Among my least favorite list of questions that people think will instantly solve all their problems are two of my favorite questions.
Two big questions
First, “What’s the next big thing in agriculture?” I tire of this question, because we’ve seen it for years with catfish, broccoli, llamas, emus, hemp, and now green energy — all of which were supposed to make farmers overnight millionaires, but often failed to live up to expectations.
The second question is, “LLC or corporation?” Some believe forming these business structures solves liabilities, inheritance taxes, and family business relationships. Whether you design your business structure as a corporation or a limited liability company (LLC) begins with documenting your family and business goals. This provides structure and guidance to the professional who will draft the document.
Business Records
Make sure you have a well-organized financial record-keeping system that includes inventory schedules, profit and loss statements, and balance sheets with cash flows. This will help you know how your business and legal structure will affect the current and future direction of your business.
If you are forming an LLC or corporation, make sure you follow the steps to become a legal entity. You may need a certain number of meetings with agendas, minutes, and discussions related to the meetings.
Second, financial transparency is key, regardless of your legal structure: Keep separate business and personal financial statements Be careful not to commingle business and personal expenses When developing your business structure, a simple LLC or corporation can become very complicated and have pitfalls that are only discovered years later.
Customize your solution
Each business and individual situation is different and requires a customized solution. A good agricultural accountant and lawyer can help and is a good investment to design what works best for you. You may have to pay up front, but it may save you headaches in the long run. As an aside, I highly recommend a facilitator who can help with the transition of control. This may be more important than a formal LLC or corporation.
