LLC ? Corporation ?

[Speedy]

Im getting ready to pull the trigger on a plane.

What are the advantages of buying it under an LLC or Corp ? Verses just buying it under my name alone. I live in Florida.

Thanks

 

[JHW]

cons: complications, and potential difficulty selling

pros: people who aren't attorneys will tell you it's a good idea

talk to your own attorney about the realities. It will be enlightening regarding much of the folk wisdom you read online about this question.

 

[Warrior]

cons: complications, and potential difficulty selling

pros: people who aren't attorneys will tell you it's a good idea

talk to your own attorney about the realities. It will be enlightening regarding much of the folk wisdom you read online about this question.

Yes. I am not an attorney and I "heard" at a financial lecture given at a dental meeting that if you own something like a golf cart that can damage folks you should own it in an LLC. He then went on to give an example of someone who injured himself in the lecturer's golf cart which happened to be owned by the LLC. The payoff to the injured party was limited to the insurance coverage thanks to the LLC.

It is interesting to hear other opinions on LLC ownership of things.

 

[AdamZ]

This is a very basic primer on the issue and you should not rely on it to make a decision but rather consult with counsel in your state. So that said,

Sole ownership means that you are liable for any injuries caused or debts incurred with regard to the plane.

An LLC or Corporate ownership generally insulates you from liabilty for accidents and debts. So for example if Peter Pilot is flying the plane and crashes and hurts someone or taxis it into the Archer sitting on the ramp. You would theoretically be insulated from liabiltiy for the accident. The LLC or Corp would not. ie the injured party would come after the entity rather than you personally. If you decide to bring others in on the plane you would personally be insulated from their negilgence. Now if you are the pilot who causes injury, the injured party can make a claim against you personally and your personal assests could be exposed regardless of whether the plane is owned by an entity or you personally.

If you take the plane into the shop to have work done and you get into a dispute with the shop over the work and you refuse to pay the bill, if you own the plane the shop could assert their claim against you personally. If an entity owns the plane they should go after the LLC or corp for payment of the bill.

If you plan on bringing other owners in at sometime. purchasing the plane in the name of an LLC or corp may make sense as you might be able to transfer shares easier than if you owned as an individual and you might also be able to avoid certain sales and use taxes when selling the shares. There may also be some tax advantages if you own the plane in an LLC or corp, but you should consult with a tax professional who is familar with your states tax laws regarding these issues.

Also if there will be multiple owners it is easier and usually less expesnive to enforce rules regarding the plane and enforce decions made by the group, i.e. to uprgrade the avionics if the plane is owned by a corp or LLC. The shareholders agreement for a corp. or membership agreement for an LLC will spell out owners obligations and should provide a means for enforcement if someone fails to comply.

 

[FORANE]

I have an LLC and had a corp but am not an attorney.

Benefits of llc or corp:
If you own an asset like a plane in a llc or corp, you may sell the llc or corp instead of the plane thus saving sales tax on the purchase to the subsequent owner.
If you allow others to fly the plane and it is in the name of a llc or corp, liability may be limited to the net asset value of the llc or corp. Flying it yourself, you may be liable regardless.
There may be other benefits such as the plane not appearing on public records, financial forms, etc. in your personal name.

Drawbacks of llc or corp:
Hassle factor of maintaining the entity. llc is less hassle than a corp but both require some amount of paperwork, state filings and possible separate returns.
Cost of above including state filing fees, accountant fees for tax preparation if you use an accountant, etc. Some states such as TN will tax the net asset value of a business annually in the form of a franchise tax; you would be wise to investigate if your intended state has one.

 

[JHW]

Benefits of llc or corp:
If you own an asset like a plane in a llc or corp, you may sell the llc or corp instead of the plane thus saving sales tax on the purchase to the subsequent owner.

Read through everything this guy went through and what was his major problem on the ferry flight to alaska in a tri-pacer. Post 18-onward is the relevant part but the whole thing is a good read

http://forums.aopa.org/showthread.php?t=86611&highlight=alaska

 

[FORANE]

Read through everything this guy went through and what was his major problem on the ferry flight to alaska in a tri-pacer. Post 18-onward is the relevant part but the whole thing is a good read

http://forums.aopa.org/showthread.php?t=86611&highlight=alaska

Might be a good read if I could access it, but I cannot. Presume it was some sort of botched title transfer? The business form of ownership can make proof of ownership and authority to transfer said ownership more difficult but should not be an overriding issue to prevent choosing a business entity as a form of ownership.

 

[AdamZ]

Read through everything this guy went through and what was his major problem on the ferry flight to alaska in a tri-pacer. Post 18-onward is the relevant part but the whole thing is a good read

http://forums.aopa.org/showthread.php?t=86611&highlight=alaska

Thanks for posting that. What a fantastic adventure. However; the author's misfortune has nothing to do with whether a plane should be owned by an individual or LLC or Corp. More to do with. Have a title search done when buying.

