LLC vs Trust: How to Title Your Airplane

A Delaware LLC owes a $300 annual state tax, but that is not necessarily the LLC’s entire annual carrying cost. Delaware also requires every LLC to maintain a registered agent in the state, and a commercial agent will normally charge its own annual fee. What that $300 does not buy you is protection from your home state's use tax. On a $400,000 airplane hangared in a 6% state, that is a $24,000 assessment the LLC does nothing to stop — and the state will find you, because the FAA registry is public and tax auditors read it.

So the real question is not whether to use an entity. It is which one, and for what. Deciding whether to buy your airplane in an LLC or a trust changes three separate things: who gets sued, who pays tax, and whether the FAA will even accept your registration. Those three pull in different directions, which is why so many owners end up with a structure that solves a problem they never had.

Here is the honest head-to-head before the details.

What each structure actually is

An LLC is a liability container. You put the airplane inside it, and if the entity is run properly, a judgment against the LLC stops at the LLC's assets. Think of it as the bulkhead in a boat: water in one compartment does not flood the rest of the hull.

A revocable living trust is a transfer tool. It is not a wall. You are the grantor, usually the trustee, and the beneficiary during your life, so for both tax and liability purposes you and the trust are the same person. What it does well is move the airplane to your heirs without probate, which in some states is a six-to-twelve-month process during which nobody has clear authority to sell, insure or even annual the aircraft.

A non-citizen owner trust is a different animal entirely. It exists because federal law — 49 U.S.C. § 44102 and 14 CFR Part 47 — only allows US-registered aircraft to be owned by US citizens or resident aliens. A qualifying U.S. trustee holds legal title while the foreign party may remain the beneficial owner. Under 14 CFR Section 47.7(c), non-U.S. persons may not collectively hold more than 25% of the power to direct or remove the trustee, and the trustee must retain the independence and authority required by FAA policy. The FAA's 2013 policy clarification on citizen trustees spells out what the trustee must know about the aircraft and be able to report. If you are a US citizen, you do not need one of these, and you should not pay for one.

Keep in Mind: the two kinds of trust share a word and almost nothing else. If an advisor quotes you five figures for "a trust" and you are a US citizen buying a Bonanza, ask which trust they mean.

Liability: what the LLC really shields

The single most common misunderstanding in aircraft ownership is that an LLC protects the pilot. It does not. If you are flying and you make a mistake, you are personally liable for your own negligence, LLC or no LLC. Every state allows a plaintiff to sue the individual who was at the controls.

What the LLC does protect against is vicarious liability — being on the hook because you owned the thing somebody else broke. Partnerships, family members, a friend who borrows the airplane, a renter in a leaseback: those are the exposures an entity addresses. Federal law at 49 U.S.C. § 44112 is supposed to shield owners and lessors who are not in possession or control, but courts have read it narrowly. The Florida Supreme Court, in a widely cited 2011 decision, held the statute protects owners only from claims by people and property on the ground below, not from the claims of passengers killed in flight. If you own an aircraft that other people fly, do not assume the federal statute saves you.

Three things sink an LLC's protection faster than anything else:

• Commingling. Paying for fuel from your personal card, or paying your mortgage from the LLC account, invites a court to disregard the entity.
• No operating agreement, no records. An LLC with no signed agreement, no minutes and no separate bank account is paperwork, not a structure.
• Thin insurance. An LLC with $1 million smooth limits and a $900,000 airplane inside it is a target with a cap, not a defense. The entity decides who pays after insurance runs out; the policy decides whether it ever gets that far.

Why It Matters: if you are the only pilot and the only member, an LLC buys you less than you think. The honest reason most sole owner-pilots form one is the estate and co-ownership flexibility, not the liability wall. Spend the money on a higher liability limit first.

Flying411 keeps listings, specs and ownership guidance in one place, so you can compare what an airplane costs to buy against what it will cost you to hold.

Sales and use tax: the Delaware myth and the transfer trap

Aircraft sales and use tax depends on the particular state’s rules, including where delivery occurs, where the aircraft is based and used, and whether an exemption applies. Forming an LLC in Delaware, Montana, Wyoming, or another state does not by itself change the tax treatment where the aircraft is actually operated or based. Registering a Delaware, Montana or Wyoming LLC does not change where your hangar is. Several states run active aircraft tax enforcement programs that cross-reference FAA registration addresses, hangar leases and fuel receipts. The entity's state of formation is close to irrelevant to the assessment.

Rates are real money. Florida's state sales tax is 6% before discretionary county surtax. California's statewide rate is 7.25%, and local add-ons push the total past 10% in some districts. On a half-million-dollar aircraft that is a $30,000 to $50,000 question — larger than most pre-buy findings.

