Buying Aircraft in LLC

[mturnerb]

I'm considering purchasing an airplane that's in an LLC. It is a Florida LLC and I live in Florida as well. Can anyone share how to do a sale of LLC that reflects normal pre-purchase items like deposit, pre-buy, deposit, etc?

What are the pitfalls?

 

[RyanB]

Is the airplane the only asset the LLC is tied to? What's the goal you're trying to accomplish by having it?

 

[paflyer]

Maybe just buy the LLC; you can still have the usual inspections etc as part of the deal. Prob should talk to an accountant in FL.

 

[James331]

If you're buying the aircraft FROM the LLC, it's all the same as buying it normally like, just the seller signs and puts his title under his signature.

If you're buying the LLC, that's a whole bother ball of wax, and one that probably needs it own type of "pre buy" in and of itself, I'd just buy the plane if it were me

 

[mturnerb]

Is the airplane the only asset the LLC is tied to? What's the goal you're trying to accomplish by having it?

I think so. Two reasons for buying LLC:

1. No sales tax
2. I may get a partner at some point.

 

[mturnerb]

If you're buying the aircraft FROM the LLC, it's all the same as buying it normally like, just the seller signs and puts his title under his signature.

If you're buying the LLC, that's a whole bother ball of wax, and one that probably needs it own type of "pre buy" in and of itself, I'd just buy the plane if it were me

I am trying do you get a sense of what the pitfalls are. And of course what does pre-buy on the LLC would look like. See earlier reply re reasons for buying LLC

Thanks for the response.

 

[azblackbird]

I'm considering purchasing an airplane that's in an LLC. It is a Florida LLC and I live in Florida as well. Can anyone share how to do a sale of LLC that reflects normal pre-purchase items like deposit, pre-buy, deposit, etc?

What are the pitfalls?

Unresolved/hidden liens against the current LLC could present a potential problem. Buy the airplane straight up, use an escrow company to hold funds. Form your own LLC if you want as the owner of the plane.

 

[iamtheari]

Buying the LLC requires you to do due diligence on the corporate entity, both its health (are there records of all annual member meetings? Balance sheets up to date?) and its liabilities (unpaid hangar rent, bank loans not secured by the plane directly, membership capital credits or dividends, etc) plus the plane itself. That doesn't mean not to do it. It just means to do your due diligence if buying the LLC makes more sense than buying the plane from the LLC.

 

[aggie06]

From a tax perspective, consider whether there are currently multiple members in the LLC. If there are 2 current LLC owners, you have to buy all the units from each of the owners. The entity then becomes a disregarded entity for federal tax purposes. That becomes a challenging trying to figure how much basis you have in the actual plane vs the LLC. If you want a partner in the future and sell him half the LLC, it becomes a partnership again. That part also gets complicated, but more so if you went from partnership to disregarded entity the first time. See Revenue Rulings 99-6 and 99-7 for more on those situations.

If it's currently a single member LLC and you buy the LLC, you need to make sure no entity classification election has been made such that you have an entity treated as a corporation for federal tax purposes. Those have to file a separate tax return.

If you want to have an LLC own it, I'd form a new LLC and buy the airplane. Too many unknowns for it to be worth it. There's no intellectual property or business enterprise to protect. Start from scratch.

Good luck with the purchase.

 

[Harold Rutila]

I'm considering purchasing an airplane that's in an LLC. It is a Florida LLC and I live in Florida as well. Can anyone share how to do a sale of LLC that reflects normal pre-purchase items like deposit, pre-buy, deposit, etc?

What are the pitfalls?

This is an unusual thing to do for a simple aircraft purchase. A more common route that allows you to hold the aircraft in an LLC is to form your own, and to acquire the aircraft from the current LLC into your new LLC. This is standard industry practice that eliminates the liability of acquiring an entire business entity rather than just acquiring a single business' asset (the airplane).

 

[citizen5000]

An LLC is not special it's just the name on the FAA registration. The principal

I think so. Two reasons for buying LLC:

1. No sales tax
2. I may get a partner at some point.

An LLC does not avoid taxes and fees. In fact, you pay an extra fee just to maintain an LLC. You really may want to talk to a lawyer if you are thinking about a complexity like an LLC for an aircraft.

 

[coloradobluesky]

You don't buy the plane. You buy the LLC.

 

[Ravioli]

I'm having trouble understanding the point of this thread.

If you're buying the whole plane, it matters not what legal entity owns it today. Except of course proving that your selling entity really legally owns it.

How you hold it after the sale is up to you and your CPA. There are pros and cons to different types of ownership.

Absolutely don't consider buying an LLC to get the plane. Talk about asking for Liability. Totally contrary to the idea of Limited Liability.

 

[GRG55]

I think so. Two reasons for buying LLC:

1. No sales tax
2. I may get a partner at some point.

The problem is you have to do TWO due diligence exercises. One on the plane and one on the legal company.

If you want it in an LLC form your own and buy the plane through it. You have no way of being absolutely certain the existing LLC does not have hidden liabilities.

 

[mturnerb]

All the answers make it clear that I should buy it outright or form a new LLC to buy it. Makes sense - seems that the "due diligence" effort, potential risks, and legal/accounting fees outweigh any potential benefit. Thanks to all who have submitted replies/answers.

 

[EminiTrader]

My planes always in Florida LLC. Must pay sales tax. I have great lawyer PM if you want to discuss