Has anyone made their private farm (meaning it is not a business and for your own personal use only) a LLC? What are the benefits to doing this? Was it easy to do? Challenges?
I have never done it but I believe the benefit is that it protects your personal assets. I think there are tax advantages too. It is probably easy enough to do although I would imagine it might require a lawyer to set it up. I’m sure there are others who can give you more specific details.
Setting up an LLC is quite easy; anyone can do it online through their Secretary of State’s website. There’s plenty of simple Operating Agreements (which specifies the setup and terms of the LLC) available online as well. Lawyers can of course do it (and charge an arm and a leg for it), but if it’s a simple, single-member LLC, you can do it yourself or use one of the many inexpensive online options (Legal Zoom, etc) to set it up.
There’s several reasons people may want an LLC. Some want it for liability protection, so that their liability is limited strictly to the LLC and doesn’t extend to them personally (IE if a rider falls of your horse and sues, they would sue the LLC rather than being able to go after you personally).
Others want to be able to write off their horse expenses as business expenses. This can be legitimate if you’re running a real business - buying and selling or breeding, for example. However the IRS has specific rules to make sure that your business is a legitimate business, and if you don’t fulfill those requirements, your LLC will be ruled a “hobby” business and you’ll lose the ability to deduct any expenses and/or losses.
Those are the two main reasons that come to mind. If one does setup an LLC, it is smart to also set up separate bank accounts and credit cards and run all related income and expenses through those rather than mixing in personal accounts. Otherwise tax time can be a total nightmare!
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