 

[JHW]

Thanks for posting that. What a fantastic adventure. However; the author's misfortune has nothing to do with whether a plane should be owned by an individual or LLC or Corp. More to do with. Have a title search done when buying.

there's more to it than that.

ownership by an individual = buyer needs to do title search before buying

ownership by an LLC = buyer needs to do title search for airplane plus due diligence on acquiring a corporation

buying and selling companies is not trivial. When shopping for planes I never considered one owned by an LLC, it's just too much work.

 

[wabower]

If/when an artificial entity is involved, you can almost always figure that the seller will want to sell the entity and the buyer will always want to buy the asset, especially if any depreciation has been claimed. Further, the buyer will be required to perform two prebuys, one on the plane and one on the business he is buying. These complications don't necessarily determine which method to use, but should be considered as part of the planning.

 

[hindsight2020]

So in other words, if the plan is to fly the airplane yourself and yourself only, the benefits of forming an LLC just to stick the airplane under it is all bang no buck. Isn't that what insurance is for anyways (limiting/capping personal liability)?

 

[Skylane81E]

My plane is LLC owned, the reasons for it are valid and personal.

However if I was to sell it today the LLC would sell its only asset to the buyer

 

[wabower]

The high-dollar aviation lawyers who present at NBAA tax risk conferences strongly advise that insurance is your friend and dependence on structure is unwise.

So in other words, if the plan is to fly the airplane yourself and yourself only, the benefits of forming an LLC just to stick the airplane under it is all bang no buck. Isn't that what insurance is for anyways (limiting/capping personal liability)?

 

[poadeleted20]

What are the advantages of buying it under an LLC or Corp ? Verses just buying it under my name alone. I live in Florida.

If the plane is going to be part of a commercial operation or other business venture (like a leaseback) or part of a joint ownership system, the advantages are tremendous, including debt and liability protection as well as possible tax advantages. If it's just going to be your personal plane which only you fly, it's just going to be added expenses with no advantages. In between, it's all situations which only your attorney and tax professional can determine.

 

[wsuffa]

there's more to it than that.

ownership by an individual = buyer needs to do title search before buying

ownership by an LLC = buyer needs to do title search for airplane plus due diligence on acquiring a corporation

buying and selling companies is not trivial. When shopping for planes I never considered one owned by an LLC, it's just too much work.

Unless, of course, you're just buying the asset, in which case the diligence gets much, much easier....

 

[poadeleted20]

So in other words, if the plan is to fly the airplane yourself and yourself only, the benefits of forming an LLC just to stick the airplane under it is all bang no buck. Isn't that what insurance is for anyways (limiting/capping personal liability)?

Exactly, although I'd add recurrent training, good procedures, adherence to regulations, and intelligent aeronautical decision making to the list along with insurance.

 

[gismo]

So in other words, if the plan is to fly the airplane yourself and yourself only, the benefits of forming an LLC just to stick the airplane under it is all bang no buck. Isn't that what insurance is for anyways (limiting/capping personal liability)?

If you're not partnering with someone, the one advantage of having your airplane owned by a separate legal entity is that if you let someone else use it, you might be shielded from any personal liability if they are involved in an accident.

 

[AdamZ]

there's more to it than that.

ownership by an individual = buyer needs to do title search before buying

ownership by an LLC = buyer needs to do title search for airplane plus due diligence on acquiring a corporation

buying and selling companies is not trivial. When shopping for planes I never considered one owned by an LLC, it's just too much work.

But the author in the AOPA did not buy the company he bought the asset. Buying the company is risky for many reasons and there is a lot of due diligence. I'd only buy the asset.

If/when an artificial entity is involved, you can almost always figure that the seller will want to sell the entity and the buyer will always want to buy the asset, especially if any depreciation has been claimed. Further, the buyer will be required to perform two prebuys, one on the plane and one on the business he is buying. These complications don't necessarily determine which method to use, but should be considered as part of the planning.

Wayne thats true if the buyer is buying the business, not a great idea IMHO. Now if he's just buying the asset the FAA from my understanding takes things on face value so if it is clean on its face it should be a valid transfer of the asset.

The high-dollar aviation lawyers who present at NBAA tax risk conferences strongly advise that insurance is your friend and dependence on structure is unwise.

Advice I agree with.

Unless, of course, you're just buying the asset, in which case the diligence gets much, much easier....

Yup.

 

[garyb]

I used to think that one bought insurance to protect oneself should something go wrong.

The lawyers corrected me. You buy insurance to protect others from your own stupidity.

First line of defense: Don't take anyone flying with you and don't crash into anyone's property.
Second line of defense: Get adequate liability insurance in case the first line got breached.
Final line of defense: Put your assets (not just the plane) into separate entities - LLC, corp, limited partnership

 

[wabower]

The distinction to be made is that sellers will in many cases want to sell the entity, and in some cases they will insist on doing so. At that point the buyer must understand that the deal is not doable, and why.

