What entity should I choose for my drone business?

How to make your drone operation an actual, legal business

Photo: @rstraub

*Anthony G. Ison, Esq. is licensed in the State of Florida and can only speak to the laws of Florida. This article is not offered as legal advice and if you are interested in forming a business entity, please contact a competent attorney in your area. If you are interested in establishing a drone business entity outside the State of Florida, it is advised that you contact an attorney in your state.

As commercial drone operations begin to pop-up all over the place, it is important that you utilize every opportunity to set your company apart from the rest. One of the best ways that you can distinguish your operation from the competition and officially start a “business,” is to establish a business entity such as a “C” Corporation, a Limited Liability Partnership (“LLP”), a Limited Liability Company (“LLC”), a “S” Corporation, and/or a sole proprietorship. This is the starting point for your new drone business.

Picking the right entity for your drone business

Forming a business entity for your drone operation can be beneficial for a multitude of reasons, including but not limited to issues regarding tax liability, personal liability, personal and business asset distinction, as well as legitimizing your company before potential clients and amongst your competition.

Drones have found their way onto movie sets (Image: @DJIGlobal)

One of the most popular business entity forms is the Limited Liability Company or LLC. One of the best features of a LLC is its ease in structuring and formation. Essentially, in the State of Florida, forming a LLC can be as simple as logging on to www.sunbiz.org, filing out the electronic form (which will include questions as to your business name, mailing address and address of your principal office, as well as contact information for your registered agent), and paying a fee. Of course, this is an overly-simplified description of the process; however, forming an LLC can be much less time-consuming and overwhelming than forming a corporation – especially if this is your first time starting a business!

The benefits of an LLC for your drone business

Beyond its flexibility and ease of formation, the LLC offers its owner/members some resounding benefits – which makes forming a LLC a wise choice over operating your drone operation as a non-entity. One of the benefits of the LLC is its “pass-through” tax structure, whereas instead of being taxed in both your individual capacity and as a corporation, profits and losses can be reported on your individual tax return – wow, what does that mean? Essentially, “pass-through” taxation avoids double taxation and saves you a bunch of time and energy from having to create and file multiple tax returns.

Remember all of your hardware and software write-offs! (Image: IG @dimabalakirev)

Also, liability protection is a great advantage to the LLC – it’s in the name! Limited liability in the sense of a LLC means that if your drone business were to be sued, you as the owner of the business would not necessarily be responsible in your personal capacity. Rather, when sued, only the assets of the business are typically at risk. That means that your house, car, and other precious, personal belongings are not on the line as potential assets to be taken in a lawsuit against your business.

Why an LLC may not work for your drone business

It is important to stress, that despite all the LLC’s advantages, it may not be the business entity for everyone and every drone operation. For example, there is limited growth potential with a LLC, in that you cannot offer shares as a way to attract and entice potential investors. Also, again, business entity law varies from state to state, so it is important that you contact an attorney in your area to discuss what is best for you and your operation.

drone banner makes money
The possibilities are endless with running a drone business (Image IG: @SayItWithDrones)

Lastly, perhaps one of the most attractive purposes of forming a LLC or other business entity is that it keeps your operation from looking “fly by night.” In other words, if you hand a potential client a business card that says “John’s Drones, LLC” it is going to look a lot more official than if you hand the client a napkin with your telephone number on it.

Obviously you can have business cards without having formed a business entity, but the point is that by forming a business entity, you have gone from being a hobbyist making money on the side, to having formed a legitimate business.

When forming your drone business, think about things like business entities, liability insurance, operational and maintenance manuals, checklists, business cards, and other foundational structuring that will set you apart from those that are hobbyists and those that are truly professionals.

What business structure do you use your drone business? We’d love to hear from you in the comments section.

Controller image: @rstraub