Anybody here familiar with this term and how it's set-up and operated? The reason I ask this, we're in the process this year of developing our farm to use all 70 acres, whether it's for crops (45 acres) or for livestock (24 acres). One acre would be set aside for the house and lawns. My concern is, with the way our country has become, you never know if one day you find yourself on the losing end of a lawsuit. It would kill me to lose this farm, since it has come to us with such a great sacrifice. So, would setting this place up as a corporation protect it from being liquidated? Any financial advisors willing to give their two cents worth on this? Thanks!
I'm only a smple dirt farmer, so what do I know? Seems to me if you form a corporation, then _it_ can get sued instead of you individually. So _if_ set up right (LLC) then it would protect the individuals from being sued, but the corp itself could be. Probably better to just buy a good umbrella liability package & spend your money there. --->Paul
...........You can "safe harbor" your assets by setting up a Trust that will have Title and under most circumstances is somewhat impervious to lawsuits. You should Visit with a Trust Attorney who is Board Certified in this particular Aspect of your State and federal law. .........fordy..
I don't know how trusts work in the USA but I'm with Paul, buy good insurance and lots of it. If you're at fault or just have a bad judgement against you, you'll still lose assts (bank acc's etc.) No fun being old without money. Not not a real hoot being young with no money either!
A Limited Liability Corporation (LLC) or limited liability partnership (LLP) is in a sense its own entity. For the most part, it (the business) can be sued but you as the director or principle shareholder or partner are only liable for the amount you invested in the business. So if you put all you land (but not your own house) into the business, and something happens, the land can be taken as a business asset but your house cannot. You personally can be sued for your house but the land cuz it belongs to the business would be untouchable in a personal suit. Setting up a LLC can be a good amount of work and requires a good deal of maintenance to be legitimate, but if you are serious about going into business, it is probably your best choice. It is much better at protecting you than a sole proprietorship. As I remember, the LLC has a âflow thruâ tax structure in that you are taxed at a personal rate (not corporate rate) on profits. A trust is usually just a vehicle for land transfer. There are numerous kinds. A lot of family farms often go for an animal called a business trust, which may or may not be legal in your state. It is sort of a blend of a corporation and a trust. Varies per state but I think profits are taxed at a corporate rate. If you are serious about setting something up, find a qualified tax, business and estate attorney. You really want to find someone(s) trustworthy, who knows what they are doing to get this thing going. Getting your beneficiaries involved with the set up (provided you trust them) can save you a great deal of hassle in the future. Always remember to carry enough insurance to cover whatever it is you are doing. Insurance is expensive but it can really save your bacon if something goes wrong (provided you have adequate coverage). Going to court for something (even if it is small claims court) can be a real pain in the neck (been there done that got the T-shirt)! Good luck!
Do an LLC. Contact your Secretary of State-they ususally have a Corporations, Elections, and Commissions-type department, and file the paperwork. You have to file "Articles of Organization" which basically lay out who owns and runs what, how/if the officers are paid, etc. Then you file with the state, pay a fee, and you're in. It's something that's totally doable yourself. Each year, you'll probably have to file an annual report with them. We can do ours online here. The catch, though, is that you can't co-mingle your family finances with the business'. Therefore, you need a separate checking and savings and credit card (if you want one) that are used exclusively for the business. You can't dip into the business when things are tight at home, above and beyond what your articles of organization list as your salary, if anything. If you start doing that, you're running what they call a "shell corporation" which is basically a way to write off personal expenses under the guise of a corporation. Plus, if you are sued, and the plaintiff can prove you co-mingled personal and business funds, the whole point of the LLC is blown, and you're risking losing your shirt. Like someone else mentioned, you're protecting your cars, your house, etc. Unless you carry adequate insurance, everything else (farm-wise) is game if you're sued. If you plan on allowing visitors to see the farm or the animals, have them sign waivers. You would be a fool not to do something, because these days, you can't count on anyone to take the high road and not sue if they break a nail on your property. Good luck, you can do it; and if you can't, there are a million lawyers that you can pay to.
Wow, thanks all! Such a great wealth of knowledge on this forum. I'm in a region of the country that's surrounded by millions of acres of farmland. I have an appointment next week to speak with a lawyer in the neighboring farming town about the best way to set this up. I'll keep you all posted on what the best plan of action is. Thank you!
If you plan to set up an LLC, do yourself a big favor and work with a competent business attorney. They will help you file all the necessary paperwork and they should be able to tell you what you need to do/not do to make and keep your LLC legitimate. As someone mentioned above, to maintain a LLC requires that you follow certain rules, such as filing an annual reports, holding an annual shareholders meeting and keeping minute notes etc. If your business is ever sued for something big, a savvy lawyer will immediately try to prove that you are not a LLC because you did not file/do certain things at certain times. If the court buys this argument, your business defaults to a sole proprietorship and all assets are fair game. Works the same way if you get sued personally. It is not as easy as filling out an online form, paying $500 and you are done. Find out the rules for your state and follow them to the letter. Issuing stocks and holding a shareholder meeting for 2 people may seem crazy, but it will be the receipts from the rented hotel meeting room and the dated meeting notes in a spiral bound notebook that can mean the difference between an LLC and a sole proprietorship in the eyes of the court. Good Luck.
I have heard that best way to keep from ever losing your land for any reason is to get a land patent. You need to own your land (i.e., no mortgage) for this. We have not done it so I don't have any more information. It's something I intend to look into though.
There are benefits available to farmers on individually-owned farms that are NOT available to corporations. Make sure that you won't be losing there, or that if you can take advantage you think about doing so before incorporating.
One thing to know about setting up an LLC in the state of Washington is that you become liable for B&O (business and ownership) taxes. Since there is no income tax in Washington, the state gets a big bite from business owners. Even C and S corporations need to pay. The amount changes from time to time. Right now it is 1.6% of GROSS earnings that must be paid to the state. Paid monthly. The paperwork and the hassle is considerable. Good luck, An over-taxed sole proprietor business owner in WA
