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 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.
Let’s say you are considering creating a single-owner LLC to hold your aircraft, and you are the only person who will fly it. In this case, 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 forego 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 of the LLC causes an accident, there is a good chance that the members of the LLC who were not flying at the time may be protected by the LLC, assuming there is no other basis for liability present, such as the member overseeing maintenance.
Whether the LLC really provides any liability protection is dependent 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 from a judgment.
Beyond the question of liability, however, there are other issues involved with aircraft owned by an LLC, including compliance with FAA regulations and tax considerations that should not be overlooked. 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.