Forming an aircraft LLC - one guy's experience

[Tom]

This post is for anyone interested in, for whatever reason, placing their aircraft into an LLC.  I've recently gone through the process and will share a bit about what I think that I've learned and am posting the process I went through.  I am by no means an expert and what I have done may be wrong.  Maybe comments can clarify this.  This post is only addressing an LLC for a private owner who will operate the plane privately and not for hire; it has nothing to do with LLCs that have anything to do with making money.

Why an LLC?  To summarize much, there are practically no reasons to go through this for tax reasons.  It is for anonymity reasons and potentially risk mitigation.  If you are in a partnership, it makes sense to form the LLC (or limited liability partnership (LLP)) as one extra hurdle in the search for deep pockets.  Of course if you are flying the plane and have an accident, it doesn't matter if you are in a LLP, LLC, or and INC plane--you're the operator and you're liable.  It can make sense to ease people buying into/out of the aircraft if a partnership LLC.  There can be some benefit when it comes to selling the plane, but my purpose was just for anonymity (notice a theme?) in an ADS-B tracking world.

I'm a sole owner so my options were generally a LLC or INC.  LLCs generally have much less administrative hassles and fees to pay every year, so it seems most people go with the LLC.

In which state to form?  I chose Montana.  It seems that several states have been in a war of "who can offer the least expensive LLC."  Delaware incorporation is expensive and not in the running.  Until recently, Nevada has been a popular place to form though now Montana seems to be the least expensive option.  L3 and some other theoretically smart people have formed in Montana to registered their aircraft, so, if you're the type that follows the presumably smarter people when you're in don't know what you're doing, Montana may be a good choice.

_____

The Montana process.  It can take as little as 20 minutes and $90 to form.  After this, you must file an annual report and pay $15 per year to the state of Montana (this is the lowest fee of any state I could find).  In addition, Montana (and most all states I think) requires that you have a registered agent located in the state that the LLC is formed.  You can be your own registered agent if you are forming in your own state (for free obviously), though the benefit of using a registered agent is that in quick online searches the registered agent is the name that comes up, not the LLC principles (though for a small fee or hurdle jump the enthusiastic snooper can still find your owner information). There are several "Registered Agent" service companies with whom you can use.  Basically you pay the registered agent whatever fee they charge to act as the registered agent, typically $40-50/year.  

The service I used cost $45 to enlist that company as my registered agent.  I simply filled in an online form that took about 2 minutes, then paid via credit card.  Immediately I had access to a series of .pdfs that included the choice of "Articles of Organization for Domestic Limited Liability Company".  This form is also found here, and this is the only form that you need to form the LLC.  You will note that you must sign the bottom and that the Registered Agent must sign in the middle of the form.  With the registered agent company that I used, after I paid the $45 and had access to the .pdfs, when I opened the AODLCC document, the registered agent's signature and address had been put on the form.  Then I typed in the remaining few items, printed the form, and signed it.  I then went to the Montana Secretary of State office and paid online the $70 LLC registration fee as well as a $20 priority fee plus a $3 credit card processing fee.  After paying this fee on the SOS website, I was given a receipt.  I then took the receipt, the AODLCC form signed by me, added a cover sheet, and faxed it to the SOS office.  The next day the LLC was registered.  If all goes well, I'll just need to pay Montana $15/year, file a brief report (nothing fancy, examples available online), and pay the registered agent $45.

Notably, several registered agent companies will file the documents for you for a few hundred dollars, but there is no reason to do this unless you need the LLC formed in the next hour, and, it seems that faxing the documents in plus $100 extra (not $20 extra priority service) to the SOS accomplishes the same thing.

