from the business and tax side.

I realize what is best for one person may not be best for me. I'm planning to meet with a professional to talk about this. But I don't know the right questions to ask yet. So I'm really interested in hearing how others are doing things and why.

Any thoughts would be appreciated.
 
Generally an LLC or trustee relationship of some kind.

Keep business in the Business account.

Just like working for any other company, except the boss is less likely to wake you with 2AM phone calls.
 
I have a LLC and all my instruction runs through it. It has its own bank account. I accept checks written to the LLC which is then deposited into that account. I also have a merchant account to accept credit cards in the name of the LLC which flows into the business account as well.

All that said, that buys you essentially zero liability protection. The only way to protect yourself is to insure for flight instruction activities with enough insurance to exceed your assets by many times. Just my opinion :)
 
jesse said:
I have a LLC and all my instruction runs through it. It has its own bank account. I accept checks written to the LLC which is then deposited into that account. I also have a merchant account to accept credit cards in the name of the LLC which flows into the business account as well.

All that said, that buys you essentially zero liability protection. The only way to protect yourself is to insure for flight instruction activities with enough insurance to exceed your assets by many times. Just my opinion :)
Click to expand...


Yeah, in this situation, where you are the one giving the training, the LLC won't protect you one bit from a tort claim. You can generally protect yourself from contract claims that are executed by you on behalf of the LLC if you clearly represent that you are signing in your capacity as agent for the LLC. (REQUIRED DISCLAIMER: Although the laws may be different in your state. Contact your own attorney for more details.) Thus, if you buy something as a corporation, or promise to do something as a corporation, they can execute against the LLC assets, but not you, with several notable exceptions. Examples include failing to honor the corporate form (such as co-mingling corporate funds with your own, and treating corporate assets as your own), and improperly disposing of corporate assets (i.e. writing yourself a big fat check when you know the corporation has debts to pay). Again, talk to your lawyer about what the exceptions might be in your state. These are just a few.
 
Walboy said:
Which is one of the primary issues giving me pause from becoming a CFI as a part time retirement gig. I haven't seen any policies with a liability limit of more than $1M.

Any source for instructor liability limits which are significantly higher? I have given cursory looks at AOPA and NAFI.
Click to expand...

Not sure. At this point in my life a million of liability is plenty. The thing that sucks is I have to bill a lot of instruction to pay for the insurance. Some years I go without it, then some student or pilot makes me nervous, and I buy it again :)
 
Unless you have no assets, get professional liability insurance. Don't be afraid to charge for every minute of your time.
 
Note: If you demand everyone pay you in cash, you will lose a lot of students.
 
There are professional liability products specifically for flight instructors. Your non-aviation insurance agent won't be able to help you with this. Both SAFE and NAFI have discounted programs.
 
i recommend finding a wife/girlfriend with a good steady income :)
 
dans2992 said:
Get paid in cash... ;)
Click to expand...

Yup

I was surprised how nearly all of my students were cool with it, but its the cleanest and most patriotic way to do it.

I've also instructed for barter.
 
write-stuff said:
Note: If you demand everyone pay you in cash, you will lose a lot of students.
Click to expand...




Not that I disagree with your statement necessarily, but DPEs seem to have no problem demanding cash only.
 
Make sure your insurance policy still covers you when you send off a solo student pilot who crashes the plane and causes damage to another person.
 
dans2992 said:
Not that I disagree with your statement necessarily, but DPEs seem to have no problem demanding cash only.
Click to expand...


I had an examiner that would take the cash, then make a big show out of counting out one bill at a time, then stack the bills and roll them up. Next he would take a rubber band out of his pocket, wind it around the bills, hold the roll at eye level, turning the roll as if he had never seen one before, drop the cash in his pocket, then look up and say "Alright lets get started." :rofl::rofl::rofl:
 
Zeldman said:
I had an examiner that would take the cash, then make a big show out of counting out one bill at a time, then stack the bills and roll them up. Next he would take a rubber band out of his pocket, wind it around the bills, hold the roll at eye level, turning the roll as if he had never seen one before, drop the cash in his pocket, then look up and say "Alright lets get started." :rofl::rofl::rofl:
Click to expand...

If I knew I was walking into that I'd bring all my old temp certs and when he handed me my new one I'd pull them out, lay the new one on top, roll them up, hold them at eye level, put a rubber band around them all and shove 'em in my pocket and say, "alright, thanks".:)
 
Get yourself a business license, (state and local) maybe a sales tax number/ein, email or website or something.... After that, it is just insurance and taxes.... LLC is an option, but in a lot of states that will cost you a little more for only some protection. You'll want a business checking account, debit card, credit card processing app for your phone/tablet..

I haven't seen cfi insurance offer more than 1m..... You may have to instruct 15-25 hours to pay for all of that? Just a guess
 
jesse said:
I have a LLC and all my instruction runs through it. It has its own bank account. I accept checks written to the LLC which is then deposited into that account. I also have a merchant account to accept credit cards in the name of the LLC which flows into the business account as well.

All that said, that buys you essentially zero liability protection. The only way to protect yourself is to insure for flight instruction activities with enough insurance to exceed your assets by many times. Just my opinion :)
Click to expand...


:yeahthat:

LLC primarily for the benefit of the FBO I subcontract to so they are clear of any hint of employee status. An LLC or Corporation can't shield you from your own acts.
 
If you dont want everything in your name, you can register and publish a 'doing business as' (dba) for your business via a ficticious name petition. The fee for that filing is very low e.g. $10 for South Dakota. You can then obtain a separate tax number (FEIN) for the dba (costs nothing). This allows you to obtain a business account under that dba, however you will remain personally liable for that account. That way, your merchant account will show up on your customers credit card as 'Billybobs flight academy' and not as a payment to you personally. If you have customers who use their plane for a business and wish to deduct the cost of your services for things like recurrent training, they will want a formal invoice with a tax ID etc.

Maintaining an LLC or Inc can cost between $50 and $900 per year and you are probably still going to file your taxes together with the personal return on a schedule C (iow there is no separate accounting fees for a corporate return, no different from a single member LLC or chapter-S corporation). Anything you can offset against your LLC income (e.g. some training expenses, uniforms) you can offset on your schedule C for the dba. As pointed out, if all the business does is to sell your personal services, there is no liability benefit to having a corporate entity (LLC/Inc). So rather than spending the money on a franchise tax/registration fee for the LLC, you are probably better off spending that money on your insurance coverage. If you maintain a fixed facility or own a plane for your 'flight school', having a corporate entity may be helpful in case of a claim that is not related to your personal services as a CFI. E.g. someone rents your plane and wrecks it or they slip&fall in your hangar.
 
Last edited:
James331 said:
Yup

I was surprised how nearly all of my students were cool with it, but its the cleanest and most patriotic way to do it.

I've also instructed for barter.
Click to expand...

Are you sure you're not confusing the U.S. with Greece? :D
 
You must log in or register to reply here.
Back
Top