LLC questions

N747JB

N747JB

Final Approach
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John
First, I will talk to my attorney and CPA this week. But, I'm curious if anyone has experience buying the LLC that owns the airplane as it's sole asset? I can buy the LLC and save $14,000 in state sales tax, which covers over half of the avionics upgrade. Other than getting hold harmless agreements signed for liabilities etc, is there any other big things to look out for? I don't plan to maintain the LLC for long after closing, in Georgia you can transfer the airplane or asset from a single member LLC to the member with no sales tax.
 
I don’t think you can avoid paying sales tax that way.
 
If you have partners, then you can add and remove members without worrying about sales tax.
It will not save you sales/use tax just by putting it in a llc. So you have to buy it first and pay sales tax. If buying in another state, you won’t pay tax in that state, but pay tax in your home state, where the plane resides.
I don’t think it works as you described.
A llc doesn’t protect you from you.
So if your partner crashes into an orphanage, you’re protected, if you crash the plane, you’re not.
 
This is really a question for your CPA and attorney. Too many specific variables regarding exactly what is happening and when, with an interstate sale.
 
I’ve talked to a few lawyers. They all say from a liability perspective, don’t bother putting in an LLC.

YMMV.
 
I worked really hard to figure out how to shield myself from GA-related liability, and the short answer is that there aren’t any really good ways, including LLCs. But that wasn’t your question.

I am not aware that buying a plane in an LLC will allow you to avoid sales tax. It may allow *you* to avoid paying sales tax, but the LLC will then just have to pay it (which means you have to pay it). There are partnership or business use reasons for using an LLC, but I don’t think there are sales tax reasons.

PS - I am not an attorney. Also, if you *do* figure out a tax-advantaged way to use an LLC by all means I am ready to be corrected!! A $15k sales tax bill is one of the big reasons I don’t upgrade my plane...
 
Jeff Oslick said:
This is really a question for your CPA and attorney. Too many specific variables regarding exactly what is happening and when, with an interstate sale.
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This.

One potential downside is you don't know the financial status of the LLC. If it has debt, you pick that up too.
 
You will still pay taxes and it will be EASY to pierce your "corporate shield." The taxman was not born yesterday!!
 
PPS - if you mean that you can buy someone else’s plane by buying the LLC they created that already owns the plane, and you can therefore avoid sales tax, I would admit that might - might - be possible. BUT, don’t forget that when you buy someone else’s LLC, you inherit all the liabilities that LLC has accrued since inception, which you may not know or even be able to figure out. This is essentially the asset sale vs equity/stock sales issue.
 
Thanks for the replies, I am aware that buying an airplane with an LLC I would have to pay sales tax, been down that road! I’m looking at buying the existing LLC, that is owned by a local guy. I have had previous planes in an LLC, but I don’t see the advantage of doing it paying the fees associated with my Delaware Corp anymore.
 
If the LLC continues to own the plane, there should not be sales tax - the owner is basically adding you as an LLC owner and then removing himself. The LLC still owns the plane.
 
DesertNomad said:
If the LLC continues to own the plane, there should not be sales tax - the owner is basically adding you as an LLC owner and then removing himself. The LLC still owns the plane.
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I don’t believe the state tax collector will agree. If they did, then an LLC would be worth it for that reason alone.
 
midlifeflyer said:
This.

One potential downside is you don't know the financial status of the LLC. If it has debt, you pick that up too.
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Ding Ding Ding Winner Winner Chicken Dinner. I have done a number of aircraft purchase / sales transactions. And everyone has different issues. Mark is spot on. Speak with an attorney specifically in your state who has handled aircraft sales and purchases. If you need a recourse try the Lawyer Pilots Bar Association they have a state search function. Good luck!
 
Salty said:
I don’t believe the state tax collector will agree. If they did, then an LLC would be worth it for that reason alone.
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This is exactly why nearly every commercial property in California is owned by an LLC or other corporate structure. The LLCs are bought and sold, preventing the trigger of new appraised value of the property under Prop 13. It is a well known loophole.

It can be done with aircraft too, you just need to be certain you know what you're doing, particularly in this case where the buyer is planning to dissolve the LLC. Again, a knowledgeable CPA and tax attorney is needed.
 
I’d love to be wrong here, but every accountant I’ve talked to has said you have to pay.

Maybe if you don’t change the address on the registration you could get away with it. But states watch stuff like that and it would be very easy for them to see a change in “ownership” of the LLC.
 
