California corp.

My graduate law class just covered legal entities. By luck my partner
and I had registered our Mooney in a Mutual Benefit Corp (C-corp). Had
we not, the attorney teaching the class said we would probably be
considered "Partners" under the eyes of the law. If we had just put
the plane in our names we would have been "Partners". As near as I can
tell "Partners" is the laws punishment for not doing anything else,
"Partners" happens automatically by default. "Partners" is the worse
case scenario because it comes with unlimited liability. If your
partner is driving to the airport and hits a dog, the dog's owner can
sue you and take your house.
In some states LLCs are a good way to establish. However, in
California LLCs have a minimum state tax of $800/year. Some people
tried to get smart and create their LLCs in other states. Well,
California now has a business fee for out of state LLCs of, guess
what, $800/year. Its kind of like sales tax. They can't charge you
8% for a plane you bought out of state, but they can charge you an 8%
"use tax" when you get it here (although there are some ways to avoid
that).
In anycase, I guess we got dumb lucky when we decided to create a
corporation. The only downside is that we have to have an annual
meeting, save meeting minutes, have officers, and report taxes
(although the corp's taxes are zero).

-Robert, living and learning

I chose to go with a LLC and deal with the $800 excise tax every year. It's
really silly that they charge that much for the "opportunity to conduct
business within California." However, the LLC provides me with protection
and allows me not to have to deal with maintaining two entities for tax
purposes (my LLC is where I make my income BTW). The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or so.

The California C-Corp has a minimum tax of $800, so any year that it doesn't
bring in income, you still owe $800. Many folks get burned by that by not
properlyl shutting down the C-Corp after they are done with it and the State
merilly charges $800 and fees and penalties. Then someone is shocked to see
a $5000 bill from the State a few years down the road.

r.

"Robert M. Gary" wrote in message
om...
My graduate law class just covered legal entities. By luck my partner
and I had registered our Mooney in a Mutual Benefit Corp (C-corp). Had
we not, the attorney teaching the class said we would probably be
considered "Partners" under the eyes of the law. If we had just put
the plane in our names we would have been "Partners". As near as I can
tell "Partners" is the laws punishment for not doing anything else,
"Partners" happens automatically by default. "Partners" is the worse
case scenario because it comes with unlimited liability. If your
partner is driving to the airport and hits a dog, the dog's owner can
sue you and take your house.
In some states LLCs are a good way to establish. However, in
California LLCs have a minimum state tax of $800/year. Some people
tried to get smart and create their LLCs in other states. Well,
California now has a business fee for out of state LLCs of, guess
what, $800/year. Its kind of like sales tax. They can't charge you
8% for a plane you bought out of state, but they can charge you an 8%
"use tax" when you get it here (although there are some ways to avoid
that).
In anycase, I guess we got dumb lucky when we decided to create a
corporation. The only downside is that we have to have an annual
meeting, save meeting minutes, have officers, and report taxes
(although the corp's taxes are zero).

-Robert, living and learning

The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or so.

Er, you're not deducting a business expense on your personal tax
return, are you?



all the best -- Dan Ford
email: (requires authentication)

see the Warbird's Forum at www.warbirdforum.com
and the Piper Cub Forum at www.pipercubforum.com

Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC is
treated as a sole-proprietership by California because I'm the only member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.

"Cub Driver" wrote in message
...

The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or
so.

Er, you're not deducting a business expense on your personal tax
return, are you?



all the best -- Dan Ford
email: (requires authentication)

see the Warbird's Forum at www.warbirdforum.com
and the Piper Cub Forum at www.pipercubforum.com

"Rob Thomas" wrote in message
...
Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC is
treated as a sole-proprietership by California because I'm the only
member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.


How does that work exactly? I'm not familiar with LLC's, except
that from what I remember you can opt to have them treated as
either partnerships or corporations for tax purposes.

I don't understand how you can pass the $800 back to your individual
return unless you're treated as an S-corp for tax purposes.

Either his sole proprietorship owns the LLC or the LLC *is* the sole
proprietorship. In the latter case, I'm not sure why he isn't filing an
1120 return.

