Value of an LLC????

[j-bird]

I am looking for folks that have some experience with owning an LLC. I am considering creating an LLC (single person) for my farm. In the past to my knowledge we have just absorbed the income from the farm into our household income and paid taxes accordingly (filing jointly). My mindset at the moment for possibly forming an LLC is for 3 reasons. #1 - I don't want to pay any more taxes than I have too. If I understand things properly if I set up an LLC and maintain a balance sheet where I can record/document the income and expenses I "should" only have to pay taxes on the profit. #2 - I am trying to set myself up to possibly expand the farm. There is a 40 that I have my eye on, and I want to go after it if/when the time comes. My intent would be to use the cash rent from the land I already have to finance the new ground (hoping that the LLC will look better in the eyes of the bank). #3 - long term I think my kids will benefit more from joining the LLC vs inheriting it from me.

I am just starting to look into this so I am sure there is lots more to it and I may not have a clue what I am talking (actually I know I don't, thus why I am asking). I should be able to do most of this without an LLC, so maybe there is no real value in doing so...... That is why I am curious if any of you have any experiences (good or bad) with them.

 

[Barndog56]

#1 You don't need an LLC to claim expenses for your farm. You just use schedule F to report the income and expenses onto your 1040.

My dahlia farm isn't set up as an LLC, so no advice on it's pros and cons.

 

[j-bird]

#1 You don't need an LLC to claim expenses for your farm. You just use schedule F to report the income and expenses onto your 1040.

My dahlia farm isn't set up as an LLC, so no advice on it's pros and cons.

good to know. This is all fairly new to me....the wife took care of all the $$ stuff.

 

[Telemark]

It sounds like you need a corporation inside a trust. There's LLC, S corp, and C corp. You will need to pay for professional advice when deciding which one suits your needs best.

But it's a good idea to start watching YouTube videos about how the corporations and trusts are structured. You definitely want to understand what you are doing rather than just taking the advice of a tax attorney. I'm not going to lie, it's complicated stuff, and it will take time and patience to understand it even on a basic to intermediate level. But in my opinion it's worth it. It not only has tax benefits, but also protects assets from unforeseeable legal issues like divorce or being sued.

Also, you have to be diligent in having your paperwork in order. This will cost money, so you should weigh the tax savings against the costs of the lawyer, but you should come out on top. There are a lot of things you can write off, including your phones, internet, a room in your house, and of course any other expenses the business incurs in it's normal operation, like a vehicle or two, perhaps. The devil is in the details, and that's why you need to pay a reputable professional to set it up for you.

 

[Telemark]

Barndog is correct in that you don't need an LLC to write off expenses, but I think you give up your personal deduction if you choose to itemize. You also still have the issue of inheritance, etc. Plus the fact that there are far fewer IRS agents looking into corporations than individuals, so your risk of being audited goes way down, and in case of an audit, your books are a lot cleaner if you're not mixing the farm's assets with your own. I tried writing off depreciation on some property I owned, and the calculations got really messy really fast.

 

[Barndog56]

Listing farm expenses on schedule F has no bearing on whether you use the standard deduction or not.

 

[buckdeer1]

I would talk to a lawyer that knows trusts and LLCs.I have a revocable trust and when I die whichever child I left a parcel of land to will receive without inheritance tax as they will have a 1 time step up.If you are going to use current equity to buy more land check into a 1031 and you might be interested in podcast American Land Man and The Land Podcast