Once the purchase is a done deal, you need to decide who will legally own the plane. You have various options:

Single human owner: Simplest and most obvious; you legally own the plane. The advantages are convenience, simplicity, and potentially tax savings. Most states have a “casual sale” exemption for sales tax which waives sales tax when a plane is sold by individuals to individuals. The downside is that if you plan to use the plane for business (e. g. flying to sales calls), it’s more difficult to take the tax deduction.

Multiple human owners: In this model, the plane is owned by multiple individuals. This can be useful for partnerships, or if you have a spouse. The owners need not be pilots or named insured. One thing to note is that to transfer the registration in the future, you’ll need signatures from all registered owners.

Corporate owner: If you choose, the plane can be legally owned by an LLC, S corp, or other legal entity. This is a useful structure if the aircraft will be used for business purposes. However, make sure you fully understand the ramifications:

  • Doing this will guarantee you have to pay sales tax on the purchase since you’ll lose the casual sale exemption.
  • Having the plane registered to a corporation does not automatically make all expenses tax deductible. If your financial planning is predicated on deducting certain flights, check with your accountant to make sure your planned deductions are legal.
  • Registering the plane to a corporation does not provide any liability insurance. You still need to carry hull and liability insurance to protect yourself in the event of an incident. If something goes wrong during a flight, you will absolutely be sued. At a minimum you will have expensive legal bills; at worst, you will need to pay a debilitating settlement. In addition, remember that insurance covers your plane while it’s parked. If a parked plane owned by an LLC is shredded on the ramp, the owner is out of luck unless it’s insured. For some reason many people recommend forming an LLC instead of paying for insurance even though it’s completely bonkers. Putting the plane in an LLC does provide certain benefits; liability protection is not one of them.

The bottom line is that unless you have a business situation that will allow you to deduct most of your flights, registering the plane to an LLC is probably not worth the complexity and cost of forming and maintaining an LLC.