And it's not just little airplanes, when I first tried to buy a G-V in Houston for a Dallas-based sports team owner in 1999, the trash hauling company that owned it insisted on selling the entity. I told them we could continue the discussion only if the transaction included only the airplane and not the wrapper, and after a brief consultation with their aviation attorney they quickly agreed.

PS: This is it. Do you like green and yellow trim? Does it remind you of any dumpsters you've seen?

But the author in the AOPA did not buy the company he bought the asset. Buying the company is risky for many reasons and there is a lot of due diligence. I'd only buy the asset.



Wayne thats true if the buyer is buying the business, not a great idea IMHO. Now if he's just buying the asset the FAA from my understanding takes things on face value so if it is clean on its face it should be a valid transfer of the asset.



Advice I agree with.



Yup.

 

[poadeleted20]

First line of defense: Don't take anyone flying with you and don't crash into anyone's property.
Second line of defense: Get adequate liability insurance in case the first line got breached.
Final line of defense: Put your assets (not just the plane) into separate entities - LLC, corp, limited partnership

I'm good with the first two, but the last won't help. Your ownership stake in the "separate entities" will remain at risk if you are found liable even if the assets themselves will not be directly at risk.

 

[Speedy]

Thanks for the advise guys. The owner is selling just the airplane not his LLC. I've researched the LLC and all is good. He is the President and only member of the LLC. He has owned the plane 10 years.

I was only looking at a tax break if bought with an LLC or Corp. Sounds like there isn't really a tax break. I will be the only one flying the plane. Still I will check with my accountant today and see what she thinks.

Thanks Again

 

[wabower]

Will sales tax be imposed if you buy the plane? If so, and if you know the LLC is clean (taxes paid, no debts, no litigation, etc.) you can explore the possibility of buying the LLC, IF your CPA and attorney bless the deal and the sales tax can be legally avoided by doing so. QUOTE=Speedy;1145945]Thanks for the advise guys. The owner is selling just the airplane not his LLC. I've researched the LLC and all is good. He is the President and only member of the LLC. He has owned the plane 10 years.

I was only looking at a tax break if bought with an LLC or Corp. Sounds like there isn't really a tax break. I will be the only one flying the plane. Still I will check with my accountant today and see what she thinks.

Thanks Again[/QUOTE]

 

[AdamZ]

The distinction to be made is that sellers will in many cases want to sell the entity, and in some cases they will insist on doing so. At that point the buyer must understand that the deal is not doable, and why.

And it's not just little airplanes, when I first tried to buy a G-V in Houston for a Dallas-based sports team owner in 1999, the trash hauling company that owned it insisted on selling the entity. I told them we could continue the discussion only if the transaction included only the airplane and not the wrapper, and after a brief consultation with their aviation attorney they quickly agreed.

PS: This is it. Do you like green and yellow trim? Does it remind you of any dumpsters you've seen?

View attachment 29594

Nice plane, drool!

Will sales tax be imposed if you buy the plane? If so, and if you know the LLC is clean (taxes paid, no debts, no litigation, etc.) you can explore the possibility of buying the LLC, IF your CPA and attorney bless the deal and the sales tax can be legally avoided by doing so. QUOTE=Speedy;1145945]Thanks for the advise guys. The owner is selling just the airplane not his LLC. I've researched the LLC and all is good. He is the President and only member of the LLC. He has owned the plane 10 years.

I was only looking at a tax break if bought with an LLC or Corp. Sounds like there isn't really a tax break. I will be the only one flying the plane. Still I will check with my accountant today and see what she thinks.

Thanks Again

[/QUOTE]

This is generally correct, as Wayne clearly pointed out previously, however, the due diligence involved in buying the corp can be pretty involved and is information that is not covered in a regular aircraft title search.

 

[wabower]

The buyer should also see the selling LLC/Corp's tax returns to determine tax basis in the asset. If it has been depreciated the buyer potentially exposes himself to recapture on sale, and reduced resale price of the entity or the plane if tax basis is less than imputed value.

Nice plane, drool!

This is generally correct, as Wayne clearly pointed out previously, however, the due diligence involved in buying the corp can be pretty involved and is information that is not covered in a regular aircraft title search.[/QUOTE]

 

[Ateaist]

This is generally correct, as Wayne clearly pointed out previously, however, the due diligence involved in buying the corp can be pretty involved and is information that is not covered in a regular aircraft title search.

Buying the LLC (or corporation) is far different from buying just the asset. If you buy the entity you will be liable for all of its liabilities whether or not they accrued before you bought it. As a buyer you want only the asset, not the entity, unless it provides you a material tax advantage to do so (and then proceed only after consulting with a knowledgable tax specialist and being represented by an experienced M&A attorney).