LLC vs individual registration

[Shake your Mooney maker]

As I anticipate owning a M20C in the near future (1st time buyer), looking at tail numbers I see quite a few LLC’s.

 

Q: as a sole owner, no partners, for private non-business use...any advantage in registering as a LLC vs individual?

 

Thanks in advance

Symm

 

 

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[ArtVandelay]

No, the LLC does not protect you from yourself. If you have a partnership, then an LLC will protect you from your partners mistakes, no tax advantages either.

 

 

Tom

 

[gsxrpilot]

LLC seems to be a needless expense and complication to me anyway.

[smwash02]

From a day to day flying perspective I've only come across two situations where this mattered.

1) Of all the places I've flown, KSGR is the only one that would not let me use the courtesy car because it wasn't business owned. I'd like to hear the story behind that one.

2) Flying to Mexico if you have it company owned you will need to write a letter on 'company letterhead' that is notarized stating you are allowed the fly the plane

I'm not sure if you can get financing if it's in an LLC, but I've not tried.

As a non-business machine the other situations are likely moot.

[gsxrpilot]

1 minute ago, smwash02 said:

1) Of all the places I've flown, KSGR is the only one that would not let me use the courtesy car because it wasn't business owned. I'd like to hear the story behind that one.

Oh yeah. I had this issue at KSGR as well. Weird, it's the only place that's ever happened.

[TTaylor]

For sole owner there is not really an advantage.  If you have a partnership, it is nice because you can have partners buy in and out without re-registration and sales tax issues.  

[McMooney]

Nice to not have your name and address show up on the faa website 

 

[Shake your Mooney maker]

I appreciate all the great advice, thank you! TTaylor, I pm’d you
SYmm


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[RobertGary1]

Before considering an LLC you should talk to a professional. If the plane is in California and in an LLC you will owe $800/yr in franchise tax (regardless of the state of registration of the LLC). Other states may have similar.

Only person I ever saw get  benefit from the LLC was a Canadian who wanted to own an N registered plane. It hide his nationality. Some also try to use it to hide from the California use tax but they'll eventually find you because they do annual audits at each airport.

-robert

[N201MKTurbo]

Ok, for a know it all, I don’t know the answer to this.

when I bought this plane I had a partner and we put the plane in an LLC.

The partner is gone but the plane is still in the LLC.

What do I have to do to put it back in my name? 

Do I have to sell it to myself? That would involve taxes!

Can I just submit a change of registration?

[ArtVandelay]

Ok, for a know it all, I don’t know the answer to this.

when I bought this plane I had a partner and we put the plane in an LLC.

The partner is gone but the plane is still in the LLC.

What do I have to do to put it back in my name? 

Do I have to sell it to myself? That would involve taxes!

Can I just submit a change of registration?

Are you going to terminate the LLC? Are you the sole member? Is the plane the only asset?

If yes, You should file articles of dissolution (probably a 1 page form).

Then you’ll distribute the assets, make sure there is no outstanding debt.

 

 

Each state is a little different regarding taxes, so expert advice from a local lawyer would be prudent, FAA should accept a transfer of assets document like they would a bill of sale, but I would check.

 

Tom

[steingar]

I have mine in an LLC because at one time I had partners and I sincerely hope to do so again.  The LLC was protection from their actions.  For a sole owner it seems like an added expense and hassle.  

That said, a friend of mine (honestly, I'm not near clever enough to run a scheme like this) used his as a tax avoidance strategy.  He had royalty payments that he directed into the LLC, they were the LLC's income.  He then used  the LLC to pay off airplane expenses.  The airplane always went through more than the royalties, but he claimed he wasn't paying taxes on the royalties because they were the LLC's income. 

[ArtVandelay]

I’ve always been told LLCs are transparent as far as the IRS is concerned, you sure is wasn’t different type of corporation?


Tom

[N201MKTurbo]

18 minutes ago, ArtVandelay said:

Are you going to terminate the LLC? Are you the sole member? Is the plane the only asset?

If yes, You should file articles of dissolution (probably a 1 page form).

Then you’ll distribute the assets, make sure there is no outstanding debt.

 

 

Each state is a little different regarding taxes, so expert advice from a local lawyer would be prudent, FAA should accept a transfer of assets document like they would a bill of sale, but I would check.

 

Tom

Thanks for the advice!

It is a North Dakota LLC. Would I get the dissolution documents from ND or are they generic? What about the asset transfer document?

Paying th $50 a year seems cheaper than an attorney.    

[ArtVandelay]

Thanks for the advice!
It is a North Dakota LLC. Would I get the dissolution documents from ND or are they generic? What about the asset transfer document?
Paying th $50 a year seems cheaper than an attorney.    

If you use LegalZoom.com , it would cost $129. Someday, you or your heirs will need to deal with that.


Tom

[NJMac]

Working thru a trust formation now and my lawyer wants ours in its own LLC.  I called a buddy about this, he used to fly a mooney, and has done extremely well (8 figure net worth).  He keeps all his planes that he solely owns outright in his LLC and advised me to do so too.  Something about a wreck killing someone only able to get to the LLC assets instead of the rest of my holdings.  Maybe its true or not.  I duno.  I can't see the extra hassle as an annual hoop personally.  Will be re-registering mine into the LLC once I have a free moment. 

[jetdriven]

56 minutes ago, steingar said:

I have mine in an LLC because at one time I had partners and I sincerely hope to do so again.  The LLC was protection from their actions.  For a sole owner it seems like an added expense and hassle.  

