LLC Registration

I just got off the phone w/Van's getting my bill of sale paperwork all set up for registration and in the course of the conversation, she asked me if I would be putting my personal name on the bill of sale or putting the plane into an LLC. I paused for obvious reasons and asked that they don't send out my bill of sale until I check into it further - I was always under the impression it had to be in my personal name for the "educational" reasons. She mentioned this has become a more frequent request and they have not seen any problems getting through the FAA yet...

Anyone familiar with this approach that can lend some advice.

Thanks,
Kevin

LLCs and airplanes

I created an LLC and its only asset is the airplane. The purpose is to segregate your other assets from the airplane and any unfortunate incidents it may encounter. I am a member of the LLC but still am able to serve as repairman. I sign my documents with my name followed by "member".

An LLC does not preclude you from attaining the repairman status. Given the legal insulation an LLC offers, I see no reason or detriment to this approach assuming the pilot has assets worth protecting.

I was advised by my lawyer friends to make sure the LLC is handled legitimately with appropriate meetings and other requirements dictated by your state of incorporation.

A lot of this information available on the net. I hope I never have to find out how well the LLC works.

Hope that helps.

Trying to think through this - - I already have an LLC for liability sheltering on other business activity, but struggle to see how dropping an experimental into a stand alone LLC works from an annual tax standpoint and the restrictions on the experimental designation itself. I am all for peeling off the liability, but I think(maybe incorrectly) to be properly sheltered, you would have to be piloting under some form of business justification (commercial "for hire") which starts a conflict. Otherwise an accident would generate a suit against both the owner of the plane (the LLC) and the pilot as an individual defeating the whole purpose.

Scenarios that seem to work are only those folks providing authorized transition training for hire or possibly the kit manufacturer themselves...?

Kevin

MrNomad said:

I created an LLC and its only asset is the airplane. The purpose is to segregate your other assets from the airplane and any unfortunate incidents it may encounter. I am a member of the LLC but still am able to serve as repairman. I sign my documents with my name followed by "member".

Click to expand...

The part of this that I don't understand is this. You set up an LLC with the purpose that you stated above. There is an incident and someone (rightly or wrongly) decides to take legal action against you. All his lawyer has to do is find this statement posted publicly on the intenet that you set up the LLC to segregate you from the airplane.....how does this help you? It seems like a jury would just decide you were intentionally getting around liability.

I know that sounds really snide, and I am sorry - but I have truly wondered of the LLC actually gives you any real protection...

Paul

An LLC will not "peel away liability" from a negligent pilot or builder

Since my day job is a trial lawyer, I guess I should comment.

A corporate form of ownership (Corporation, P.C., LLC, etc.) isolates legal issues involving the aircraft to that legal entity, but only to an extent. For example, let's say you start an LLC and register your aircraft under the LLC. Your LLC, as a legal entity, owns the aircraft. If anyone sues your LLC for some reason, for example a breach of contract, and they obtain a judgment against your LLC, then they can levy (take) your aircraft and sell it to satisfy that judgment.

If, on the other hand, you take off one fine day with a happy passenger and the engine fails because you improperly constructed the fuel system. An oak tree and the resulting deceleration trauma creates two widows; yours and passenger's. Pax's widow reads the NTSB report and learns that you not only negligently constructed the fuel system, but you also failed to maintain airspeed, resulting in the meeting with the oak tree instead of the available field next door.

At this point, her trusted lawyer is going to sue your estate because you were personally negligent in construction and piloting. Although the lawyer might sue the LLC also, it would be of little use since its only asset would be what's left of your aircraft (although it might be worth it to recover the insurance payoff for any hull coverage).

The fact that the aircraft is owned by an LLC does not insulate the negligent pilot or negligent builder. Now, is the widow a bad person for suing your estate? Is her lawyer a dirty rotten shyster and carpet bagger for representing her? No, for cryin out loud. It was your negligence that made her a widow and, according to the laws we have had since our nation was created, you (or your estate) should be responsible to compensate the widow for your negligence.

So, how do we protect our widows and our estates in the event we kill or injure someone with our negligence? The same way we protect ourselves if we injure someone with our cars: with INSURANCE. A good insurance policy will compensate the victims of our negligence and defend us (or our estates) if we have to go to court. I hope this helps.

The other issue I've wondered about with a LLC is since the IRS wants it run just like any othe company, how do you handle covering expenses such as fuel, maintenance, and upgrades?

If the LLC doesn't have another source of revenue, doesn't that create a situation, since experimentals can't be rented. Most folks with SPAM cans just rent them back to themselves, but I can't see how that would work with an experimental.

I would think that if the LLC isn't self sustaining, then the IRS would consider it hobby as oppose to a business.

I'm just curious on how you would put an experimental in a LLC with out setting off red flags with either the FAA or the IRS. If there is other revenue and you treat the aircraft as an expense, that makes sense to me. What doesn't is how the LLC functions with the experimental aircraft as the sole asset of the LLC.

insurance

My understanding is that the maximum liability available for a homebuilt is $100K. The insurance sales people have a clever presentation "smooth million" coverage, but the reality is the liability medical coverage on the people in the aircraft-the passenger-is only $100K.
As a practicing physician I have to tell you, that ain't much. Your seriously injured passenger would be lucky to get out of the ICU for that, much less cover the whole hospital stay and then rehab, not to mention pain and suffering, lost wages, loss of consort, etc, etc, that always appears on these lawsuits. There's a certain amount of real liability risk that you have to accept with these things. The best defense I can see is not a LLC, but be careful who you fly around in your aircraft and be as safe as you can imagine when you do carry passengers. Probably not a bad idea regardless of the liability.