Suggestions for partnership agreement

"GE" wrote in message ...
Getting a few steps closer to owning my first airplane. I have a friend who
will be my partner and we plan on setting up an LLC to actually own the
plane. I don't know anything about LLC's, but I do want to have a
partnership agreement that spells out our financial responsibilities. Any
suggestions? Does anyone have a sample that I could look at? Thanks.

Be careful. In some locations the LLC has a minimum franchise tax. In
CA you pay a minimum of $800/year in state tax for the right to have
the LLC. If you create the LLC out of state you pay a use tax of
$800/year (they get you either way). You can fill out a form to
request an exception as not-for-profit but it takes a very, very long
time to get a response and you need to pay the taxes in the meantime.
It may or may not be the same where you are.

However, if you don't do the LLC you will be regarded as "partners" in
the legal sense. Anything your partner does related to the airplane
can create liability for you. This includes things not covered by your
airplane insurance like driving to the airport.
Also, make sure you have good articles. Whether you are "partners" or
an LLC, the other guy can create debts against you unless you have
something written up otherwise.

I've owned my Mooney in a C-corp with a partner for several years now
and I can't imagine owning a plane myself ever. Between the two of us
we keep it flying enough. Unless you really think you will put more
than 100hr/year on a plane you really shouldn't own it yourself.
Now we're looking at adding an L-2 to our line.

-Robert

Robert M. Gary wrote:

Be careful. In some locations the LLC has a minimum franchise tax. In
CA you pay a minimum of $800/year in state tax for the right to have
the LLC. If you create the LLC out of state you pay a use tax of
$800/year (they get you either way). You can fill out a form to
request an exception as not-for-profit but it takes a very, very long
time to get a response and you need to pay the taxes in the meantime.
It may or may not be the same where you are.

How difficult and expensive is straight-forward incorporation in the U.S.
(i.e. not an S-corp or an LLC -- is that what you mean by a C-corp?)? In
Ontario, Canada, it costs a bit over CAD 200 (USD 150) to set up a federal
corporation online, including the name search -- you pay by credit card, and
if there's no name conflict the federal government e-mails you the articles
of incorporation in PDF format a few hours later. Unless the corporation
collects sales tax or makes a profit, the only other fees are CAD 20/year
(about USD 15/year) for filing the annual corporate information return
online, and whatever you pay at Staples for some blank paper and a binder to
keep the articles and minutes.

If it's similar in the U.S., perhaps that would be a better choice than an LLC.


All the best,


David

David Megginson wrote in message . rogers.com...
Robert M. Gary wrote:

Be careful. In some locations the LLC has a minimum franchise tax. In
CA you pay a minimum of $800/year in state tax for the right to have
the LLC. If you create the LLC out of state you pay a use tax of
$800/year (they get you either way). You can fill out a form to
request an exception as not-for-profit but it takes a very, very long
time to get a response and you need to pay the taxes in the meantime.
It may or may not be the same where you are.

How difficult and expensive is straight-forward incorporation in the U.S.
(i.e. not an S-corp or an LLC -- is that what you mean by a C-corp?)? In
Ontario, Canada, it costs a bit over CAD 200 (USD 150) to set up a federal
corporation online, including the name search -- you pay by credit card, and
if there's no name conflict the federal government e-mails you the articles
of incorporation in PDF format a few hours later. Unless the corporation
collects sales tax or makes a profit, the only other fees are CAD 20/year
(about USD 15/year) for filing the annual corporate information return
online, and whatever you pay at Staples for some blank paper and a binder to
keep the articles and minutes.

If it's similar in the U.S., perhaps that would be a better choice than an LLC.

It depends on the state. In general the difference between a C-corp
and an LLC is the paperwork. A C-corp must report officers each year
to the state and you must hold board of director's meetings and have
notes. If you fail to do one of these someone can "pierce the coporate
veil" by saying you were not really a C-corp. In either case you need
to isolate the money, have a specific checking account, etc. If you
co-mingle money, the LLC or the corp will be pierced pretty quick.

In California the costs depend on what type of C-corp you want. A
mututal benefit corporation can be had for $35 (plus the paperwork of
putting together the articles of incorporation). I believe a
for-profit C-corp is around $200 filing fee.

However, in CA you must also pay $800/year minimum franchise tax. This
is the same for mututal benefit corps, LLC, out of state corps, etc.
The only way around this is to fill out another form requesting state
exception because you are not-for-profit (please note that
not-for-profit is in no way related to chartity or in anyway related
to being an IRS exempt corp).
Once you get that letter (about 12 months out) you can stop paying the
minimum $800/year tax. You don't really need do to anything with the
feds because the feds don't expect taxes to be paid unless you make
money or pay saleries, etc.


In all of this there is only one part that is very easy, can be done
in real time over the internet, and does not cost anything. That part
is getting the tax-payer ID number you'll need for your forms and back
account. If you want to save money, expect months and months of
paperwork, but if you just want a number so you can pay money, it
happens right away!

-Robert