LLC or Personal?

[Fookz92]

Is your Mooney in a LLC (Limited Liability Company) or in your personal name? If in a LLC, Which state did you form it in and why?

 

I am having a hell of a time with the FAA Registration office and getting my airplane in a Delaware LLC. Had anyone else been through or experienced a difficult time with something like this? 

 

 

 

[Vance Harral]

An LLC can be helpful when there are - or may be in the future - multiple owners/operators of the aircraft.  Our aircraft is owned in an LLC for this reason.  It's a Colorado LLC because that's where all the parties live.  It was formed with 3 partners originally.  Over the years a few individuals have sold out of/bought into the partnership.  This was done by selling shares in the LLC, and hence did not require changing the aircraft registration, or filing any state or federal paperwork at the time of sale.  The LLC also provides "some" (but not absolute) liability protection for one partner, if a different partner were to have an accident with liability exceeding the amount of the insurance policy we maintain.  Note that the LLC does nothing in the way of liability protection for the partner actually operating the aircraft.

In exchange for these benefits, we get the burden of maintaining profit/loss records and capital accounts in the LLC, filing a separate tax return for the LLC every year, distributing K-1 forms to the partners, and following the required rules for operating a Colorado LLC.  These things are not particularly onerous or expensive in Colorado, but it's still a nonzero effort and expense - enough so that we pay an accountant for help.  It's particularly important to follow the requirement for an annual meeting, and document it took place.  If you don't follow this rule (and any other applicable rules), it's trivially easy to "pierce" the LLC should push come to shove.

I've never understood the interest in forming an LLC to own an airplane when one is and expects to always be the sole operator.  I suspect most people who do this think it provides some form of tax advantage and/or liability protection that it simply does not.  I'm not well-educated about states outside Colorado, though.  I guess I'd ask what benefit(s) you're interested in by forming an LLC, and what you've been advised about those benefits by actual, practicing tax and law professionals.

[gsxrpilot]

LLC is a waste of time and money if you're a sole owner. 

[midlifeflyer]

If you are looking for personal liability protection for accident you are involved in, an LLC won't give you that. There may be other types of benefits, even for single-member LLCs,  including some liability ones for actions taken by others and asset protection ones, but the asset protection ones are going to be part of a more extensive asset protection/estate planning strategy.

what kind of problems are you having with FAA registration? There are a few Is to dot and Ts to cross because the owner is an entity and not you. You are not alone in having a problem,  but the requirements, although widely misunderstood are actually pretty simple.

Edited April 9, 2018 by midlifeflyer

[Raptor05121]

Sole owner.

[Shiny moose]

I am an LLC in Missouri cost a 1 time fee of 105 dollars. LLC as a separation for asset protection, I don’t want to find out if it really protects anything but it makes me feel good! 

 I had a few problems with the FAA during ownership transfer, they requested that I write a letter stating I was a citizen of the US. I sent a copy of my passport but that didn’t work. I ended up calling them and they were extremely nice,  got it done after an extension, follow the directions exactly, as foolish as they sound. 

[jlunseth]

If you are the pilot when the accident happens, an LLC is no protection.  

[Jerry 5TJ]

Spend the money you would have paid for LLC formation and taxes on buying more liability insurance coverage. 

[FloridaMan]

I have a bit of a different attitude. Mine is in an LLC for identity protection. For instance, if someone backs out in front of me in a parking lot and I hit them in my 20 year old car and they get a lawyer, I don't want a cursory google search of my name revealing that I own an airplane. While those of us with old airplanes know what an expense and stretch the ownership is for us, to most people, owning an airplane makes you somehow wealthy. 

Edited April 9, 2018 by Antares

[Eraaen]

Made the mistake of LLC.  "Thought" I was hiding ownership (from prying eyes etc.) it doesn't.  Total pain in behind.  Now, in order to move it back into my name.  Registration is easy enough.  But then there is the finance company, and, and, and.  I could do it.  I'm just lazy, and I file taxes as zero's.  No reason if you are the sole owner.  Only reason I could think of other than partnership issues mentioned above is that you are writing the whole thing off as a legitimate business expense.  Good luck on that one.  Probably a guaranteed Audit.

[Eraaen]

Funny, we must have hit the button at the same time.  I was hiding ownership from my Ex and my wife's Ex.  They pulled registration and had if figured out within a month.

[mike_elliott]

46 minutes ago, Antares said:

I have a bit of a different attitude. Mine is in an LLC for identity protection. For instance, if someone backs out in front of me in a parking lot and I hit them in my 20 year old car and they get a lawyer, I don't want a cursory google search of my name revealing that I own an airplane. While those of us with old airplanes know what an expense and stretch the ownership is for us, to most people, owning an airplane makes you somehow wealthy. 

If they get a lawyer who doesn't figure out you own a plane and he is after your assets, they hired the wrong ambulance chaser.

[LANCECASPER]

If you are doing a Delaware LLC and signed the FAA transfer and don't put "member" as your title it will get kicked back every time. (LLC's are managed by "members" and the FAA is very strict on this, but they don't spell it out clearly.) After four times of going back and forth a few years ago, once I put member as my title it went right through. On a couple of transfers after that, I did it that way and they went through right away.