How to convert the plane from private ownership to LLC:
FAA provides guidance for registering aircraft into an LLC (see attached)
A helpful individual on the web created a document that satisfies the current FAA requirements (see attached)
8050 forms (I've only submitted these, waiting to hear back if I screwed it up, and remember must be on original forms, no typos, no corrections):
8050-2:  in the "Name and Address of purchaser" one writes "Whatevername Limited Liability Company" and the address of the company.
8050-1: Type of registration is "3. Corporation" [even if LLC], and "Name of Applicant" is "Whatevername Limited LIability Company" with appropriate documentation regarding the LLC as cited in the FAA guidance on the subject.

Hope this helps!

 

 

 

 

 

easy faa llc.pdf

faaLLC.pdf

Edited September 7, 2015 by Tom

[N33GG]

Very interesting.  Thanks!

[ryoder]

The best way to avoid liability I can quote from a rap song "got everything in my mama's name."

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[Bravoman]

The best way to avoid liability I can quote from a rap song "got everything in my mama's name."

 

 

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that's a false economy if you ever get a divorce!

[ArtVandelay]

that's a false economy if you ever get a divorce!

Not if "mama" is your actual mother

[Joe Zuffoletto]

I just put my Mooney into a Colorado LLC because I've started renting it to a couple friends of mine and I want a bit more of a liability shield in case one of them crashes the plane. My attorney is my registered agent. Colorado is cheap too: $100 to form, $10 per year. Because I'm concerned about liability protection, I'm taking other steps to strengthen my LLC veil. For example, I created a bank account in the LLC's name and all the income and expenses for the plane now go through that... my buddies write their rent checks to the LLC, and the LLC pays for all the maintenance, GPS database upgrades, hangar, insurance, etc.

Edited September 8, 2015 by Joe Zuffoletto

[DonMuncy]

You (any of you with LLCs) probably ought to consult an attorney in your area.

In law there is a concept called "piercing the corporate veil". Essentially, it says that if you don't treat a corporation like it is a real corporation, the liability protection afforded to a corporation won't be recognized. That means, among other things, you must keep your money and the corporation's money separate, like Joe is doing. If you don't do it properly, you may have wasted you money and effort in setting up the LLC, as it relates to liability.    

[ArtVandelay]

As far as the anonymity, so FAA lookups show the LLC as owner, I thought there was a way to find the owner of a LLC, although maybe not a free web site?

[N601RX]

When registering a plane under an LLC the FAA requires you to provide a copy of the Articles Of Incorporation showing that the person signing the FAA form is actually a managing member and has authority to conduct transactions, so they already have a contact person if they want to talk to someone.

[Joe Zuffoletto]

As far as the anonymity, so FAA lookups show the LLC as owner, I thought there was a way to find the owner of a LLC, although maybe not a free web site?

I don't think it would be difficult to determine the managers/members of an LLC. It gets convoluted if the LLC is owned by another LLC, corporation, etc.

[midlifeflyer]

As far as the anonymity, so FAA lookups show the LLC as owner, I thought there was a way to find the owner of a LLC, although maybe not a free web site?

Depends on the state. In some states, the current members of an LLC are part of the organizational documents and annual reports. In others not. The FAA requires a citizenship statement for an LLC that includes a list of the members. I don't know offhand the degree to which that statement is publicly available.

If information is needed there's usually a way to find out. Although LLCs can be used in some states for some small measure of annonimity, that is not really the goal of the design.

[Danb]

Joe that's the same way I do it, Being a cpa Don nailed it, always do your best to separate business from personal, Easier to beat the irs with adequate,timely,fully documented records versus a bag of commingled trash...you can win with clearly documented lies and easily lose with poorly kept truthful items...

midlifer..it is easy to get the info. Since it is available to the public..be careful..

[midlifeflyer]

Joe that's the same way I do it, Being a cpa Don nailed it, always do your best to separate business from personal, Easier to beat the irs with adequate,timely,fully documented records versus a bag of commingled trash...you can win with clearly documented lies and easily lose with poorly kept truthful items...

midlifer..it is easy to get the info. Since it is available to the public..be careful..

not too sure what the "be careful" is for.

