Business Entities: What are the Differences?
While roughly 98% of farms and ranches across this nation are owned and run by families, the business needs of these operations can be overlooked. As farms and ranches expand by bringing on more family, utilizing a business entity can aid in dealing with the complexities of the transition. Legacy Consultant Alan Hojer with Keep Farmers Farming explains business structures often utilized in agriculture include general partnerships, LLCs and sub chapter S corporations. He says which entity to utilize needs to be explored.
Both from a farm program payment limitation standpoint at FSA, that needs to be recognized as well as FSA from a lending standpoint. Is there any limitations there? There's a liability shelter opportunity that an entity provides that we do not have individually. We need to take into consideration any tax advantages or limitations that are involved. And last but certainly not least, what is the exit plan?
The Keep Farmers Farming Program within the South Dakota Agriculture Foundation offers a consulting service to assist farm and ranch families with estate, succession, and transition planning. Hoyer explains legacy consultants will educate families on the entity idea, handing discussions off to advisors to finalize. He believes utilizing business entities in farm operations can help simplify many decisions.
So as we're talking about the vision or where you wish to take your operation and we have found common ground and we find that sweet spot and where we're going, this is just a strategy to deal with the complexities will pop up as we're having more people work together.
Learn more about business entities options for farms and ranches here.