Aircraft Co-Ownership Legal Structures: LLC, Partnership, or Informal?

Most shared-aircraft groups choose between three structures: informal joint ownership, a general partnership, or a limited liability company (LLC). Each is common; each has trade-offs.

1. Informal joint ownership

Two or more people share title directly on the FAA registration. No separate entity. The simplest option and the one most two-person partnerships start with.

• Pros: cheap, fast, no annual filings, no entity-level tax return.
• Cons: every owner is personally liable for everything the aircraft does. No liability shield. When a partner dies or divorces, their share passes by will or state law, not by a partnership agreement.

Informal joint ownership works for two pilots who trust each other and have their own insurance. It stops working the moment you add a third pilot or renters.

2. General partnership

A general partnership is formed by written (or even unwritten) agreement among the partners. Title is still usually held in the names of the partners, but the partnership agreement controls how the aircraft is operated, how costs are shared, and how a partner exits.

• Pros: a written agreement forces you to decide the edge cases (exit, death, dispute) before they happen.
• Cons: still joint and several liability. One partner's actions can expose all partners personally.

3. LLC

The aircraft is owned by a limited liability company, and the partners are members of the LLC. The LLC holds the title and the insurance; the members share profits and losses per the operating agreement.

• Pros: liability shield (with limits, see below), clean exit mechanics, flexible tax treatment (disregarded, partnership, or S-corp).
• Cons: annual state filings, a little more paperwork, some states impose annual fees (California's $800 minimum franchise tax is the classic trap).

4. What to decide either way

Regardless of structure, your agreement should spell out:

• Ownership shares and what happens when they change (sale, death, divorce, default).
• Who can fly, what qualifications are required, and who approves new members.
• Scheduling priority and the resolution process for conflicts.
• Cost-sharing rules (see our post on splitting aircraft costs).
• Capital calls for unexpected expenses: how they're triggered and how partners who can't fund them are treated.
• Exit and dissolution: how a departing partner is paid out and how the aircraft is valued.

Get the structure and the agreement right up front. Changing either after the fact is expensive and usually contentious.