I’m a drone pilot who just got his license (Part 107). I’ve done some shots and gigs for friends but as I am looking into possibly venturing out on my own as a business I keep getting told that it’d be good to be an LLC. Every time I look into it I just get inundated with technical terms. Just wanted someone to really simplify it for me so I can know where I stand. Thanks so much!
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It’s a Limited Liability Corporation.
There are many ways you can form a business.
If you just do stuff as yourself, that’s a sole proprietorship. But you’re also personally liable for all business debts and other liabilities should something go wrong.
In an LLC, your personal assets are shielded from the business. So even if the business gets sued into oblivion, you won’t lose everything you personally own.
It stands for “Limited Liability Corporation”. Ostensibly this is to protect you and your assets from something you might be liable for like injuring someone or causing damage to someone’s property to use a couple of examples.
So if you were to injure someone with one your drones, for example, they couldn’t sue you personally only your LLC. This is how it’s supposed to work but I have heard of ways around this in some cases, and IANAL.
It also affords you some other benefits like tax breaks, anonymity (to some extent), and some other things.
If you crash your drone and hurt someone, they can sue you. If you lose, they can take all your assets.
If you’re working for a company and you crash the company’s drone and hurt someone, they can sue the company. If the company loses they can take all the company’s assets.
I’m not a lawyer.
And there are also tax incentives depending on where you are.
In very short.
If you do business and something happens the business is responsible. For example your drone crashes and falls into a wedding cake worth thousands of dollars. Currently you are the business so you are fully liable for any damages.
An LLC creates a legal person. It doesn’t really exist but for the law it does. Now if there are damages this legal person is responsible as it is the business. You still would want to pay for the wedding cake damages, but if there are anything massive which you simply can’t pay and would bankrupt over, the only thing that is going bankrupt is your business and the legal person. You basically were just an employee that gets out with all your private assets unharmed.
An LLC is a legal structure for a business, usually used by very small businesses of 1-3 people, and often just one person. It’s primary role is to protect an individual from the business and vice versa.
If you crash your drone in a wooded area, and the battery has a fault and causes a fire that destroys people’s homes, then those people are going to sue the person responsible for the drone. If you can prove that you were flying your drone on company business, they can only sue the LLC and only claim damages against the property of the LLC – equipment owned by the company and any liquid financial assets it has.
If you don’t have an LLC, they are now suing you, which means that, depending on the amount of the lawsuit, they can claim everything you own – your house, your vehicle, anything.
It also protects the other way – if someone is suing you, the lawsuit cannot touch any of the assets owned by the LLC. So at least if you’re in a really bad lawsuit, at least you have your business to fall back on.
There are other benefits to them, but the legal/financial ones are the primary reason people establish them.
A limited liability corporation is a way to have a layer of separation between you the person and your business. Say you are an electrician that just does electrical work without an LLC. Now say you do a job inccorectly and some faulty wiring causes someone’s house to burn down. That person can now sue you and you may wind up losing your own home and business to pay for the damages. Now the same scenario but you have an LLC. Only the assets that are involved in your company at risk. You business may go under but you will still have a home to go back to.
Besides the reasons posted, I think it also adds legitimacy to a company. When I worked adjacent to procurement in a previous role we would often be a little skeptical about people that had sole proprietorships. It doesn’t take much to create an LLC.
“Corporation, n. An ingenious device for obtaining individual profit without individual responsibility.” Ambrose Bierce, The Devil’s Dictionary
Think of an LLC like a shield between yourself and your personal assets. So let’s say your drone runs out of power halfway through a shoot. It falls on someone and lands them in the hospital. And the person sues you for their medical bills.
Now without an LLC, you would be personally responsible for paying those legal fees. Which means the courts can force you to sell things like your house and your car in order to pay those off. With an LLC however, since the accident happened while you were conducting your business, the injured party now has to sue your business. Of course that might mean your business going bankrupt if it can’t afford to pay, but they can’t touch your personal properties.
Note however that the above only applies if you keep your personal property separate from your business. Like let’s say you want to make your car a part of your business, because you need to drive around to gigs. The pros of this include being able to get tax breaks on the vehicle, and also being able to write off things like maintenance and repairs done as business expenses. After all, can’t get a job done with a flat tyre.
However the risk of it is, since it’s now considered a part of the LLC, if your LLC needs money in any way, like legal fees, or paying suppliers or insurance, that means your vehicle is liable to be sold or repoed in order to cover that debt.
Of course there’s probably a lot of fine details I might be missing out, and the laws might differ from country to country, state to state. So it’s best to either do more research on this or consult with a lawyer or accountant if you’re really unsure.
Its a corporate structure that can shield the owner from liability, while passing profits through as owner income.
Lets say you have an LLC and someone sues your business. They can come after your business assets, but they cant come after your personal assets like your home or retirement accounts. You also aren’t usually personally responsible for the businesses debts.
Its not bulletproof. You can still sue through an LLC to the owner in some circumstances. Its limited liability, not zero liability.
Theres a big trend right now in hustle culture where people brag about having an LLC as though its some kind of accomplishment or signal of wealth. This only impresses idiots.
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