Airplane Ownership Legal Structure and Accounting

10 Replies

I am a real estate investor in Grand Rapids, MI and Anna Maria Island FL, and I am looking into purchasing a small airplane for both personal and business use. I currently have an LLC that holds 5 properties in MI and one in FL. Does anyone have advice on how to structure the aircraft purchase? Should I start a new LLC to hold the aircraft or just use my current LLC? How do I best account for the aircraft costs?

@Robert VanZee I think you should talk with your tax advisor. But in general I'd be careful about having it owned by your primary LLC. Liability has to be somewhat high for airplanes.

Love the idea though. Side note I'm from Hudsonville so maybe next time I get up that way we can grab a coffee or something. I'm in Chattanooga TN these days but end up in MI about 5-7 times a year. I have property in MI, TN and GA

Generally, keep track of all costs and organize by category to make things easier for your tax preparer (e.g. fuel, maintenance, storage fees, etc).  It's best to have all expenses organized, either in Excel or accounting software.

Also document all flight hours and note what hours were for personal use and what hours were for business.

Whether you need a new LLC or not should be a conversation with your attorney. I would think it would be a good idea to form a new single-member LLC to hold the aircraft as your real estate assets and the new aircraft have very different risk profiles. However, I'm not an attorney.

as a aircraft owner pilot.  I can tell you what we did.. I had a partner.  we bought a Cirrus sr 22 brand new in 04..

we created an LLC that owned that aircraft.. the hanger we bought was in a different LLC .. pretty straight forward.

your risk of audit goes up if you claim it for business like we did.. I got audited.. its pretty easy to document.

your log book is a great source.. it has your departure airport were you went etc etc.. I would put in my remarks section of the log book.. just a simple note went to see my project in Tillamook or went to see client in Spokane or Salt Lake whatever it was.. We also wrote off training flights as education necessities..  the auditor did not ding us.

one thing to keep in mind as well.. was when I bought it brand new aircraft had the section 179 deduction.. so we paid 440k for it and wrote off 90% year one.  So those will get looked at.. check with used aircraft its different.. we subsequently bought another sr 22 for about 250k it was used so I don't think we go the big write off on that one.

Keep in mind though just like with real estate  depreciation recapture is a BEOTCH.. 

Insurance is a big deal..   there are aviation attorneys that specialize in set up and of course aviation insurance brokers. 

One thing I like to suggest to anyone taking to the air as a private pilot  even if you don't own a Cirrus.. Join the Cirrus owners and pilots association its about 60.00 a year it has the most robust  BP style forum out there.. Tons of very very experienced pilots who are more than willing to help with questions from newer pilots .. most of the m are self made and very successful in business and so there is some great networking behind the scenes a lot like BP>. 

And of course if you can swing it I would buy a Cirrus you can get a decent SR 20 in the low 100s  the parachute has saved over 150 lives.. its real.. I would not fly any other non turbine airplane.. 

most used Cessna's etc are all 50s and 60s tech.  Cirrus is todays tech..  big difference.. 

if your looking for something else. I have owned a few pipers and for beginner pilot the Piper archer is a very good deal and forgiving airplane..  however the cirrus on basically the same GPH will do 150 knots true the archer 110  LOL I like speed.. my 22 was 170 knots true LOP  very economical for aviation standards.. 

as with anything aviation stay up to date.. train often .. we live in the best country in the world to be a private pilot.. its an awesome thing  it really is.. and huge time machine.

you must become an expert at weather though.. and always remember you don't really need to be there.. when in doubt hang out . 

Thanks for all the replies.  Paul Leason we will definitely need to go on some aerial recon flights to check out new properties! Jay Hinrichs Eamonn McElroy great info thanks.

I am looking into an aircraft to fly weekly to Chicago from Michigan for my W2 job with a big cold lake in between me and Chicago so mostly looking at twins (Baron or Cessna 310). I will plan on forming a new LLC to hold the airplane and document what costs were associated with each usage (personal or biz).

I love the SR22 but with wife and 3 kids I would like to be able to haul all of us and I would be much more comfortable with 2 motors over Lake Michigan.  I have my ATP and thousands of jet hours but just getting back into General Aviation to supplement my RE biz and personal family travel.

Originally posted by @Robert VanZee :

Thanks for all the replies.  Paul Leason we will definitely need to go on some aerial recon flights to check out new properties! Jay Hinrichs Eamonn McElroy great info thanks.

I am looking into an aircraft to fly weekly to Chicago from Michigan for my W2 job with a big cold lake in between me and Chicago so mostly looking at twins (Baron or Cessna 310). I will plan on forming a new LLC to hold the airplane and document what costs were associated with each usage (personal or biz).

I love the SR22 but with wife and 3 kids I would like to be able to haul all of us and I would be much more comfortable with 2 motors over Lake Michigan.  I have my ATP and thousands of jet hours but just getting back into General Aviation to supplement my RE biz and personal family travel.

sounds like a plan.. with my experience I would never fly over lake Michigan LOL..  I would take the long way.  your far more experienced than I so I am sure you can work out the details..  great values with small twins these days.. as many have sold and bought the cirrus..   and PS you have the experience to handle an engine out.

and still recommend COPA  lots of turbine owners small jets  multi's  its a great group.. most started with cirrus and moved up.

 

Originally posted by @Robert VanZee :

@Jay Hinrichs the Cirrrus Jet looks great too!

I’m close to Oshkosh had fun this morning watching some unique aircraft fly over on their way to EAA Oshkosh 

OH don't get me started on the Cirrus jet I had a deposit on one.. then the economy cratered they could not build them and could not have bought one.. but if I would held my position I could have sold it for some big bucks  LOL   Reveiws are strong on that plane.. not the fastest or highest flying.. but then again Cirrus has created brand loyalty that is pretty hard to duplicate.

TBM 700 may be an option too..   

Anyway safe flying.. 

 

@Robert VanZee , sounds like you and I are in similar situations. I'm also an ATP with mostly jet time, getting back into GA for the same reasons. I'm talking to my tax accountant, but there's also a very good write-up on the various tax implications here: https://www.aopa.org/go-fly/ai...

There are some reasons to put the plane into it's own LLC, but there are other reasons why a sole-purpose entity like that could cause problems. If your tax person isn't familiar with airplane ownership, you could call someone like this: https://www.aviation-cpa.com 

I see this thread is a few months old - have you progressed any further on this? I'd be curious to hear what you bought, how you structured the ownership, etc. 

Mike thanks for the response.  

After several discussions with my aviation attorney and accountant here is where I currently stand:

Attorney recommends LLC to hold airplane and biz LLC to lease from Aircraft LLC, using industry standard hourly rates. I asked why the lease was necessary, and was told that if you hold the aircraft in an LLC AND use it for business purposes, the FAA sees it as a for-profit operation and would require FAA part 135 certification. So if my business leases the airplane at a neutral cost from the LLC, no profit equals no need for 135 certificate.

All this set-up (new LLC, Lease agreement etc) was going to run about $2000.

Accountant asked how much aircraft use was going to be personal vs biz use and I was honestly at 70% personal 30% biz so does the cost of setting up the entities justify the tax savings?  My personal answer for the time being is NO.

So while I dont really like having the airplane in my personal name, for the time being that is where I am: Title the airplane in my personal name, carry adequate liability insurance on it, keep track of all business use, and give those direct costs to my accountant for taxes.

By the way I found a nice Beechcraft Debonair. Pre-buy inspection in the next 2 weeks, and hopefully close around the first week of November.  Cant wait to be able to fly my own airplane!

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