Choosing the Correct
Entities for Your
Farming Operation
Presented by
Miller Legal Strategic Planning Centers, P.A.
Choosing the Right Farm
Entity to Achieve Your
Family’s Goal
Farming Entities
● Sole Proprietorship
● General Partnership
● Limited Partnership
● C-Corporation
● Limited Liability Company
Sole Proprietorship
Advantages
1. Simplicity
2. Total Control
3. No Extra Tax Returns
Sole Proprietorship
Disadvantages
1. Can’t add Next Generation or Partners
2. Does not Take Advantage of Passive
Rental Income
3. Difficult to Use Within Estate Plan
4. No Discounting is Allowed
5. Difficult to Transfer Ownership
6. No Asset Protection
General Partnership
Advantages
1. Allows for Partners and Entry of
Next Generation
2. Allows for Multiple Governmental
Program Credits (Direct Payments)
3. No Limit of Number of Partners
4. Easier to Use Within Estate Plans
General Partnership
Disadvantages
1. No Asset Protection
2. Additional Tax Return
3. Does Not Allow for Passive Income
4. Difficult to Transition to Next
Generation and Exit From
5. May Dissolve With Death or Disability
of General Partner
Limited Partnership
Advantages
1. Allows Some Asset Protection to
Limited Partners
2. Allows for Entry of Next Generation
3. Can Retain Control by Being General
Partner
4. Discounting is Allowed
5. Works Well With Estate Planning
Limited Partnership
Disadvantages
1. Does not Take Advantage of Passive
Rental Income
2. No Asset Protection to General Partners
3. Legal Dissolution With Death or
Disability of General Partner
4. Requires use of Corporation or LLC as
General Partner in Estate Plans
5. Additional Tax Returns and Bookwork
C-Corporation
Advantages
1. Allows Asset Protection of Personal
Assets From Risks of Corporation
2. Allows for Entry of Next Generation
3. Allows for Extra Tax Deductions
4. Allows for Passive Rental Income
5. Continues to Operate After Death or
Disability of Shareholder
C-Corporation
Disadvantages
● Corporation Not Protected From
Personal Risks
● More Complicated
● Tax Advantages Mainly for Larger
Operations
● Farm Operation Must Consistently be
Profitable
● Many Farms Can’t Take Advantage of
Fringe Benefits Because of Cash Flow
Limited Liability Company
Advantages
1. TOP DOWN and BOTTOM UP asset
protection in Certain Jurisdictions
(Wyoming)
2. Allows for Great Discounting in Certain
Jurisdictions (Wyoming)
3. Allows for Passive Rental Income
4. Easy Entry of Next Generation
5. Great Tool in Estate Planning
Limited Liability Company
Disadvantages
● Guaranteed Payments Subject to
SE Tax
● More Complicated Than Sole
Proprietorship
● Use of Wyoming Requires
Registered Agent
The Farm
Advanced
Collaborative Planning
LTC Insurance
Incorporation
Charitable
Limited Partnership Trusts
RLT LLC
ILIT FLP
Planning Using Advanced
Collaborative Planning
● Plans Customized to Meet Clients
Hopes, Dreams, Goals and
Aspirations
● Multiple Disciplines Used to Create
the Best Possible Plan for the Client
● Farm Succession and Operation is
Completed in a Manner That Works
for the Whole Family
Farm Succession Solution
Break Estate into Separate Parts
Farming Estate
Operation House
Grain
Farm
Cash
Real Estate
Machinery Life Insurance
Livestock Investments
Farm Succession Plan
Developed
● Plan is Designed to allow for
Possible Entry of Farming Child Into
Current Business
● Plan is Designed to Allow for
Transfer of Farm Operation Either
During Life of Parents or Upon Their
Death Thru Inheritance
Farm Operation Transfer
● Farming Operation is Formed
● Operational entity allows for maximum tax
saving and future transitional planning
● Farming Operation may be owned until
death, sold or gifted. Farming Parents
may retain 100% Control
● Buy/Sell Agreement or Right to Purchase
used when needed
● Plan developed to deal with possible
disability
Farm Land Transfer
- Farm Land is either owned individually or
in Revocable Living Trusts or in possible
entity
● Privacy – avoids probate
● Allows for Complete Control
● Avoids capital gains taxes
● Maximizes estate tax avoidance
● Step up in basis
● Flexibility to replace buyer
● Buy/Sell or Right to Purchase used to transfer
land to farming child
Treat Heirs Equitably
● Estate receives cash for non liquid
farm land
● Each heir receives inheritance in cash
● Including the buying heir
● Siblings live in harmony
● Estate saves taxes through
specialized estate plan
Farm Succession Planning
● Mom & Dad retire comfortably
● Clients’ goals are met with customized
estate plan
● Farm transferred to active farmer
● Flexibility to change buyers
● All heirs treated equitably
● Cash available at time of inheritance
● Tax savings stays with family or possibly
goes to the community