Today I am excited to kick off a new blog series that provides an overview of different business entity options for farmers and ranchers. This was a topic that Amber Miller and I recently discussed on the Ag Law in the Field Podcast #5. At presentations, people often ask me whether having a general partnership is a good idea or whether an LLC is the best business entity. I wish it were that simple, but as with most legal questions, there is no magic answer to the question of what is the right business entity for your operation. Each entity structure offers pros and cons and should be evaluated in light of your particular situation.
Over the next couple of months, this series will provide an overview of the following business structures: sole proprietorships, general partnerships, limited partnerships, limited liability companies, and corporations. For a brief explanation of these various entities, the Texas Secretary of State has prepared a short article titled “Selecting a Business Entity” which is available here. A similar fact sheet with an agricultural focus was written by James Decker and Amber Miller for the Texas & Southwestern Cattle Raiser’s Convention, which is available here. Further, Texas business entities are governed by the Business Organizations Code, which may be accessed online here.
Although this series focuses specifically on Texas law, it may be useful to farmers and ranchers in other states, as most states have fairly similar business entity statutes and provisions. For those of you living in New York, Manhattan-based attorney Cari Rincker previously did a similar series focused on New York on her blog, available here. Paul Goeringer at University of Maryland Extension Service did the same for folks in Maryland, available here.
As always, you should consult with an attorney and tax professional licensed in your jurisdiction before selecting a business entity to review the specific goals and facts of your situation. There is no one-size fits all answer to selecting the right business entity for you, but understanding the various options and the benefits and downsides to each is the first step in making the right decision for your operation.