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

 

[Telemark]

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

Good to know. I have no experience with farm expenses.

 

[RGrizzzz]

Accounting/taxes and estate planning are two different things. I'd check with the proper professionals bringing your specific info. They will be able to make the best recommendation for you

 

[Telemark]

Accounting/taxes and estate planning are two different things. I'd check with the proper professionals bringing your specific info. They will be able to make the best recommendation for you

They can utilize some of the same legal structures. Several states have inheritance tax or estate tax, and inheriting property or assets can have tax implications for his kids. I would consider estate planning part of the same process when structuring assets for tax purposes.

 

[RGrizzzz]

They can utilize some of the same legal structures. Several states have inheritance tax or estate tax, and inheriting property or assets can have tax implications for his kids. I would consider estate planning part of the same process when structuring assets for tax purposes.

I agree. Having dealt with my late uncle's estate, I see how estate planning and taxes matters. Some of this varies state to state, so that's why I'm suggesting asking someone local, and bringing the financial data.

 

[j-bird]

This is why we haven't done this already......it sounds like a huge PITA. And thus my question of if it's worth it. I will talk to some locals and see what they do and who they work with. I may be making this far more complicated than it needs to be......

 

[Telemark]

This is why we haven't done this already......it sounds like a huge PITA. And thus my question of if it's worth it. I will talk to some locals and see what they do and who they work with. I may be making this far more complicated than it needs to be......

It is complicated, and it is a huge PITA, and it's not cheap. But a lot of things in life are like that, and we do them anyway. I'm not trying to discourage you, I just want you to be prepared for what you are getting into. Start with some YouTube videos and do some simple math to get a rough estimate of what you could expect to save in taxes. It all becomes much easier to understand as you learn more about it. Like many things, it seems very opaque from the outside, but it gets easier as you gain more knowledge and experience.

 

[RGrizzzz]

It is complicated, and it is a huge PITA, and it's not cheap. But a lot of things in life are like that, and we do them anyway. I'm not trying to discourage you, I just want you to be prepared for what you are getting into. Start with some YouTube videos and do some simple math to get a rough estimate of what you could expect to save in taxes. It all becomes much easier to understand as you learn more about it. Like many things, it seems very opaque from the outside, but it gets easier as you gain more knowledge and experience.

It probably depends on a number of factors. Do you have $10,000 or $10,000,000 in income/profit? It's probably going to cost you something to form the LLC and deal with it's separate taxes/structure. Are you going to save enough in taxes to justify the additional expenses? Only you really know that.

A revocable trust is probably a good idea for your assets, at some point. It could limit inheritance taxes, depending on your state.

I would imagine you can find a local attorney who you can get a consultation with to help you decide.

 

[Mortenson]

When searching for a potential long term attorney, do any of you keep political ideology in mind? Additionally, is it ok to ask a lawyer how they lean?

Our long time family attorney has gone silent and I think health troubles have caught up to him.

 

[Turkish]

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.

This is a topic I’ve been interested in. If you ask an insurance professional about it, they defer to accountants. If you ask accountants, they tell you to talk to an attorney. Ask an attorney and they break out the cash register.

I do know that you don’t have to have an LlC to get any special tax treatment. I think an LLC can help with cleanliness of all that. I can’t get a straight answer on whether having land in an LLC has any liability benefit. I DO KNOW that, in my area, some equipment rental services will rent to any LLC but not to individuals. So there’s that.

 

[Double Creek]

LLC’s became popular as a way to protect your personal assets if someone got hurt at your farm, rental property, business, etc. it’s a separate legal entity. I’m not an attorney, so I can’t comment on whether it truly offers protection in a court of law and a jury of 12. I am a CPA and I personally have 2 different properties owned by the LLCs.

It’s way too complicated to get into on a forum, but you don’t need an LLC to have a farm and take tax deductions. In fact, LLCs don’t really provide much benefit in the form of tax savings until you start talking about setting up an Scorp to shelter income from self employment taxes. And even then you need high enough business profits with enough tax savings to offset the costs of doing it properly and legally.

 

[Foggy47]

I'm starting a new company....and operate as an individual at this point. When I do some documents (like non disclosure stuff.....I use my name and a DBA: XYZ Corp. If my new product line works out...then I will incorporate. Lots to know for me yet.