Where structure genuinely does matter

Moving an airplane you already own into a newly formed LLC is a transfer of title. Some states treat a contribution to an entity you wholly control as a mere change in form and exempt it. Others treat it as a sale and want tax on fair market value. The answer is state-specific and it is worth one hour of a tax attorney's time before you file the bill of sale, not after.

Transfers into a revocable grantor trust are usually safer ground, because most states look at beneficial ownership and see no change. That is one of the quiet advantages of the trust route for an owner who already has the airplane and simply wants estate continuity.

Also watch the exemptions you may be relying on. Fly-away and out-of-state removal exemptions have short clocks — Florida's export exemption, for example, is measured in days, not months — and a late-breaking decision to retitle into an LLC can blow the timing. If you are on the selling side of this, our guide on tax implications when selling an aircraft covers the other half of the transaction.

Heads Up: sales and use tax is not the only state bill. Georgia, North Carolina and many Texas counties levy annual ad valorem personal property tax on based aircraft. An LLC does not exempt the airplane; it just changes whose name is on the notice.

Bonus depreciation and the business-use tests

This is where structure and tax finally intersect in a way that favors the LLC — but only for a buyer who actually has business use.

The One Big Beautiful Bill Act, signed in July 2025, restored 100% bonus depreciation under Section 168(k) for qualified property acquired after January 19, 2025, and made it permanent rather than letting it keep stepping down from the 80% and 60% rates of 2023 and 2024. Section 179 expensing was also raised, with a $2.5 million limit and a phaseout starting at $4 million for 2025, both indexed going forward. For a business buyer, that is the difference between writing off an aircraft over six years and writing it off this year.

The catch is Section 280F. An aircraft is listed property. Business aircraft must satisfy both the Section 280F 50% qualified-business-use test and the separate 25% test applicable to certain aircraft use before accelerated MACRS, Section 179, or bonus depreciation is available. Fall below that line and you are pushed onto the alternative depreciation system — straight-line, six years for a non-commercial aircraft — with no bonus and no Section 179. Personal entertainment flights are separately disallowed under Section 274 and the related regulations, and flights provided to employees for personal non-entertainment travel are handled through SIFL imputed income.

Why the entity choice matters here

A single-member LLC is disregarded for federal income tax, and so is a revocable grantor trust. Neither one creates a deduction by itself. What the LLC gives you is a clean container for the business-use story: a separate bank account, a dry lease to your operating company at a defensible rate, a flight log that ties hours to purpose. When the IRS asks you to substantiate 62% qualified business use three years from now, an LLC with its own ledger answers the question. A personal checkbook does not.

An irrevocable trust is the structure to be careful with. It is a separate taxpayer, and depreciation deductions can end up trapped where they are worth little. If your goal is a tax write-off, the trust is almost never the vehicle.

For the mechanics of the deduction itself, see our walkthrough on how to calculate aircraft depreciation and maximize deductions, and on the valuation side, understanding aircraft valuation methods and depreciation.

Good to Know: Section 168(k) contains a specific carve-out for certain non-commercial aircraft with long production periods — written binding contract, a nonrefundable deposit of the lesser of 10% of cost or $100,000, cost above $200,000, and an estimated production period over four months. If you are ordering a new airplane rather than buying used, that provision can matter to which tax year the deduction lands in.

The FAA traps that catch owners

Citizenship paperwork for LLCs

The FAA Registry does not take an LLC's word for citizenship. Because an LLC is neither a corporation nor a partnership under the registration statute, the Registry asks for a statement identifying the members and managers and their citizenship. A corporation qualifies when its president and two-thirds of its directors and managing officers are US citizens, the entity is under the actual control of citizens, and at least 75% of the voting interest is owned or controlled by citizens. Expect the Registry to apply the same arithmetic to your LLC. A single-member LLC whose sole member is a foreign national is not eligible, full stop — though 14 CFR 47.9 offers a narrow path for a US-organized corporation that is not a citizen, provided the aircraft is based and primarily used in the United States with at least 60% of flight hours flown domestically.

The flight department company problem

This one has cost real owners real money. If you form an LLC whose only business is owning the airplane, and that LLC then carries you, your family or your operating business for compensation, the FAA can treat it as a commercial operator whose principal business is transportation — which means it needed a Part 135 certificate. The usual fixes are a properly papered dry lease to the user, or for large and turbojet aircraft, the Part 91 Subpart F provisions including time-sharing agreements under 14 CFR 91.501(c)(1). Note that those Subpart F options are generally limited to aircraft over 12,500 pounds and turbojets, so they are no help to a Cirrus owner.

Related: 14 CFR 91.23, the truth-in-leasing rule, applies to large civil aircraft. It requires the lease in writing, a copy carried aboard, notice to the responsible Flight Standards office at least 48 hours before the first flight under the lease, and a copy mailed to the FAA Aircraft Registration Branch within 24 hours of execution.

