Requesting feedback on the best type of aircraft ownership. Are there any real advantages to forming an LLC versus personal ownerships? I’m thinking more insurance might be the best protection from potential lawsuits but insurance companies have maximum limits too.
Ownership Pros/Cons—LLC versus Personal
- Thread starter Jozment
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unsafervguy
En-Route
I’ve been told by a couple of lawyers that single owner Llc’s offer little protection from liability. Best to check with a good lawyer to look at your particular situation.
On high value assets it may be cheaper to transfer ownership of the llc than pay sales tax on a plane.
An llc doesn't offer liability protection against your actions but if someone else flies the plane a llc may protect your assets better than if you own the plane personally.
A llc is easy to form and maintain but does require annual filings and fees.
An llc doesn't offer liability protection against your actions but if someone else flies the plane a llc may protect your assets better than if you own the plane personally.
A llc is easy to form and maintain but does require annual filings and fees.
Tommar98
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Tommar98
The reason the LLC doesn’t offer much liability protection because the LLC as a corporate entity is essentially a sham. The LLC isn’t really performing any corporate function so piercing the corporate veil is easy. It’s just an extension of the personal owners private life. However an LLC still offers legal protections as between multiple owners and their estates and can include an Operating Agreement which spells out how buyouts are handled and what happens in the event of an owners death. Much of that can be done with a partnership agreement as well without the costs of LLC annual filings.
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That's not actually why an LLC doesn't provide any liability for an owner-pilot.
LLC's can provide some privacy, if that matters to you.
EdFred
Taxi to Parking
Single member LLC doesn't provide any liability protection because YOU are still the pilot, and YOU will be gone after. Now if you have a 4 member LLC and it's set up right, and one of the other pilots does something, then your personal assets are safe. But you are always on the hook for your actions.
idahoflier
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idahoflier
Not an attorney and I didn't consult any, but as a sole owner I didn't see any asset protection value from forming an LLC other than the previously mentioned modest privacy enhancement.
It depends on the state you live in as LLCs are created via a state level law. There can be state tax issues for LLCs on assets the LLC owns so may want to check with an accountant on that. Same goes for liability--there can be state laws that define this but a sole proprietor LLC will not protect you from your own negligence. I used my LLC to purchase every aircraft I bought, but I was repairing/salvaging them and not flying them.
AdamZ
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Adam Zucker
forming an LLC. or other corporate type entity does have its benefits even if it is a single member LLC. There has been some correct advice given here and some incorrect advice. It is best to talk to an attorney in your state regarding what type of ownership would benefit you. As someone correctly said that will change from state to state. Make a decision based on what your personal counsel tells you not web-board advice.Like anything else in life you get what you pay for. If you need an attorney who handles entity formation for aircraft you can check the rolls of the Lawyer Pilots Bar Association www.LPBA.org or you can contact an attorney through the AOPA legal services plan. Best of luck.
texasclouds
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thebruce
Pre-takeoff checklist
This is why many large boats are held in LLCs (in California, anyway).
aggie06
Line Up and Wait
LLCs are also different with respect to incurring sales or use tax in each state. For example, some states may give an exemption to occasional sales between individuals but not provide that to the LLC.
Really depends on the state.
Really depends on the state.
DaleB
Final Approach
Makes it easier to manage ownership if you're going to have one or more co-owners. The airplane stays registered to the LLC, and the ownership of the LLC can change pretty much however and whenever and in whatever share or arrangement you wish.
Thanks to everyone that responded. From the replies, I sense that forming an LLC would not create any significant advantage to personal ownership.
Anyone who doesn't like something is likely to cal it a sham.
(You know this) There are two types of liability protection - contract and tort (primarily injury and property damage). Whether one or the other, the liability protection afforded to a member of an LLC, a shareholder in a small corporation, an employee of a company is limited to the acts of the company, not the acts of an individual. In contracts for example, if a vendor makes the deal with the company (as oppose to the individual), the company is the responsible party. To get through to the individual (assuming the individual didn't guarantee the transaction, like 99% of the bank loans to small companies) would require "piercing the veil." That can be difficult or easy depending on state law, but most "piercing" cases have one of two bases: (1) inadequate funding of the company; and (2) the failure of the members of the company to treat it as a company independent from themselves.
In the tort arena, we are playing by slightly different rules. The human being who commits the "bad act" is personally liable for the consequences. If she is on company business, the company will be liable, but the human being is liable too. The best non-aviation example I can think of (which I like specifically because it surprises a lot of people) is, if the driver of a UPS truck causes an accident, both UPS and the driver are liable. Not because of "piercing." Because it's how the system is designed to work to begin with.
So for our aircraft ownership LLC, If the pilot causes an accident; the pilot is responsible. But that's also why, in a properly managed LLC, Owner A is generally not personally liable Owner B's accident absent something more than the bare fact an accident took place.
Privacy is a different issue. That depends a lot on state law. In some states, the identity of the members of the LLC is a public record; in others not. Even when it is not part of the state's public record, the FAA requires a listing of the members of the LLC.
This should just be a sticky so that we don't need any more, "should I create an LLC?" threads.
Ventucky Red
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Jon
Wouldn't the driver be an agent of the company... and if that is the case, doesn't all the liability fall on the shoulders of the company?
The fact the driver is an agent of the company is why UPS is ALSO liable. That doesn't get the driver off the hook personally just because he was on the job. That said, as a matter of practice, the company usually undertakes defense of the driver.
Good explanation, and good on you for taking the time to explain it all more thoroughly than I was willing to
EdFred
Taxi to Parking
IF that was the case, I'd just put all my vehicles into my company's name and then I go drunk/reckless driving without repercussion.
"Sorry officer, this is a company vehicle, so I'm allowed to be negligent and reckless without any legal recourse by the state."
It does. But that does not remove the liability of the driver. We don't hear a lot about that because the company is typically the "deep pockets." But let's say the company is under-financed and/of lets it's insurance lapse. The driver is still holding the bag.
I see the question a lot. So answering it is easy.Good explanation, and good on you for taking the time to explain it all more thoroughly than I was willing to
Ventucky Red
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Jon
Point taken, but would you honestly do this?
1RTK1
Pattern Altitude
Also talk to an accountant, don’t forget there might be tax benefits above what was previously mentioned..