Monday, August 24, 2015

Benefits of Registering Your Aircraft in a Limited Liability Corporation

More and more aircraft buyers are registering aircraft in Limited Liability Corporations (LLC).  There are several benefits and reasons to utilize an LLC versus individual/personal ownership. LLC ownership may give you some level of liability protection in the event an incident occurs with the aircraft and you’re not the pilot in command (i.e. you let a partner, friend, instructor, etc. use the aircraft and had an incident, your personal liability may be limited).  Another benefit is to have your spouse be a Member with signature authorization in the event of your death, eliminating probate issues/taxes. Creating a new tax entity ease of accounting purposes, especially if used 100% for business can be beneficial.  With some aircraft lenders, an aircraft loan would not show up on your credit bureau(s) as it is booked in their systems as a commercial loan versus a consumer loan (helps keeps your credit scores up, you would still need to indicate loan to potential creditors as a “contingent liability” however).
If you are obtaining aircraft financing for the airplane, the lender will require copies of the LLC Operating Agreement, Articles of Organization, Certificate of Formation date stamped by the Secretary of State where incorporated and an E.I.N. number (you can use your social security number if it’s a single member LLC, otherwise you’ll need to contact for an EIN#).  On newly created and/or first time aircraft registration using an LLC, the FAA requires an LLC Statement in Support document that states date and state LLC formed, who the member(s) are, how managed, confirmation of ownership percentage, and verification of United States citizenship (FAA will not allow an aircraft to be registered in an LLC unless 75%+ of members/ownership are of U.S. citizenship).

For advice in your particular situation, consult your attorney.