Benefits of a LLC

A lot of farmers use corporations as their business structure but often there are advantages to using a Limited Liability Company or LLC as CliftonLarsonAllen Principle and Farm CPA Today blogger Paul Neiffer explains

Neiffer: "There are certain cases where a Limited Liability Company might make a little more sense. A couple of examples are corporations are very easy to put assets into it but it is very difficult to pull those assets out without triggering a tax liability — even a S corp you still have to pay that tax liability. So with an LLC we can put assets in, pull assets out and generally there is no tax affect by doing either of those. Another nice feature of limited liability company — especially in the state of Washington where we are a community property state or Idaho — not Oregon but most other states are community property states. If a husband and wife have a LLC for their farming operation and the husband or the wife passes away, the heir gets to step up to fair market value all of those assets inside of that LLC — assuming between the two of them they owned 100 percent. The nice feature about that is that they can sell the crop that has been harvested and not owe any tax. They can start re-depreciating the equipment. They can sell farmland and not owe any tax. There are certain situations where a Limited Liability Company makes a lot of sense compared to a corporation."

Neiffer adds that it is always a good idea when discuss with your tax advisor whether moving to an LLC would be right for your situation.