This month’s topic stems from the calls we often receive regarding forming a Limited Liability Corporation (LLC) and/or Trust in the United States. Clients who are foreign nationals registered with Aircraft Guaranty Corporation sometimes wonder about taking their aircraft out of Trust and putting it in an LLC instead: Can they do it? Is it better? The answers require a bit of explanation because it seems like a good strategy for protecting the asset – it can be in fact – but there are restrictions and a specific course of action to adhere to.
Registering an aircraft with an LLC is a strategy often put to use by US citizens. The purpose in both forming an LLC and registering an aircraft with it are the same: to limit the liability of an individual in any kind of recourse, protecting the asset. For instance, if an accident occurred and the aircraft damaged property, an individual owner would not be personally liable – the LLC would. FAA regulations restrict this practice though and only allow aircraft registration by an LLC if two thirds of the stakeholders are US citizens.
There is, however, another approach for our clients that has the same results. An LLC can be the beneficiary of a Trust instead of an individual. In this way, liability again extends beyond the individual, or owner trustee, to the beneficial owner of the aircraft, the LLC. This effectively accomplishes the same aims US citizens have when they register an aircraft at the FAA with an LLC – to protect the asset by protecting an individual from potentially unfair recourse.
To sum it up, if we have a foreign national client who would like to protect their asset through an LLC, but the LLC does not meet the two thirds US citizens requirement for FAA registration, we can instead place the LLC as the beneficiary of the trust. With this course of action, AGC can help ensure that the aircraft and the owner are carefully protected.