Mike
MU-2

"Tony Cox" wrote in message
hlink.net...
"Rob Thomas" wrote in message
...
Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC
is
treated as a sole-proprietership by California because I'm the only
member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.


How does that work exactly? I'm not familiar with LLC's, except
that from what I remember you can opt to have them treated as
either partnerships or corporations for tax purposes.

I don't understand how you can pass the $800 back to your individual
return unless you're treated as an S-corp for tax purposes.

"Robert M. Gary" wrote in message
om...
My graduate law class just covered legal entities. By luck my partner
and I had registered our Mooney in a Mutual Benefit Corp (C-corp).


What is a "Mutual Benefit Corp"? A non-profit? As I remember, you'll
need to file more papers to avoid the minimum franchise tax of $800 (CA),
and will need to continue to pay that fee until your status is approved
(which can take over a year).

Had
we not, the attorney teaching the class said we would probably be
considered "Partners" under the eyes of the law. If we had just put
the plane in our names we would have been "Partners". As near as I can
tell "Partners" is the laws punishment for not doing anything else,
"Partners" happens automatically by default. "Partners" is the worse
case scenario because it comes with unlimited liability.


There are other ways of protecting yourself against liability than forming
a corp. The extra insurance is often cheaper than messing with the
paperwork of maintaining a corp (if you can get a 'flat' policy).

If your
partner is driving to the airport and hits a dog, the dog's owner can
sue you and take your house.

Perhaps the next class will deal with "piercing the corporate veil".
You might not be as enthusiastic about corporate ownership after
that.

Single entity LLC's (one director, me) are treated *exactly* like sole
proprietorships by the IRS. However, they are still afforded the same legal
protections as a C-Corporation. It *used* to be that LLC's were treated as
partnerships, or the LLC could elect to be treated as a C-Corp for tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business) just as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so it's not
just a holding company for an aircraft. I know some people set them up that
way, but just wanted to point out that mine is not setup that way.

r.

"Tony Cox" wrote in message
hlink.net...
"Rob Thomas" wrote in message
...
Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC
is
treated as a sole-proprietership by California because I'm the only
member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.


How does that work exactly? I'm not familiar with LLC's, except
that from what I remember you can opt to have them treated as
either partnerships or corporations for tax purposes.

I don't understand how you can pass the $800 back to your individual
return unless you're treated as an S-corp for tax purposes.

The LLC is the sole proprietorship. 1120? I don't file that. 1040 with
Schedule C.

r.

"Mike Rapoport" wrote in message
hlink.net...
Either his sole proprietorship owns the LLC or the LLC *is* the sole
proprietorship. In the latter case, I'm not sure why he isn't filing an
1120 return.

Mike
MU-2

"Tony Cox" wrote in message
hlink.net...
"Rob Thomas" wrote in message
...
Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My
LLC
is
treated as a sole-proprietership by California because I'm the only
member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.


How does that work exactly? I'm not familiar with LLC's, except
that from what I remember you can opt to have them treated as
either partnerships or corporations for tax purposes.

I don't understand how you can pass the $800 back to your individual
return unless you're treated as an S-corp for tax purposes.

"Rob Thomas" wrote in message
...
Single entity LLC's (one director, me) are treated *exactly* like sole
proprietorships by the IRS. However, they are still afforded the same
legal
protections as a C-Corporation. It *used* to be that LLC's were treated
as
partnerships, or the LLC could elect to be treated as a C-Corp for tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business) just as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so it's not
just a holding company for an aircraft. I know some people set them up
that
way, but just wanted to point out that mine is not setup that way.


Thanks for the clear response. BTW, do you use your
aircraft for business or do you just use your LLC to hold
title?

I've been advised *not* to mix my aircraft (which is used
very occasionally for business) with the corporation. My
CPA says it attracts attention from the IRS. Not that I'd
be worried about the attention per se, but of course the
costs involved in even a successful audit are time, effort,
and paperwork frustration.

Did the FAA require further info on the LLC to register
your plane? Like proof of LLC ownership, conditions
for ownership transfer etc? I had the devils own trouble
attempting to register the plane to a revocable living
trust & finally gave up on the buggers and reregistered
in my own name.