Purchasing a plane in an LLC / buy LLC?

[bluesideup]

Hi everyone.
How complicated is it to get this done, I've never done it before.
Is it better to get a personal registration, on a person's name, or get the LLC knowing that the there will be some fees to maintain it.
Benefits or problems..
This is in CA, yes I know.
Any suggestions on an attorney in SoCal.
Thank you.

 

[midlifeflyer]

Other than fees, etc, the downside to buying an LLC is that you acquire the LLC's debts, even unknown ones. There's a reason corporate business acquisitions are often asset purchases rather than company purchases. A lawyer will walk you through that.

 

[Anthem]

you dont want to purchase an LLC as you dont know what debts and liabilities are potentially involved. Always buy the assets out of an LLC unless you have done some extreme due diligence.
Now whether you want to put your plane in an LLC. I used as that was what has been handed down as old wives tales. but it doesnt gain you anything if its just you flying it as it doesnt shield you from any lawsuits/liabilities. . . However, if you have other people flying it - then it is a good idea. because when they are flying it, it will properly shield your personal assets from the LLC when it isnt you flying it. However, when you are flying it - even within the LLC, you personal assets are not shielded. So it really is of limited advantage for a self owned/flown plane.

 

[mandm]

It’s more for privacy, it’s easy to start an LLC and to do the paperwork to buy an airplane, mostly everything is a template with fill in the blanks. California LLC’s have outrageous fees, but you can form an LLC in a state that’s cheaper.

When you fly the aircraft ownership is public record, so it’s up to you if you want your name there or a LLC.

The more stuff that’s in your name, the more you become a target. There’s a lot of gold diggers out there.

 

[bluesideup]

Hi everyone.
Thank you for the feedback, some things that I did not think about showed up.
If one buys an LLC do the items that are not necessarily assets, like a hangar, storage... lease / rent come with it or as soon as the name of the primary member (manager) changes everything that is attached to it has to be renegotiated, other than the acft in this case?
Can one continue to use the i.e. hangar without interruption, as long as the rent is being paid under the LLC name?
Thank you.

 

[mandm]

LLC is a person basically and you’re buying that persons life, contracts, liabilities, debts, assets.

 

[bluesideup]

Hi everyone.

LLC is a person basically and you’re buying that persons life, contracts, liabilities, debts, assets.

OK, does that imply that if someone had a plane in a hangar, on a month to month, can the new buyer continue that without interruption, given that there is waiting list over 1 year for that hangar?
Will the airport allow the new owner to continue to use it? Doe the present LLC owner need to tell the airport about the LLC sale?
Typically if an owner sells a plane, ownership change, name change the typical procedure is to terminate the contract and get someone on the waiting list to take over.
Thanks.

 

[mandm]

Hi everyone.

OK, does that imply that if someone had a plane in a hangar, on a month to month, can the new buyer continue that without interruption, given that there is waiting list over 1 year for that hangar?
Will the airport allow the new owner to continue to use it? Doe the present LLC owner need to tell the airport about the LLC sale?
Typically if an owner sells a plane, ownership change, name change the typical procedure is to terminate the contract and get someone on the waiting list to take over.
Thanks.

Technically the contract is between the LLC and the landlord and would remain in force. However you need to read the contracts to see, and sometimes you’ll have someone who isn’t happy with that and starts a fuss and of course who wants to engage in a lawsuit over this?

 

[midlifeflyer]

Will the airport allow the new owner to continue to use it

Depends on the contract. If the contract is with the LLC with no restrictive language, nothing has changed. The “person” who rented the hangar is XYZ LLC, not a member or members.

OTOH, if the contract has a provision which, for example, requires lessor consent if the membership of the LLC changes, it’s a different story.

OK, does that imply that if someone had a plane in a hangar, on a month to month, can the new buyer continue that without interruption, given that there is waiting list over 1 year for that hangar?

if it’s truly a month to month it hardly matters since either side can terminate it for any reason or no reason at all, even if ownership hasn’t changed.

Always gotta read the words on the pages.

 

[bluesideup]

Hi everyone.

Technically the contract is between the LLC and the landlord and would remain in force. However you need to read the contracts to see, and sometimes you’ll have someone who isn’t happy with that and starts a fuss and of course who wants to engage in a lawsuit over this?

OTOH, if the contract has a provision which, for example, requires lessor consent if the membership of the LLC changes, it’s a different story.

if it’s truly a month to month it hardly matters since either side can terminate it for any reason or no reason at all, even if ownership hasn’t changed.

All great points. I will have to look at the details.
Have a great weekend everyone.
Thank you.

 

[farmrjohn]

re. ownership in LLCs: I just received an information letter from our CPA concerning the Corporate Transparency ACT that went into effect Jan. 1, 2024. That has reporting requirements to the feds that if not done can incur significant penalties including jail time. Plus in Cali I believe that makes the plane ineligible for property tax exemption if it would otherwise qualify as an "airplane of historical significance" if you exhibit it 12 times during the year. Then there is the annual LLC filing fee to the state as well.

 

[bluesideup]

Hi.

re. ownership in LLCs: I just received an information letter from our CPA concerning the Corporate Transparency ACT that went into effect Jan. 1, 2024. That has reporting requirements to the feds that if not done can incur significant penalties including jail time.

Can you elaborate on what the difference, added reporting, is? My understanding is that in CA there is a reporting required every year, and obviously the monthly dues.
Thank you.

 

[farmrjohn]

Can you elaborate on what the difference, added reporting, is? My understanding is that in CA there is a reporting required every year, and obviously the monthly dues.
Thank you.

This is a Federal law, not state. I believe the state fee is annually.

 

[bluesideup]

Hi everyone.
Thank you @farmrjohn . I will try to understand what the commies want now.
Have a great day.

 

[Wagondriver]

If you buy and LLC that owns property, technically the property didn't change hands. So, perhaps no sales tax on the sale?

I bought an LLC that owned a hangar, then years later sold the LLC. No tax due on the sale of the property, property ownership didn't change.

 

[Jeff Oslick]

If you buy and LLC that owns property, technically the property didn't change hands. So, perhaps no sales tax on the sale?

I bought an LLC that owned a hangar, then years later sold the LLC. No tax due on the sale of the property, property ownership didn't change.

This is correct (at least for California). If you buy the LLC, you do not pay "use" (sales) tax that would otherwise be due. On the flip side, there is an $800 annual LLC fee, and as another person stated above, LLCs cannot use the "antique aircraft/display" exemption for property tax (if the plane is old enough). LLCs also require annual Federal and State tax filings.

The main reason to have a plane in a LLC is for liability insulation between LLC shareholders. Single-owner LLCs for aircraft rarely make sense.

 

[bluesideup]

Hi everyone.

This is correct (at least for California). If you buy the LLC, you do not pay "use" (sales) tax that would otherwise be due. On the flip side, there is an $800 annual LLC fee, and as another person stated above, LLCs cannot use the "antique aircraft/display" exemption for property tax (if the plane is old enough). LLCs also require annual Federal and State tax filings.

The savings in Use tax, would be a good reason, if we are talking in the 100K (around 8K tax?), even when considering the annual tax filing.. the "antique aircraft/display" would not apply in this case any way.?
A lot of things to consider in CA, it's best to get an Attorney that knows, has done that in the past, but we are not able to get one that has done that recently.
Thanks again everyone.