If you're going to register your new airplane in an entity like an LLC, most lenders prefer that you form a new entity rather than use an existing one.
Doing so clearly proves there are no other outstanding liabilities, business activities or accounts tied to that LLC that could affect the aircraft financing process. While creating a new LLC isn’t always required by lenders, it does streamline the process.
Whether you choose to go with a new or an existing LLC, lenders will require the following LLC documentation: A certificate or statement of formation, certificate of good standing, operating agreement, and tax ID. Depending on your state, some of these documents may have slightly different names, and copies of the recorded documents may be available online through your state’s Secretary of State website. Not all states require operating agreements for LLCs, but aircraft lenders do. If your state doesn’t require an LLC operating agreement, it’s best to get one drawn up early in the financing process to avoid closing delays.
The operating agreement defines the LLC’s management structure-- typically, LLCs are either manager-managed or member-managed. It also defines who the manager or members are. The operating agreement gives lenders a clear understanding of the operations of that LLC, even if it is only a holding company for the aircraft. Note: If your LLC is managed by someone who is not a member of the LLC, such as your CPA or your attorney, the lender may request additional documentation about the manager.
Remember, the aircraft will be registered with the FAA according to the ownership structure you choose. Therefore, lenders need the loan documents to match or at least reference, the ownership structure as listed with the FAA. If you have questions about LLC ownership structure, management, or operating agreements, be sure to discuss your situation with experienced legal counsel. The FAA has specific requirements and regulations that apply differently to LLCs than to individuals or other ownership structures. And don’t forget, AOPA members have access to our Pilot Protection Services program which can assist you in finding legal counsel. Our Aviation Finance team can help connect you with our Pilot Protection Services team to make sure that everything is set up correctly.
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