How do I Create a Farm LLC?

by David Ingram Google
    An LLC is a popular business structure for farms.

    An LLC is a popular business structure for farms.

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    Farm owners who wish to structure their business with liability protection while still being taxed as sole proprietorships or partnerships can take advantage of the LLC form of organization. As an LLC, a farm has a right to produce, raise and sell agricultural products and livestock under its own name while being owned by one or more members. LLCs do not have to be actively managed by their owners, making this unique business structure ideal for large land owners who place others in charge of their property.

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    Step 1

    Check the name of your farm against your state's database of registered business names to see if it is available. If you are already running an unincorporated farm without a name, you will need to create a name before registering your LLC. File a name reservation application if your state allows it to ensure that your chosen name is reserved until you submit your articles of organization.

    Step 2

    Put together a team of members. LLC members own the company jointly, according to the provisions set out in the operating agreement. Members may or may not help in managing the day-to-day operations of the farm. Consider joining with other farm owners to create your LLC, listing each farm owner as a member. Consider including your spouse or other family member if you own a family-run farm. If you are incorporating an existing private farm, consider bringing one or two of your most skilled and trusted employees on board as managing members of the LLC. You may also choose to own the company as the sole member.

    Step 3

    Choose a registered representative. The registered representative's contact information will be used for all official communications from the state. Choose a representative who is active in handling your farm's legal issues, if possible.

    Step 4

    Draft and file your LLC articles of organization. Most states provide a ready-made template to help LLC members file their articles of organization. Contact your secretary of state to locate your state's template. Generally, articles of organization include the name of the company, its purpose—in this case agricultural production or livestock—its address and the registered representative's contact information.

    Step 5

    Create an operating agreement. Check with your secretary of state to see if the operating agreement is a legal requirement in your state. Even if it is not legally required, however, drafting an operating agreement can help your farm LLC to operate as smoothly as possible by clearly setting forth the rights and obligations of members and providing rules for adding and removing members and dissolving the company. Operating agreements stipulate what each member is expected to bring to the table and what each is responsible for, as well as how the profits are distributed. For example, a farm LLC operating agreement may stipulate that one member brings 500 acres of land, three barns and two tractors into the business and is entitled to 60 percent of the profits, while the other member brings $100,000 to the table, actively manages the farm and is entitled to 40 percent.

    About the Author

    David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.

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