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An LLC also will want to prepare an operating agreement, which is similar to by-laws for a corporation.

If the LLC has more than one member it will likely file a partnership tax return on an IRS Form 1065.

In most cases, it’s a good idea to seek the assistance of qualified legal and accounting professionals to help you establish a corporation or LLC. The club would have to file articles of incorporation with the state, and it is required to have by-laws and keep written minutes of director and member meetings.

Corporations must file tax returns and if annual revenues exceed expenses, the club will need to pay taxes on the profit.

The advantage of an equity model is that it offers more control, better fleet stability, and a stronger sense of ownership among the members, as well as lower hourly rates.

The trade off is the initial buy-in to join the club is usually higher than for a non-equity club.

However, the big disadvantage is the exposure of members to personal liability.

There are two basic ownership structures that clubs may choose when acquiring an aircraft—equity or non-equity—and it’s not as simple as you might think.

The disadvantages include the expense of incorporating, which can vary, as well as the paperwork requirements, including maintaining minutes, filing taxes, and creating other documents that chart the corporation’s actions.

The structure required for corporations provides basic roles for some key and required positions such as president, secretary, and treasurer.

A non-equity club is one in which the club, as an entity, either leases or owns the aircraft.

The members don’t have a financial right to a portion of the asset if the aircraft is sold or the club is dissolved.

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