Name mismatches and the registration gap

The name on the FAA Bill of Sale must match the LLC's legal name with the state exactly — "Skyhawk Holdings LLC" and "Skyhawk Holdings, L.L.C." are not the same to the Registry, and a mismatch means a rejection letter weeks later. Our list of common mistakes that invalidate an aircraft bill of sale covers the rest of the tripwires, and the aircraft closing process guide walks through escrow and FAA filing in order.

Registration is not transferable. The moment you move the airplane into an entity, the old certificate dies and a new application starts. After an ownership transfer, the second or “pink” copy of the Aircraft Registration Application provides temporary authority to operate within the United States while the application is pending, until the FAA issues or denies the registration or 12 months have elapsed from the first application following the transfer. It does not by itself authorize international operation. Also remember 14 CFR 47.45: an address change must be reported within 30 days. Owners who register an LLC at a registered agent's address and never check that mailbox are the ones whose registration quietly expires.

Pro Tip: privacy is no longer a reason to use a trust. Following the FAA Reauthorization Act of 2024, the FAA now accepts requests from registered owners to withhold personally identifiable information from the public registry. You can get the privacy without paying a trustee for it.

Flying411 keeps model histories, ownership costs and market listings in one place, so you can compare the all-in cost of two candidate airplanes before you decide how to title either one.

So which one fits you

Sort yourself into one of these and the answer gets simple.

The combination in row four is the one most owners end up at once they understand both problems: the LLC holds the airplane and absorbs operating liability, and the revocable trust holds the LLC. You get the bulkhead and the probate bypass without paying twice at the FAA, because only the LLC appears on the registration. If estate value is part of your reason for doing this, our piece on aircraft valuation for estate or tax purposes explains how the number gets set.

One last warning on the exit. Whatever structure holds the airplane, dissolving it does not erase what happened while it owned the aircraft. Entity or not, read how to avoid liability after selling an aircraft before you sign the last bill of sale.

Flying411 keeps buying, selling and ownership guides in one place, so you can compare what the paperwork costs against what the airplane costs.

Making the call

Deciding whether to buy your airplane in an LLC or a trust is really three decisions wearing one hat. The LLC answers liability and gives your business-use deductions a clean home. The trust answers succession, and for foreign owners it answers eligibility. Neither one answers sales and use tax, which follows the hangar and not the paperwork, and neither one protects the pilot from his own landing.

Budget a few hundred dollars for a state-specific conversation with a tax attorney before closing, not after. On a $400,000 airplane that conversation is roughly one-tenth of one percent of the purchase price, and it is the cheapest line item in the whole deal.

When you are ready to compare listings, visitFlying411and see what is on the market today.

Frequently Asked Questions

Does an LLC protect me if I am the pilot who crashes?

No. You are always personally responsible for your own negligence at the controls. An LLC protects your personal assets from claims arising out of somebody else's operation of the aircraft — a partner, a renter, a borrower. For your own flying, liability insurance limits are the real protection.

Can a Delaware or Montana LLC help me avoid sales tax?

No. Use tax is imposed by the state where the aircraft is based, hangared and used. Several states actively audit against FAA registration data and hangar leases. Out-of-state formation changes the mailing address, not the tax situs, and in some states an aggressive structure can add penalties on top of the tax.

Will transferring my current airplane into an LLC trigger tax?

It can. A transfer of title to an entity is a taxable sale in some states even when you own 100% of the entity; others exempt it as a mere change in form. Check your state before filing the bill of sale. Transfers into a revocable grantor trust are more often treated as no change in beneficial ownership.

Do I need a new FAA registration after moving the aircraft into an entity?

Yes. Registration does not transfer with title. You file an FAA Bill of Sale and a new Aircraft Registration Application in the entity's exact legal name. You may operate domestically on the pink copy while the registration application is pending, until the FAA issues or denies the certificate or 12 months have elapsed from the first application following the ownership transfer. International operation requires appropriate registration documentation rather than relying on the pink copy alone.

Can I take 100% bonus depreciation on an airplane I fly for fun?

No. Business aircraft must satisfy both the Section 280F 50% qualified-business-use test and the separate 25% test before accelerated depreciation or bonus depreciation is available. Below that threshold you are limited to straight-line alternative depreciation, and personal entertainment flights are separately disallowed under Section 274.

Is a trust still worth it for privacy on the FAA registry?

Rarely, now. Following the FAA Reauthorization Act of 2024, registered owners can ask the FAA to withhold their personally identifiable information from the public registry. Paying a professional trustee purely to keep your name off a website no longer makes much sense for a US citizen owner.