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If you’ve spent your time researching, running the numbers, getting preapproved, and inspecting the aircraft you want to purchase, you might have one big question left about the purchase you haven’t considered: Do you want to title this aircraft in your personal name or through an LLC?
It might sound like there should be an obvious answer to that question if you have a general understanding of your financing situation, but the truth is that it’s a highly conditional question.
If you already own a business, real estate, or other high-value assets, your attorney or certified public accountant (CPA) has probably already made the LLC case. If you’re a first-time buyer who doesn’t yet have that infrastructure in place, it’s worth knowing that the right structure depends on how you plan to use the aircraft, your tax liability, whether other pilots will fly it, and how much administrative overhead you’re willing to carry.
Here’s what you need to know before you answer.
Benefits of a Personal Title
Personal ownership is exactly what it sounds like. Your name goes on the FAA registration, and you’re the borrower on the loan. There’s no separate entity, no operating agreement, annual state filing fees, and additional paperwork to untangle at closing.
Simplicity has real value, especially if you’re a first-time buyer without an existing LLC or operating business. Individual ownership is the most straightforward structure. The individual is both the owner of the aircraft and the borrower on the loan, with no separation between the two, and loan qualification is based on the individual’s credit and financial condition. Lenders can move fast, and the documentation burden at closing is minimal.
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Personal title also keeps your ongoing compliance obligations low. You don’t have to maintain corporate formalities, file annual reports with your secretary of state, or worry about what happens if you accidentally comingle personal and business expenses. If you take weekend trips and do the occasional fly-in, that might mean more to you than a theoretical liability shield.
Why Pilots Form LLCs
If, on the other hand, you’re already operating through an LLC or corporation, your attorney or CPA will likely steer you toward an LLC for the aircraft.
The appeal of an LLC comes down to five overlapping benefits—liability protection, tax flexibility, estate planning, co-ownership clarity, and privacy.
- Liability: Personal liability protection is the primary reason for placing an aircraft’s title in an LLC. LLCs are treated as separate legal entities from their owners under U.S. state law, acting as a shield to protect the assets of its owners (also called “members”) from any debts or liabilities the LLC may suffer. If someone other than you files that aircraft into a situation that results in a lawsuit, your personal assets are not automatically on the table, but the LLC’s assets are.
The key phrase there is “someone other than you.” If you are the pilot-in-command (PIC), the LLC does not protect you from your own negligence. The more hands that fly your airplane, the more the liability argument for an LLC strengthens.
- Tax flexibility: A single-member LLC is treated as a disregarded entity for tax purposes by default, meaning income and expenses flow through to the owner’s personal return with no separate entity-level tax. If the aircraft is used for business purposes, the LLC structure makes it easier to document and substantiate deductions. That can be significant, particularly in the early years of ownership when depreciation is most aggressive.
- Estate planning: When structured appropriately, a member can hold an aircraft title in an LLC with other heirs subject to an operating agreement that grants the deceased member’s interest to surviving members upon death. Living heirs can assume greater ownership without any transfer of legal title to the aircraft.
- Co-ownership: If you’re sharing the airplane with a partner or two, an LLC is the cleanest vehicle available. Ownership interests in the LLC can be adjusted, transferred, or sold without reregistering the aircraft with the FAA. The airplane stays titled to the entity, but the people behind it can change.
- Privacy: When an LLC owns your aircraft, your personal name doesn’t appear in FAA registration records or on flight tracking services. This is a minor convenience for some owners, but some high-net-worth individuals or business owners might need the extra layer of protection depending on litigation exposure.
Traps You Have to Know
The LLC path comes with two significant pitfalls that catch buyers off guard.
Flight department company: Under FAR Part 91, LLCs can dry lease aircraft to a third-party business or individual. However, if the LLC also provides pilot services together with the aircraft, the FAA is likely to declare that an illegal wet lease or air charter operation and require all flights to operate under FAR Part 135. If the FAA makes that determination, significant consequences can occur, including heavy fines, insurance being voided due to illegal operations, and the IRS seeking an additional 7.5 percent Federal Excise Tax (FET) liability on all flight income paid to the LLC.
This technicality has been known to catch well-intentioned owners who provide pilots as a courtesy to business associates. If you ever plan to let employees, clients, or partners fly aboard your LLC-owned aircraft, get an aviation attorney involved before you do it.
LLC liability shield can be pierced: Forming an LLC doesn’t make you untouchable. The LLC liability shield may be pierced if you are acting as pilot of a FAR Part 91 flight and act negligently or unlawfully, if your aircraft fails to comply with an airworthiness condition, or if creditors or litigants pierce the corporate veil, which can occur when certain corporate formalities are not properly maintained.
In other words, the LLC only works if you actually run it like one. Separate bank accounts, documented expenses, and maintenance of the aircraft in airworthy condition are just as important for your liability protection as the existence of the LLC.
What Lenders Need From an LLC
Choosing an LLC structure adds documentation to your financing process, but it doesn’t disqualify you from competitive loan terms. Lenders will require a certificate or statement of formation, certificate of good standing, operating agreement, and tax ID. Aircraft lenders require operating agreements for LLCs, so it’s best to get one drawn up early in the financing process.
Most lenders also prefer that you form a new LLC rather than register the aircraft to an existing entity with other business activities attached to it. The cleaner the entity, the faster the closing. As long as the LLC is created only as an asset ownership entity, lenders will still rely on the personal credit and financial condition of the members of the LLC to qualify for the loan.
Titling the aircraft in an LLC does not let you separate your personal credit from the transaction. Your financial profile still drives the rate and the terms. The LLC is simply a legal and structural tool.
FAA Registration
Before you finalize your entity structure, there are FAA citizenship requirements that affect how an LLC can hold an aircraft title.
To qualify for U.S. aircraft registration, an LLC must meet the federal definition of a “citizen of the United States.” Specifically, it must be organized under the laws of the U.S. or a state, with at least two-thirds of its managing officers being American citizens and at least 75 percent of the voting interest owned or controlled by U.S. citizens. That means a foreign national can hold a minority stake in a properly structured LLC and still allow the entity to register an N-number aircraft, but the ownership can’t exceed that 25 percent threshold without crossing into noncompliance.
Permanent residents (green card holders) have a simpler path. An aircraft is eligible for U.S. registration if it is owned by an individual citizen of a foreign country lawfully admitted for permanent residence in the United States. A green card holder can take personal title directly, with no trust or LLC required.
The FAA requires a Statement in Support of Registration to be filed at closing alongside the standard title documents.
Which Structure Is Right for You?
Personal title is the right default if you fly recreationally, you’re the only pilot, your aircraft is relatively modest in value, and you want simplicity. The administrative and legal overhead of an LLC is a real cost, so it doesn’t make sense for everyone.
An LLC starts making strong sense if other people fly your aircraft, if you’re co-owning with a partner, if the aircraft represents a significant asset you want to keep segregated from your personal balance sheet, if you’re running legitimate business deductions, or if estate planning is a consideration.
Either way, the decision should be made well before you sign a purchase agreement. Changing the ownership structure after the fact is possible but creates unnecessary complication and cost. The structure should be determined before the purchase agreement is signed.
FLYING Finance works with buyers in every ownership configuration. Whether you’re buying under your name or through an entity, we’ll connect you with lenders and aviation legal resources that understand the full picture. Reach out to FLYING Finance to get started.
