Creating and maintaining a limited liability company (LLC) for your farm business requires some extra effort and expense. How do you know if it’s worth it? A wise approach is to consider whether the benefits outweigh the costs. We have a resource to help you! Check out our free Forming an LLC for Your Farm Basics. This tipsheet will walk you through a series of questions and explanations to help you determine whether the LLC business structure is the right fit for your farm.
If you sure you want to form an LLC and are looking for help actually forming it and running it, you will want Chapter 4: LLCs of the Farmers’ Guide to Business Structures by your side. You’ll learn more about the LLC model, including how to form and maintain one effectively. Checklists make the process easier.
Don’t forget the importance of the operating agreement! Especially if you are working with others, disagreements can cause intractable problems for the farm business further down the road. You’ve heard the stories… fights about debt loads, mismanagement of budgeting, unclear communication causing stress… There is a solution. Although it’s often not legally required, we can’t stress enough the importance of a thorough governance document in preventing these types of problems before they harm the farm or ranch business (and the personal relationships of those involved). No matter the business structure chosen, write an operating agreement that addresses unique needs of the farm or ranch business.
We provide two model operating agreements- one intended for a married couple and the other for unrelated persons doing business together in Chapter 4: LLCs of the Farmers’ Guide to Business Structures. Both are fully annotated with detailed descriptions of how and why the agreement was drafted as it was. Follow along with the fictional stories of the farmers creating the agreements. Sample annual member meeting minutes round out the legal resilience package that is LLCs.
Did you consider your other options, in addition to forming an LLC? If not, check out our Farm Business Structure Basics. It answers the most frequently asked questions farmers have when choosing a business structure, such as: I’m not sure I want to form a business entity? Can’t I just sell my products or services? Which one is better – a corporation or an LLC? If you are more of a visual learner, and want to see all your business structure options, follow the flowchart in our free Understanding the Options which is Chapter 2 of our Farmers’ Guide to Business Structures. Through a series of Yes/No questions, this flowchart leads the reader to business structure options that are likely to fit the farm’s needs.
For audio learners, listen to our Podcast Episode 5: Farm Like You Mean Business! This podcast is a basic introduction to business entities for farms. You’ll learn about sole proprietorships, partnerships, LLCs, and corporations as the hosts explore the big question: What’s best for your farm enterprise? Hear directly from farmers about their personal experiences with tax issues, organizational documents, and more.