Start farm llc or not? Advice please

[PapaPerk]

I have a 6 acre property I live on. And access to another 15 acres of family property. I also have a wide assortment of equipment and ways of hauling them.

I'm interested in starting a farm LLC. I would like to make some money from producing a product and providing farm related services on customers properties (mowing, etc). Also I would like to take advantage of writing off farm and operating expenses from my taxes. I have a good paying day job.

There seems to be many hurdles to clear for me to setup a LLC. In a nutshell do you think it's worth it? Or should I just do my work for others and sell my products as an unregistered farm and not worry with it? Is the tax savings worth it? One concern I have is liability off the farm property.

What is your opinion on this and is there anyone in a similar situation?

Thank you... This is typed on a phone so I apologize in advance!

 

[smstonypoint]

There are several issues here.

First, I think you will find that producing a commodity (or commodities) on 21 acres or less is not economically feasible. You may find specialty crops that are economically feasible, but these will be labor- and management-intensive, require access to suitable markets, and marketing skills.

Regarding taxes, IRS Publication 225 Publication 225, Farmer's Tax Guide is a great resource. Just be aware that you may need to convince the IRS that you are operating a business rather than a hobby farm.

A LLC can offer potential advantages from a liability standpoint, but you should have liability insurance regardless of your legal structure. I think some folks lease their equipment to their LLC's or Sub-Chapter S corporations for tax and liability reasons.

I believe that the LLC statutes differ across states, so you should obtain legal advice in KY.

Good luck.

Steve

 

[QRTRHRS]

I ran my horse boarding, breeding, training operation as an LLC. Cost me maybe a grand for a lawyer to set up some thirteen-fourteen years ago. It is actually a valid LLC albeit non active. Per my accountants advice (in another state then KY where the operation was), I just stopped claiming the operation.

Do check with your accountant and lawyer if you have one or get one but when I was in it, it was a no brainer with horses. At that time, the state had no equine liability laws. The LLC allowed me to lease my property and buildings, etc. to the LLC to somewhat protect me from lawsuits. There is no need for officers and such as with a corporation. I did not need to provide quarterly reports to the state like I did when I simply registered my business with the state.

I did have a problem with the state I was in sending me warnings about quarterly reports as if they had no knowledge of an LLC. My accountant always took care of it. I don't know that there is a huge tax advantage overall. I did have to provide the IRS with a business plan early on which I did adhere to more or less. No matter how you do it, if you are going to deduct, you do need to keep track of things and keep careful organized cross referenced records.

Again though, you do need to work with a lawyer and an accountant.

 

[PapaPerk]

Thank you for the feedback guys! I really appreciate it!

I would certainly have SOME income with my custom mowing and work for other farms. Plus I would like to raise a small crop of some type on my property and lease the other 15 acres out for cattle. So there would be income.

Question is... How much income is really needed? And coupling that with my income from my day job... Will I really get that much of a tax break? In other words... Is the expense of setting up the LLC, paying lawyers and CPA worth it?

Or should I just do the odd jobs on the side as an individual and not a business? Of course I can't write my equipment off in that scenario. Questions questions.

I need to get an appointment with a CPA.

 

[PapaPerk]

Anyone else have any input?

 

[teejk]

Anyone else have any input?

I'll chime in...the whole purpose of the LLC is to put a legal buffer between you and your business operations. Federal tax law is "blind" with respect to LLCs and there are NO tax advantages at all. If you form an LLC as a "single member", you get the same tax result as if you didn't form it (form 1040 sch C or E or F either way). If multiple parties (other than a spouse filing a joint return), you get the same result as a partnership. Since the LLC is "disregarded" in federal tax law, you have the same hobby loss etc. rules to watch out for as if you didn't have an LLC.

What you do get is that "buffer"...if something happens on your farm, it's a lot of work for a lawyer to get at your house or personal bank/investment accounts/other personal assets. You can form your own LLC for maybe $100-200 depending on the state.

 

[Jstpssng]

Why you wouldn't be able to write off your equipmemt as a sole proprietor? You would need to keep accurate records, including the number of hours used in the business vs for your own use; which will then be used to prorate those costs including depreciation between the same. Some things like your GL insurance will be 100% expensed.


You are absolutely right about the CPA. Don''t necessarily stick with the first person you talk to either; go in with a list of every question you can think of and if you don't feel that he understands what you are doing talk to somebody else.

I was self employed for 10 years and not doing the above was the biggest mistake I ever made... also the only reason that Iwork for somebody else now.

 

[randy41]

an LLC will not protect you from personal liability claims. it will protect you from creditors. in VA y0u can form your own LLC for $100 online.

 

[riptides]

I have a 6 acre property I live on. And access to another 15 acres of family property. I also have a wide assortment of equipment and ways of hauling them.

I'm interested in starting a farm LLC. I would like to make some money from producing a product and providing farm related services on customers properties (mowing, etc). Also I would like to take advantage of writing off farm and operating expenses from my taxes. I have a good paying day job.

There seems to be many hurdles to clear for me to setup a LLC. In a nutshell do you think it's worth it? Or should I just do my work for others and sell my products as an unregistered farm and not worry with it? Is the tax savings worth it? One concern I have is liability off the farm property.

What is your opinion on this and is there anyone in a similar situation?

Thank you... This is typed on a phone so I apologize in advance!

Are you classified as a farm by your county/state, now? Zoning and what not?

I am classified as a farm, zoning wise, but take no business purpose out of it. My LLC is in another area that I consider, business.

I think for 2013 the IRS has changed the tax deductions for a home office setup, so that should assist in the LLC area, if your able to take advantage of it.

 

[DrRod]

I agree with what's been said here. Bottom line, the LLC is treated like personal income so no tax advantage but it does offer some liability protection for your other assets. And its very easy to set one up - just file a few papers. But the surprise I got with mine was the unrelenting stream of paperwork that followed. Everyone complains about government demands on small business but you'll really get a taste for it once you establish a business tax ID. Both the state and the feds will want reports on income, withholding, sales tax collections, employees, unemployment insurance, and so on -- sometimes even if you don't have employees. But given the liability protection, I would still say its worth it.