That said, a friend of mine (honestly, I'm not near clever enough to run a scheme like this) used his as a tax avoidance strategy.  He had royalty payments that he directed into the LLC, they were the LLC's income.  He then used  the LLC to pay off airplane expenses.  The airplane always went through more than the royalties, but he claimed he wasn't paying taxes on the royalties because they were the LLC's income. 

Until he gets audited. You have to have a legitimate buisness use for the airplane, and they love to disallow them.

[midlifeflyer]

I'm going to be a small fly in the ointment. Most tend to focus on the lack of liability protection for our own actions, which is absolutely true.  But there may be other reasons to hold even a personal aircraft which will never be flown by anyone else but you in an LLC. Those reasons mostly involve your overall estate and financial protection planning and are the subject of a discussion between the pilot and a professional.

 

Just saw @NJMac's post. That's exactly the type of thing I am talking about (although it sounds like someone misunderstood something).

Edited July 12, 2019 by midlifeflyer

[carusoam]

I’m thinking the same as MidLife...

Eight figure net worth... lots of legal requirements and probably a lawyer to organize all of one’s papers...

Insurance is probably a bit different as well...

Hiding one’s home address also makes sense...

Lots of variation from state to state...

There may be some guidance for the PP with a six figure net worth available through AOPA legal services...

PP thoughts only,

-a-

[ArtVandelay]

Working thru a trust formation now and my lawyer wants ours in its own LLC.  I called a buddy about this, he used to fly a mooney, and has done extremely well (8 figure net worth).  He keeps all his planes that he solely owns outright in his LLC and advised me to do so too.  Something about a wreck killing someone only able to get to the LLC assets instead of the rest of my holdings.  Maybe its true or not.  I duno.  I can't see the extra hassle as an annual hoop personally.  Will be re-registering mine into the LLC once I have a free moment. 

If your the pilot, I can always sue you, and if you solely own the LLC.... I can take that too. You are always responsible for your own actions.
The only limitation is retirement assets, homes, life insurance may be protected depending on the state.


Tom

[kortopates]

14 minutes ago, ArtVandelay said:

If your the pilot, I can always sue you, and if you solely own the LLC.... I can take that too. You are always responsible for your own actions.
The only limitation is retirement assets, homes, life insurance may be protected depending on the state.


Tom

Thanks, This is what every professional has advised me to date and why I don't have an LLC. We do have a trust. But with a Calif $800 annual renewal fee and the added hassles of flying internationally I can only see negatives and no real benefits for having one as single owner flying for pleasure. Far more important to have smooth liability coverage for protection.

Edited July 12, 2019 by kortopates

[NJMac]

If your the pilot, I can always sue you, and if you solely own the LLC.... I can take that too. You are always responsible for your own actions.

The only limitation is retirement assets, homes, life insurance may be protected depending on the state.

 

 

Tom

Tom, I think you just made my point. We have 6 other LLCs that would be protected in my case. 3 operating entities and 3 for the commercial real estate. Those 6 are where the vast majority of my wealth is and I'm assuming many other business owners' wealth is too.

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[ArtVandelay]

Tom, I think you just made my point. We have 6 other LLCs that would be protected in my case. 3 operating entities and 3 for the commercial real estate. Those 6 are where the vast majority of my wealth is and I'm assuming many other business owners' wealth is too.

 

To be clear:

If you are the pilot and crash, hurting or killing those on the ground, whether your plane is in a LLC or not, your assets, including your portions of the 6 LLCs are fair game, they are not protected from lawsuits against you.

If your partner, CFI, mechanic crashes, then only the plane and other LLC assets are at risk.

If you do some electrical work on one of your real estate holdings in LLC#1, and someone gets shocked and hurt, then again, they can go after all your assets in all LLCs.

You made the mistake, you pay.

LLCs protect you from others mistakes. So all real estate repairs, etc should be handled by licensed and insured contractors. And all correspondence, bills, checks etc. should be titled to the LLC name. Otherwise they can claim they were dealing directly with you, not the LLC, and you just lost your protection.

If you have your brother, an amateur electrician do the work ,then they can claim you then didn’t do due diligence, so now again you’re at fault, and the LLC protection is voided. Make sure you have professionals do the work.

 

 

Tom

[jetdriven]

Make sure you have a good umbrella policy. Unfortunately I can’t find one that includes airplane crashes or professional liability as an A/P.  

[FlyingScot]

13 hours ago, ArtVandelay said:

To be clear:

If you are the pilot and crash, hurting or killing those on the ground, whether your plane is in a LLC or not, your assets, including your portions of the 6 LLCs are fair game, they are not protected from lawsuits against you.

If your partner, CFI, mechanic crashes, then only the plane and other LLC assets are at risk.

If you do some electrical work on one of your real estate holdings in LLC#1, and someone gets shocked and hurt, then again, they can go after all your assets in all LLCs.

You made the mistake, you pay.

LLCs protect you from others mistakes. So all real estate repairs, etc should be handled by licensed and insured contractors. And all correspondence, bills, checks etc. should be titled to the LLC name. Otherwise they can claim they were dealing directly with you, not the LLC, and you just lost your protection.

If you have your brother, an amateur electrician do the work ,then they can claim you then didn’t do due diligence, so now again you’re at fault, and the LLC protection is voided. Make sure you have professionals do the work.

 

 

Tom

I consulted an aviation attorney (which I am not) on this very topic recently, and this is very consistent with what I was told - For an individual owner, there did not seem to be any significant advantage (save for keeping your name off of the FAA registry), but some disadvantages/inconveniences/hassles in some circumstances (like foreign travel) - Bob