Can I buy an airplane from an LLC I own?

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rookie1255

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rookie1255
Hypothetically speaking, say I owned an airplane free and clear and it was in an LLC. I guess legally the LLC really owns it. Could I "buy" the airplane from the LLC using bank financing? The bank would wire the funds and the end result would basically be getting cash out of the equity in the plane. I figured this would be a potential way to do it since there's no such thing as a "plane equity loan."

Is this idea feasible/legal/ethical? I know interest rates would be a little higher compared to mortgaging one's home, but it also allows one to increase liquidity.

The only other way I could think of to make something like this happen would be to sell the airplane, then get a loan to buy another one. This would be more steps, potential losses in transactional costs, and I might happen to like the airplane I already have.
 
Interesting question. I'd be pretty surprised if the bank would let you even try to do it.
 
A plane is an asset like any other and will show up on your net worth sheet. If you want to borrow some money I'd just approach the bank for a personal loan, including the airplane aka LLC in your assets. The buy/sell idea is unnecessarily complicated.

That said, a small bank or credit union is more likely to have the flexibility to do something like this. Big banks won't want to screw with it and will probably assume the liquidation value of your airplane asset to be a fraction of what you claim. A small bank may well do better. If you find someplace that will do this, they will probably also ask that you move your banking relationship to them.

I wouldn't try to explore this on the phone, at least initially. Just walk into the bank/credit union and tell them you'd like to talk about a personal loan. Have a net worth statement with you and an airplane valuation from Vref. IIRC Vref sells some short-term subscriptions to their service, which provides more detailed information than the free AOPA Vref service.
 
Personal loan interest average 8-10%. Aircraft loan 6%. Plus aircraft loans have longer terms=lower payment. Plan B could be to donate the plane to my spouse and then buy it back from her. Unless banks have some rule where THAT'S not allowed.
 
Do not forget sales, property and use taxes can also come into play.

Tim
 
What exactly are you trying to accomplish by doing this? Are you wanting to void the LLC?
 
rookie1255 said:
Personal loan interest average 8-10%. Aircraft loan 6%. Plus aircraft loans have longer terms=lower payment. Plan B could be to donate the plane to my spouse and then buy it back from her. Unless banks have some rule where THAT'S not allowed.
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Talk to some banks rather than speculating. I don't think sham transactions will make any difference to your loan or your interest rate.
 
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I was thinking of those who build their own planes from kits. They pay for each kit, probably out of pocket, and by the end can own something like an RV-10 that's worth $200k plus. That can be a lot of money to have tied up.

Someone who buys an already completed RV-10 might only have to come out of pocket 30k or so and finance the rest.

Seems to be an unfair liquidity penalty for homebuilders.
 
airdale said:
A plane is an asset like any other and will show up on your net worth sheet. If you want to borrow some money I'd just approach the bank for a personal loan, including the airplane aka LLC in your assets. The buy/sell idea is unnecessarily complicated.

That said, a small bank or credit union is more likely to have the flexibility to do something like this. Big banks won't want to screw with it and will probably assume the liquidation value of your airplane asset to be a fraction of what you claim. A small bank may well do better. If you find someplace that will do this, they will probably also ask that you move your banking relationship to them.

I wouldn't try to explore this on the phone, at least initially. Just walk into the bank/credit union and tell them you'd like to talk about a personal loan. Have a net worth statement with you and an airplane valuation from Vref. IIRC Vref sells some short-term subscriptions to their service, which provides more detailed information than the free AOPA Vref service.
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This. We did it, you just list it as an asset.
 
rookie1255 said:
I was thinking of those who build their own planes from kits. They pay for each kit, probably out of pocket, and by the end can own something like an RV-10 that's worth $200k plus. That can be a lot of money to have tied up.

Someone who buys an already completed RV-10 might only have to come out of pocket 30k or so and finance the rest.

Seems to be an unfair liquidity penalty for homebuilders.
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Be careful on your assumption of the completed plane’s value.
 
Why would you want to have a sales taxable transaction?
 
Technically, yes, you can buy property from the LLC. Will a lender give you a loan to do so? Maybe. Will you be in violation of the loan agreement if you do it without telling them? Probably. Most loan agreements will have a clause that represents and warrants that it's an arms-length transaction. Buying property from an LLC you wholly own is not arms-length. Tax consequences will vary by state, some just ignore transactions between LLCs and their members, some don't.

Note: the LLC's property is NOT legally your property.
 
bradg33 said:
Most loan agreements will have a clause that represents and warrants that it's an arms-length transaction.
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What if you have a REALLY long stick and put a pen on the end..like something MORE than an arms-length...is it ok then?
 
I'll loan ya the money. 20%. I'll need to see the collateral. Send pics of kneecaps
 
rookie1255 said:
Hypothetically speaking, say I owned an airplane free and clear and it was in an LLC. I guess legally the LLC really owns it. Could I "buy" the airplane from the LLC using bank financing?
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Yes, no matter how you finance the buy, all you must do FAA wise is sign the bill of sale as the LLC owner
Then submit a registration request as the new buyer, Now the last registered owner is you.
 
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