They also have a page showing exactly how it must be done if the Seller on record is deceased. PM me if you need that and I can get it for you.

[RobertGary1]

Not an LLC. I live in California and having LLC assets in state cost an $800 annual franchise fee to the state of California for “operating” in the state regardless of the state of registration. 

Delaware is a popular place to incorporate or register because they have greater protection against investor lawsuits. Not sure that helps anything for an aircraft  

-Robert 

Edited April 9, 2018 by RobertGary1

[Bravoman]

I can only speak to the liability aspect, because that is what I do. Here in Georgia anyway, an  LLC or any corporate form will certainly not protect the operator for liability up to his or her assets.  There would be no vicarious liability for the actions or  omissions of a partner in the aircraft while the partner is operating the aircraft.  The only potential avenue of liability I could see to a non-operating partner would be under a negligent entrustment theory, which is a form of direct liability versus vicarious liability.  The non-operating partner would, of course, potentially be liable for maintenance undertaken to the aircraft that might have been a proximate cause, but that again is a species of direct versus vicarious liability.  The bottom line is that a corporate entity will not shield an  owner from the  liability that the owner would otherwise have.  

Edited April 9, 2018 by Bravoman

[INA201]

I was in a Piper Archer partnership a few years ago and we decided to form an LLC for some liability protection but mostly to simplify ownership changes. When everyone in a group is listed on the aircraft registration and a partner wants to sell his/her share you have to go through the registration process every time. The LLC makes it easy to add partners and repurchase the ownership percentage of partners without too much difficulty. We never had this problem but for a partner that was abusing the plane, not paying his/her share, or just breaking the rules of the “corporation,” it’s a lot easier to buy them out and have rules in place to do so quickly. The bank account and adresses(P.O. box) can all remain in the LLC name which also keeps things simpler.  In many ways the LLC makes a partnership situation much more professional. That’s all I’ve got. 

[chrisk]

I do not have my Mooney in a LLC, as I am the only owner and no one else flys the plane.  I do have another aircraft that can be flown by others.  It is in a LLC, with the hope that their bad judgement stops at the LLC.  

[RobertGary1]

I had a partnership in an LLC once that mostly functioned as a way to avoid paying sales/use tax each time a member changed. So i guess that’s one advantage  

-Robert

[midlifeflyer]

4 hours ago, LANCECASPER said:

If you are doing a Delaware LLC and signed the FAA transfer and don't put "member" as your title it will get kicked back every time. (LLC's are managed by "members" and the FAA is very strict on this, but they don't spell it out clearly.) After four times of going back and forth a few years ago, once I put member as my title it went right through. On a couple of transfers after that, I did it that way and they went through right away.

 

The FAA is probably making the silly assumption that people who set up an LLC know what it is, what they are in relation to it, and the proper way of signing for it. The only thing FAA-specific is the citizenship requirement for registration, which the FAA explains pretty well  here.

[Danb]

Delaware Llc should pose no problem setting it up, as others have stated the usefulness of the Llc is limited.

[kris_adams]

Personal here (no llc)...no partners...lots of insurance for liability protection...

[Guitarmaster]

Funny this discussion is going on.

My airplane is registered to me, however, that will be changing shortly.

I recently learned that an LLC is not all that great anymore. It used to be pretty good for liability protection, but lawyers have figured out how to pierce the armor of the LLC. Once that armor is pierced, the track goes directly to you and your personal assets.

One thing to consider, it's my understanding, there is no such thing as a, "Delaware LLC;" unless of course you live in Delaware. There is a Delaware Corporation. That's different. The LLC has to be filed in the state at which you are doing business.

I have learned that to completely protect your personal assets, you need to have a dual entity setup. In other words, a Delaware Corporation and an individual LLC in which the aircraft is held. In the event of a lawsuit, the LLC may be pierced, but it will only get as far as the holding company..

I only know this because I am starting a business in a different Realm and I'm very concerned with asset protection. I'm not a lawyer, I don't even play one on TV, but it seems that this would apply to aircraft as well as other businesses.

Realistically speaking, you should carry enough insurance to cover you in the event something happens. An LLC will not protect you like you think it would.

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[RobertGary1]

1 minute ago, Guitarmaster said:

Funny this discussion is going on.

My airplane is registered to me, however, that will be changing shortly.
 

Just check your state laws to see what they charge for being an LLC or C-corp. California is $800/yr each if you have assets in California regardless of where you incorporate.

-Robert

[Guitarmaster]

Just check your state laws to see what they charge for being an LLC or C-corp. California is $800/yr each if you have assets in California regardless of where you incorporate.
-Robert

That's true. In some cases you are probably better off with an umbrella policy.


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[RobertGary1]

25 minutes ago, Guitarmaster said:

That's true. In some cases you are probably better off with an umbrella policy.


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Are there ones that cover aviation? USAA said theirs does not.

-Robert