A key question to ask the CPA and attorney is if there is a difference in how this is handled tax-wise via an asset sale vs. a stock sale of the LLC. Not advice, not an attorney or CPA, but my understanding is that in California, if it is done as a 100% stock sale, then it is exempt from sales tax.

What I don't know is if that would pass the smell test if the LLC is then quickly dissolved and the aircraft moved out of state.
 
The responses here are a perfect example of why you really can't ask complicated questions like this on the internet and expect competent answers. 80% of the folks responding don't even understand the question you're asking (though to be fair, it's a nuanced question).

A few main issues to consider:

1) Does the state you're in or the state in which the LLC is organized tax the sale or transfer of LLC membership interests? Some states, like California in particular, have closed this loophole as it relates to commercial real estate.
2) Does the LLC own anything other than the airplane? Was the hangar lease for the airplane in the LLC name? Is the LLC current on its state registration/franchise tax fees? In other words, what other creditors of the LLC might be out there?
3) While the seller sounds willing to sign an indemnity/hold harmless, are you comfortable that the seller actually has the means to satisfy any obligations that might arise under that indemnity? This can be hard to actually establish.
 
Jeff Oslick said:
A key question to ask the CPA and attorney is if there is a difference in how this is handled tax-wise via an asset sale vs. a stock sale of the LLC. Not advice, not an attorney or CPA, but my understanding is that in California, if it is done as a 100% stock sale, then it is exempt from sales tax.

What I don't know is if that would pass the smell test if the LLC is then quickly dissolved and the aircraft moved out of state.
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The plane won’t be leaving the state, plane is local and maintained for 25+ years at the shop that I use. But, I agree, I might wait a year or so to remove it, or I could always leave it in the LLC. :cool:
 
In addition to all of the above, sort out what the requirements are for a LLC in your state, and make sure the LLC is still around. In NY, if you don't pay the minimum corporate taxes each year, they dissolve the corporation. Every state has potentially different rules. Minimum corporate tax for an LLC in NY actually isn't bad, or didn't used to be, but could be different in different places. In addition, as others have mentioned, the corporation could have debt, judgements, or pending lawsuits against it. If anything goes sideways, the corporation is stuck with it, and that aircraft isn't yours, it's the corporations.
 
Albany Tom said:
In addition to all of the above, sort out what the requirements are for a LLC in your state, and make sure the LLC is still around.
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It wasn't a sale of an LLC, but last year I untied a title clusterF in the sale of an aircraft. Like many owners, the previous owner set up an LLC but then not only never maintain it properly but made a mess of it. The buyer was finally able to get the registration process completed 18 months after buying the airplane.
 
TL;DR: Get a prebuy on the LLC just like you do on the plane.
 
Salty said:
I don’t believe the state tax collector will agree. If they did, then an LLC would be worth it for that reason alone.
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When the ownership of an LLC, S-Corp, or Corporation changes, there is no sales tax on any vehicle owned by the entity. The registrations and titles remain unchanged, thus no transfer of ownership to tax.

If you change states, there could be use tax issues.
 
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Wow. Lots of bad info in this thread. It always amazes me what people tout as fact because “the tax man just won’t allow that loophole.” The tax man doesn’t get to define the law. He just enforces it.

The answer depends on the state, but we do this all the time for non-aviation assets for all kinds of businesses. There is no stock in an LLC (only a member interest). Because of that, you need to know what state the LLC was formed in, how many current members exist, and how many members will exist after the transaction. You will also want to make sure the LLC hasn’t made any entity classification elections in the past.

That said, what you propose should avoid transfer taxes in most states. The reason it isn’t used in a lot of situations is that it is more hassle to set up the LLC and the initial sales/use tax is likely not covered by an occasional sale exemption or the like. Once it’s inside an entity that isn’t disregarded by the state, that use tax has been paid.

Talk to your own CPA with all the facts, though. Don’t listen to the one on the internet that does this kind of thing for a living.
 
N747JB said:
First, I will talk to my attorney and CPA this week. But, I'm curious if anyone has experience buying the LLC that owns the airplane as it's sole asset? I can buy the LLC and save $14,000 in state sales tax, which covers over half of the avionics upgrade. Other than getting hold harmless agreements signed for liabilities etc, is there any other big things to look out for? I don't plan to maintain the LLC for long after closing, in Georgia you can transfer the airplane or asset from a single member LLC to the member with no sales tax.
Click to expand...

I'm buying a new plane and used this company to help me avoid California sales tax:

Aviation Tax Group
http://www.aviationtaxgroup.com
 
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