Should I Start an LLC for My Flight School?

Starting a limited liability company (LLC) for your flight school can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a flight school, lawsuits can arise from things like educational malpractice or disputes arising as a result of a former student causing an accident (e.g., as a result of reckless or negligent teaching practices).

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your flight school seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Flight School?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Flight School

By starting an LLC for your flight school, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Flight schools will benefit from liability protection because of the risk of being sued for personal injuries, property damage, and trademark infringement.

Example 1: A student sues your flight school for damages after they have an accident during a lesson. If found to be guilty, only the business’ assets will be affected, as liability protection protects the owner’s personal assets from being used.

Example 2: A student sues your flight school for failing to properly train them, leading to an accident during a solo flight. As long as your business is operating as an LLC, your personal assets will remain protected from being used to pay for any damages or legal fees associated with the lawsuit, even if the business is found to be liable.

Example 3: A student sues your flight school for breach of contract after they are unable to complete their training due to an injury sustained on the premises. The LLC structure helps to safeguard the business owner's personal assets even if the business is found to be guilty.

Example 4: Your new logo is nearly identical to a competing flight school’s trademarked design. The school sues yours for infringement.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Flight School

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a flight school owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Flight schools rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a dependable LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

This is especially important for businesses in high-risk industries, such as aviation, where the consequences of an accident or other unexpected event can be significant.

Common Situations Business Insurance May Cover for a Flight School

Example 1: While visiting your flight school, a potential student trips over some equipment he fails to see, breaks an arm in the resulting fall, and asks you to pay for his medical treatment. General liability insurance would cover his medical bills and any related damages if he files a lawsuit.

Example 2: The owner of a competing flight school files a lawsuit against your business, claiming you libeled her school in a recent advertising campaign. While you disagree with the claim, you know you need legal advice. General liability insurance would pay for your legal defense and any damages awarded in a settlement.

Example 3: As an employee brings a plane around to the front of your business to attract new customers, she forgets to look left while preparing to park and runs into a customer’s car. General liability insurance would cover the customer’s vehicle repair costs and any additional damages if the customer decides to sue.

Other Types of Coverage Flight Schools Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all flight schools should obtain:

Commercial Property Insurance

You made a major investment to establish your flight school. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building(s) and grounds as well as your planes, specialized equipment, and other business supplies.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a work-related accident.

Commercial Auto Insurance

Any vehicle you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured but also sufficient protection for any business materials you carry in your vehicle.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, workers’ compensation insurance, and commercial property insurance.

Read our Flight School Business Insurance article for more info.

Starting a flight school can be expensive, with costs including purchasing office and classroom space, a hanger, airplanes, and liability and property insurance, which can reach six or seven figures. Most business owners will need to take out a loan to cover these expenses, which may also include buying fuel and paying instructors' salaries.

Visit our How to Start a Flight School guide to learn more about the costs of starting and maintaining this business.

A flight school’s regular costs are relatively high and include employee salaries, airplane maintenance, lease or mortgage payments, airplane fuel, and insurance costs.

Learn more about running a flight school.

A flight school makes money by charging clients for flying lessons.

Learn more about starting a flight school.

Flying a plane requires many hours of training to keep the plane’s occupants safe. This instruction is provided by flight schools, which typically teach people who want to become private pilots.

A flight school’s profit margins are relatively low because ongoing expenses are relatively high. However, it is possible to make enough profit to pay for overhead and the owner’s salary.

Learn more about starting a flight school.