Your LLC May Not Be Affording You the Protection You Think

Many aircraft owners place their aircraft in a limited liability company (LLC). Most presumably choose this arrangement under the belief that the LLC affords liability protection in the event of an accident. Depending on how the aircraft is used, however, this may be a mistaken assumption.

Generally, LLCs and other entities exist to protect an owner's assets when the entity commits a tort, breaches a contract, or commits another wrong during its operations. The law generally views entities as separate, legal persons, with their own set of rights, obligations, and liabilities.

But here’s the catch. Many states will hold the pilot in command (PIC) as primarily responsible for the safety of the operation (see FAR 91.3) regardless of how the aircraft is owned. Once an LLC owner dons the PIC cap, the owner may have assumed liability for anything that goes wrong.

To apply these principles, let’s say you are considering creating a single-owner LLC to hold your aircraft and you are the only person that will fly it. Here, it may not make sense to place the aircraft in an LLC. You will always have potential liability as the PIC and the LLC likely will not shield you. Absent this protection, many owners may forgo the hassle of creating and maintaining the LLC.

But let’s say that several people will own the LLC and fly the aircraft. In that case, an LLC may make sense. If one of the owners causes an accident, there is a good chance that other owners may be protected by the LLC, assuming there is no other basis for personal liability present, such as an owner assuming maintenance duties for the aircraft.

In sum, whether the LLC really provides any liability protection may depend on who is flying the aircraft. If the owner is PIC, there likely is no protection. If the owner is not acting as PIC, there is a much greater chance that the LLC will shield the owner's personal assets.

Beyond the question of liability, there are other important issues involved with entity-owned aircraft, including compliance with FAA regulations and tax considerations. The issues are complex. And every situation is different. That is why it is important to speak with an experienced aviation attorney regarding your specific operations.

Dan Hassing

Daniel Hassing is an in-house attorney with AOPA’s Legal Services Plan who counsels Plan members on a daily basis. He is a private pilot and a Part 107 UAS pilot. Before joining AOPA’s Legal Service Plan, Dan worked at a firm for 10 years, litigating cases across the United States. Dan also clerked for a Justice of the Nebraska Supreme Court for two years. Dan received his law degree at the University of Nebraska College of Law and received his bachelor’s degrees at the University of Nebraska-Omaha. In his free time, Dan enjoys spending time with his family, flying, and golf.

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