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If you own an airplane as an individual, you're putting your personal assets at risk. However, you can legally separate your plane from your other assets by placing your airplane in a Delaware LLC or corporation. Asset protection is an important strategy to separate your plane from your other assets, and will protect your bank accounts, home, cars, and more in the event of a lawsuit involving your plane.
We have more than three decades of experience forming Delaware companies for people who want to protect their assets. Forming a company to hold your assets is a common way to protect both you and your assets. However, we are not a law firm and cannot give legal advice. Please do not consider our services legal advice. If you need legal advice on this matter, please consult an attorney.
Read on to learn more about why other airplane owners have chosen to protect their assets by incorporating a plane in Delaware, as well as how the process works.
Fortunately, airplane crashes are rare. Unfortunately, those that do occur are almost always catastrophic. If such a catastrophe involves an airplane owned by you personally - a plane in your name and not owned by another entity-your personal assets will be at risk. Placing the airplane into an entity, specifically, a Delaware LLC or Delaware corporation, is a smart way to shield your personal assets from the consequences of a crash or other issues involving your plane. If you are sued for an accident that wasn't your fault, it may help to be incorporated in Delaware. A Delaware LLC or corporation will provide another layer of protection that complicates the plaintiff's lawyer's task. This extra layer of protection may cause the lawyers to reconsider suing you personally, or may be an inducement for them to attempt to reach a settlement.
Why incorporate your plane with us? We make the process easy for you and don't overcharge you, unlike other companies. Instead of assessing a special "airplane owner's price," which is code among some other services for a higher rate, we offer you our normal low $50 per year registered agent fee, and a special low rate for FAA mail forwarding.
We also understand the special needs of airplane owners. One example: We have the expertise to prioritize your mail, i.e., which pieces to send to you immediately and which ones to discard. Through our FAA mail service, we process all Airworthiness Warnings as well as all mail from the FAA on a same-day basis. However, we spare you the time and bother of excess promotional and junk mail.
Now that you know you need to incorporate your plane, you need to know how to incorporate your plane in Delaware. The first step is to determine which type of entity is right for you. Typically, U.S. clients who own an airplane form an LLC for asset protection, while the FAA requires non-U.S. airplane owners to form a corporation.
The following are strategies used by our customers to protect their assets, depending on whether they own one plane or multiple planes.
If you own one plane...
There are several ways to approach the process of incorporating a plane that will be for personal use, but this is one method that can be used: Form an LLC and purchase your plane under that LLC's name. This protects you on multiple levels—the plane is separated from your personal assets in the event of a lawsuit aimed against you personally, and your personal assets are protected in the event of a lawsuit involving the plane.
If you own more than one plane...
Some airplane owners who own multiple planes choose to form one corporation and place the ownership of all the planes in that corporation. While this arrangement is preferable to a sole proprietorship, it still leaves the corporation vulnerable to losing all its other assets and planes in a lawsuit resulting from an accident involving one plane.
Forming multiple entities so that each one owns a single plane is the safest strategy, and one that large transportation companies—including major airlines—employ. They use this strategy for maximum protection from lawsuits, and so can you. Here's how it works:
To use this strategy, form a Delaware subchapter S corporation. This entity is your operating company, the one you use with customers and suppliers. Your subchapter S corporation gives you tax benefits while separating your personal assets from your flying business, protecting them from the business's potential liabilities.
This subchapter S corporation doesn't own any of the planes. Instead, each plane is owned by and titled in the name of a separate Delaware LLC and leased to your operating company under a separate contract. As a result, if one plane is involved in a lawsuit, the other planes can keep flying without being grounded or sold.
Why are LLCs utilized? They are tax-free companies with strong liability protection. If you set them up correctly, you won't need to file separate tax returns for each.
This strategy is just one of many you can use to protect your assets. It's wise to consult with your attorney and accountant first, and then rely on us to handle the details of filing and maintaining your company.
Ready to form your company now and protect your assets? Click on the button below. The process only takes a few minutes!Protect Your Plane. Form a Company.
The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, startups and general business topics.
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