LLC or not?

Discussion in 'Flight Following' started by Flyingfanatic, Nov 16, 2017.

  1. Flyingfanatic

    Flyingfanatic Pre-Flight

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    I'm thinking of increasing the amount of flight instruction I provide in the future. I currently only have one student and the occasional Flight Review.

    Is it worth it to develop an LLC or just get a tax ID number and a fictitious name registration? I may develop my work further into contract flying down there road. I can retire in 6 1/2 years so I thinking of going back into Aviation after I retire.

    Thoughts?
     
  2. MauleSkinner

    MauleSkinner En-Route

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    What are you expecting to achieve with the LLC?
     
  3. Flyingfanatic

    Flyingfanatic Pre-Flight

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    Tax and liability benefits. But I'm really not sure what those are specifically.

    I have the feeling that the money made won't really justify the LLC for the tax benefits and liability insurance could handle that, but I thought I'd ask those that have been there and done that.
     
  4. FORANE

    FORANE Pattern Altitude

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    LLC will cost time and money to form and maintain. I have one. It provides no liability protection for my personal actions, only those of other members or employees of the LLC (if any exist). It provides no tax benefits over running my business as a sole proprietorship. YMMV.
     
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  5. brien23

    brien23 Line Up and Wait

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    Join NAFI then Avemco insurance for CFI covers a lot of what you do as a CFI.
     
  6. Fearless Tower

    Fearless Tower Touchdown! Greaser!

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    You get little to zero liability benefit of an LLC in your situation, unless your LLC has multiple instructors.

    An LLC can provide personal liability protection if another member does something wrong. But in an LLC, you are still very much liable for any negligence on your part.


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  7. James331

    James331 Touchdown! Greaser!

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    Got a simple LLC I use for my plane, easy to set up and doesn't cost much, I only use it for accounting/tax reasons, like others said it doesn't do jack for lawsuits or anything like that.
     
  8. NoHeat

    NoHeat En-Route PoA Supporter

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    Filling out tax returns is no fun. And you have to do another if you incorporate.

    So instead of tax savings, you might just get tax hassles.

    OTOH, if the proposed tax cuts for “pass-through” entities happen, they might be good for your flight instruction business, if your personal tax bracket is higher than the reduced “pass through” rate.
     
  9. flyingron

    flyingron Touchdown! Greaser! PoA Supporter

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    Fictititous name doesn't provide any protection at all. It's just a thing that recognizes another name (D/B/A, T/A for an existing business). For a one man operation, an LLC or Corporation isn't likely to provide ANY additional liability protection.

    As for the proposed tax cuts, those who think they are going to see anything from the tax cut bill if it gets passed have been duped as badly as the rest of the country. There's actually ZERO change for service-based businesses, such as flight instruction would be. It's only a relief for capital costs.
     
  10. Ravioli

    Ravioli En-Route PoA Supporter

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    Hangars and airplanes are capital costs, are they not? Might want to get a sim. Plenty of capital involved with even the smallest of flight training operations.
     
  11. luvflyin

    luvflyin En-Route PoA Supporter

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    How does that work? I don't know much, if any of the details. What it sounded like was the 'boss' would get his take home pay after taxes were applied at the Corporate rate instead of at the Personal rate.
     
  12. FORANE

    FORANE Pattern Altitude

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    A single member llc is a non-entity in the eyes of the irs. One would need a separate tax id for a corporate rate.
     
  13. Ravioli

    Ravioli En-Route PoA Supporter

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    A single member LLC can elect to be taxed a corporation. It's a 1 page form.
     
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  14. midlifeflyer

    midlifeflyer Final Approach

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    Ask an accountant about tax benefits. But, in terms of personal liability, for an individual instructor who is doing all the training himself, there are none. or better of for worse, the goal of a limited liability entity is not to remove personal exposure for what we do. If you expand and hire other instructors, there may be some. benefit in insulating you from something they do.

    I did it, but for reasons having nothing to do with liability or taxes. In my case, I thought that the "LLC" label made it sound more like a business rather than just a guy. Strictly marketing.
     
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  15. bflynn

    bflynn En-Route

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    If you can get someone else to be a partner in the LLC, the liability protection alone would be worth it. It takes little time or money to create a LLC.

    If the new tax bill working through Congress right now passes, there would be significant benefits to a LLC. Pass through income would be taxed at 25% rather than a higher personal rate. Partner or not, that carries some kind of benefit.
     
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  16. flyingron

    flyingron Touchdown! Greaser! PoA Supporter

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  17. labbadabba

    labbadabba Pattern Altitude

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    Yep, there are a lot of states too that tax pass-thru income at a lower level than personal income. Kinda BS if you ask me, particularly when it's a 1-owner LLC. But hey, if they're going to write the law that way might as well make it work to your advantage.
     
  18. paflyer

    paflyer Final Approach

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    I don;t know where the "protection from liability" rationale came from; probably the same place that says you should incorporate in Delaware...

    Well, we do have to pass it to see what's in it. But as to capital cost relief, I say "buy an airplane."

    Earlier this year I opened an LLC to own the next airplane for legal separation and privacy reasons if I use it for my business. Also, it'll make it easier to add "partners" should I decide to do that. I'm already paying for tax prep, so adding another form is a minor incremental cost.
     
  19. paflyer

    paflyer Final Approach

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  20. Fearless Tower

    Fearless Tower Touchdown! Greaser!

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    It’s in the name! It says ‘Limited Liability’....therefore it must be good, right?

    And Legal Zoom is laughing all the way to the bank....
     
  21. midlifeflyer

    midlifeflyer Final Approach

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    That's easy. The whole idea behind a "limited liability" company or other entity which provides "limited liability" protection (corporations, some forms of registered partnerships, even business trusts in some states) is, um..., er..., well, "limited liability": the individual is not personally liable for company obligations.

    It's not a particularly long stretch, albeit incorrect, to conclude the entity protects us from our personal obligations so long as we are operating through the company. It really comes as no surprise to me. 40 years of experience tells me it is the single most common misunderstanding of what a limited liability entity is and what it is designed to protect. I've come across people who claim to be familiar with the concept who don't understand it fully; a couple of easy questions can show they don't.