I am working in partnership with a friend of mine to structure a deal
to import about 20 used foreign aircraft for sale in the U.S. We?re
concerned about liability (obviously) and are leaning toward
establishing a Delaware LLC as our business entity. I've heard that
there might be tax advantages as well as additional liability
protection afforded by using multiple entities, e.g. :
1) Corp A to ?hold? aircraft; Corp B to sell them. (Restricts
liability to the sales corporation, which holds no assets.)
2) Corp A to operate; Corp B to raise/lend money and hold first lien
against assets. (In event of lawsuit which bankrupts the operating
company, Corp B -- also ours -- gets first dibs on the assets.)
3) Corp A to operate/sell aircraft in CA; Corp B to show profit in NV,
e.g. through advertising or other service to Corp A. From tax
standpoint, if all profits eventually pass through to owners in CA,
does it matter?
We?ve already paid one attorney for an opinion as to whether any of
these options make sense, or whether a single entity is sufficient,
and only received general guidance. His answer (repeated below) was
"Generally, yes it's a good idea to use multiple entities"...but he
then went on to caution us if the sales entity was "thinly
capitalized" it might not provide any protection. In our case, we're
about as thinly capitalized as possible...it's just the two of us, and
our deal. No infrastructure, no office, just rented hangar space for
airplanes.
So...what should we do? In responding, if you believe that the multiple-entity
solution is worthwhile, then specifics as to the charter of each
company, how/when assets are moved from one to the other, etc. would be
very helpful.
Previous attorney response:
"I generally agree with the notion that you should form more than one
entity. In my experience, most major aircraft providers, both in the
whole and fractional markets, divide their companies into a number of
separate corporate entities for a number of reasons, risk allocation
being one. For example, fractional customer buy their shares from
NetJets Sales, Inc., but receive management services from NetJets
Aviation, Inc. Cessna's aircraft service centers are separate from
their sales division and their financing arm (and, of course, they're
now all subsidiaries of Textron). Ditto, separate divisions at
Honeywell, Teledyne, etc. However, you need to recognize that forming
separate companies is not a panacea. If you get sued, there is an
extremely high likelihood that every one of your entities will be
sued. One of the principal questions a court will then ask when it
decides whether to pierce the corporate veil is whether the entity was
thinly capitalized. If your sales entity is the only company that is
in a direct contractual relationship with the customer and you drain
every dime out of the sales company so that there's nothing available
to respond to claims, a court will be much more likely to consider
ignoring the corporate formalities. There are other factors a court
will review, but inadequate capitalization is one of the most
critical." |