[Yetti]

Texas is $300.00 to register. No fees a year if your revenue is low.   The problem is most states publish the registered agents and officers.   If it is a Texas LLC I can find the owners in about 3 minutes.   Montana looks to be the same.  https://app.mt.gov/bes/  

Also the FAA registration will show a transfer from your name to the LLC and the address are probably the same.

You still have to do a tax report You did not mention getting your Tax ID from the IRS.  I just use Turbo Tax.  

 

The hardest part in Texas was finding a name that was not already taken.

There may be more anonymity by creating a DBA under the LLC.   In Texas that is a form with the County Clerk and not sure they are online searchable.

Not an attorney, not an accountant, every now and then I can do a nice landing

[midlifeflyer]

   There may be more anonymity by creating a DBA under the LLC.   In Texas that is a form with the County Clerk and not sure they are online searchable.

The whole purpose of a DBA  filing requirement is to let the public know who is behind a business that is using a name other than it's legal name. It is specifically to avoid anonymity. So they are (almost?) always searchable. Whether they can be searched online or you need to go to the filing office or there is some other mechanism in place depends.

If the LLC created the DBA, the (legit) filing will list the LLC in the DBA certificate. Then you just search the state records for the LLC.

The question of anonymity is really anonymity from whom? There have been historically very few attempts at truly anonymous official set-ups. The Illinois Land Trust was a notable one. The unofficial but legal ones generally involve a complex web of layered entities in states that don't require identification of the underlying owners. But, even then, it's typically more a matter of digging through the layers rather than true anonymity.

 

 

[Yetti]

Last time I looked Harris county Texas DBAs were not so online.  Now there are, but you have do a login to get the film or go to the office.   So then you are left to matching addresses with the online information.  Which is not too hard either.

 

[Danb]

The be careful is just to keep your records clean and personal and aircraft documentation separated...it was just in case of an IRS audit of which I have handled to many over the last 3 decades...merely separation of "adequate documentation"

[Danb]

"Adequate contemporaneous record keeping "   enough good stuff on a timely basis

[YellowBird]

The downside of registering your plane under an LLC in Texas is that the County Tax Assessors search the FAA registry regularly and will impose a business personal property tax on the LLC,.  The LLC will have to file a rendition and pay property taxes on the value of the plane and any other personal property the LLC owns.  This can be a significant ANNUALexpense, depending on the value of the aircraft. 

 Is this the case with a Montana LLC?

[carusoam]

Welcome aboard, YellowBird.

Best regards,

-a-

[peevee]

Montana has state airplane registration, now that your airplane is based there legally, you'll have to address that

[Austintatious]

On 3/27/2019 at 7:27 PM, YellowBird said:

The downside of registering your plane under an LLC in Texas is that the County Tax Assessors search the FAA registry regularly and will impose a business personal property tax on the LLC,.  The LLC will have to file a rendition and pay property taxes on the value of the plane and any other personal property the LLC owns.  This can be a significant ANNUALexpense, depending on the value of the aircraft. 

 Is this the case with a Montana LLC?

In prep fr purchasing my mooney we formed an LLc but ultimately decided not to register the aircraft under it... There really is no benefit if the aircraft is for personal use.  In fact there are quite a few pitfalls to doing so.

 

Another thing peopel should know about purchasing an aircraft in texas is that if it qualifies as an Occasional sale, it is exempt from sales and use tax.

[Andy Edson]

How would this impact taking your plane out of the country IE: Mexico, Canada or the Bahamas? 

[peevee]

1 hour ago, Andy Edson said:

How would this impact taking your plane out of the country IE: Mexico, Canada or the Bahamas? 

I believe it is recommended you have a letter from the LLC authorizing use, but I have flown to canada in our plane, registered in MT and have never had anyone question me. I also happen to be the LLC managing partner.

Edited April 21, 2019 by peevee

[irishpiper]

Do you need to set up a post office box for the LLC or are you using your personal mailing address?  I'm at the beginning stages of my purchase adventure.  Trying to learn as much as possible from others' personal experiences.