Two ways the registry sees you
The FAA aircraft registry records a registrant type for every aircraft. For shared aircraft the relevant ones are Co-Owned (type 4), where two or more individuals are named directly, and LLC (type 7), where a limited liability company holds the aircraft and the individuals sit behind it.
Across the whole registry, co-ownership is much the more common arrangement for small groups: our analysis of the registry found around 25,900 aircraft registered as Co-Owned and roughly 3,100 as Partnerships, against 86,800 LLC registrations — but the LLC figure is dominated by single-owner and corporate aircraft rather than the two-to-six person groups this guide is about.
Direct co-ownership
What it is: each partner's name appears on the registration. You jointly own a chattel, in much the same way two people can jointly own a boat.
Advantages: simple and cheap to set up, no annual filings or franchise fees, no separate tax return, and insurance is straightforward because the named insureds are the actual owners. For a group of friends buying a Cherokee, this is often exactly right.
Disadvantages: no liability shield between the aircraft and your personal assets beyond what insurance provides. Transferring a share means a registration change with all owners involved. And on death, the deceased's interest passes through their estate, which can leave surviving partners waiting on probate to resolve who they now co-own an aeroplane with.
The LLC
What it is: an LLC owns the aircraft; the partners own membership interests in the LLC.
Advantages: transferring a share means transferring an LLC interest, with no FAA registration change. The operating agreement sits naturally at the LLC level. Succession is cleaner — a deceased member's interest passes under the operating agreement rather than dragging the aircraft through probate. And there is a liability shield, though see the warning below.
Disadvantages: formation cost, annual state fees (trivial in some states, several hundred dollars in others), possible separate tax filings, and more paperwork generally. Some states also treat the transfer of an aircraft into an LLC as a taxable sale, which can be an expensive surprise.
There is also a specific FAA wrinkle: an LLC must satisfy US citizenship requirements for registration, and single-member LLCs owned by non-citizens create real complications. If any partner is not a US citizen, take advice before choosing.
The liability shield is thinner than people think
The most common reason people give for wanting an LLC is liability protection, and it is the reason most often overstated.
An LLC does not protect the pilot. If you are flying and cause harm, you are personally liable for your own negligence regardless of who owns the aircraft. What an LLC can do is limit the exposure of the other members to a claim arising from a flight they were not on.
That is worth something, but it is worth much less than adequate liability insurance, and courts will look through an LLC that is not genuinely maintained — no separate bank account, no records, expenses paid personally, formalities ignored. A poorly-run LLC provides the illusion of protection while costing real money.
If liability is the concern, the first conversation is with an insurance broker about limits, not with a lawyer about entities.
How to choose
Direct co-ownership suits two to four people who know each other well, a modest aircraft, a state with high LLC fees, and a group willing to keep good records without a corporate structure forcing them to.
An LLC suits larger groups, more valuable aircraft, groups expecting membership to change over time, groups with members in different states, and anyone who wants a clean answer to the succession question in advance.
A reasonable heuristic: if you expect the membership to be the same people in five years, direct co-ownership is usually fine. If you expect turnover, the LLC pays for itself in avoided registration changes alone.
Whichever you choose, keep the money separate
This matters far more than the entity choice. Open a dedicated bank account for the aircraft. Pay all aircraft expenses from it and pay all partner contributions into it. Never run aircraft money through a personal account, even briefly, even for convenience.
With an LLC this is what preserves the liability shield. With direct co-ownership it is what makes the books reconstructable — and the day someone leaves, or dies, or the group is audited, being able to reconstruct the books is the thing that matters.