Form an LLC or not??

[Hawk32]

Is it beneficial to form an LLC on a recent land purchase or not. I'm getting varying opinions. I've got one guy who says its an absolute must and get a separate account and charge everything for farm to that account and another person saying its not necessary. I already have a separate account for my farming on the side but that is not for this recent purchase of rec ground.

 

[JNRBRONC]

There are changes coming to Iowa tax laws that are only available to farmers who did not form an LLC. Farm income and I think capital gains on the sale will be excluded, but I’d have to go back and reread the changes.


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[deerdown]

I'll give you my .02 on the subject.

I am part of 3 different LLC's with varying degrees of ownership between my wife and i, and my brother and I.

They were initially created with the "Limited Liability" limitations protection in mind when created.

If I had to do it over again, I wouldn't have created them. Having to do tax returns on all of them is a pita, and to have them done is costly. There are other downsides to them, i.e. in Missouri, you can get a NR deer tag if land is title in your name, but not if titled in an LLC that you own. In Iowa, you need a registered agent in the state in you're a NR of an IA LLC. To buy ground under an LLC you have to send them your Oper Agreement, and possibly your Articles of Incorp. In Nebraska you have to file a Biannual report for a Nebr LLC. There's the cost of setting them up as well. Etc..
Maybe you won't have some of these concerns, but these are some of what I've run into. You also might need different insurance aside from your personal policy, such as an umbrella policy, and I don't know if all carriers offer an umbrella for ground titled under your LLC. I know we've trouble getting umbrella coverage for farm ground. That was probably more an issue with the independent insurance co we were using and what they had access to, and not an LLC issue. Wouldn't hurt to check with your insurance agent on this tho.

What I would have done instead, would have been to just properly insure them for liability, and called it good.

 

[IowaBowHunter1983]

I think they have their place. If you don't apply for an EIN you don't have to file a return with the LLC. It just flows thru to your personal. If nothing else they provide a level of anonymity if done right, which can be useful. The insurance issue is something I have not thought about and should check on.

 

[Hardwood11]

There are changes coming to Iowa tax laws that are only available to farmers who did not form an LLC. Farm income and I think capital gains on the sale will be excluded, but I’d have to go back and reread the changes.


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How they (Iowa) treat the farm income will be the key for me. If my wife and I own the farm individually, rather than an LLC , we may have tax advantages. As far as liability, an umbrella policy can handle that .

 

[Hawk32]

Thanks for the info. Think at this point we are leaning towards not forming one if there are no substantial tax benefits. Maybe I'm wrong in saying this but it seems like most of the time when you see one its a multi owner partnership on the property.

 

[Elvis188]

We have multiple LLC's and we do it to keep a layer between us and the property should someone get injured with or without permission. Having a corporate veil between us and the property protects us should someone sue for whatever reason. Yes we have liability insurance but if the property is in our personal name, we will get sued as well. Lawyers always go after the deepest pockets and having the extra layer of protection is worth having to file an extra tax return that flows thru to us anyway. I'm not a lawyer but when it comes to avoiding lawsuits, I believe in belts, suspenders, crash helmets and a nut cup!