; Using LLCs to Mitigate Liability Risks of Farming Operations | Conferences | AgRisk Library


Conference Name Using LLCs to Mitigate Liability Risks of Farming Operations

Robert Moore


The Limited Liability Company (LLC) has become the entity of choice for most new businesses. One of the primary reasons for the popularity of LLCs is the limited liability protection provided to the owners. The concept of limited liability means that a person is not liable for the actions of a business simply by being an owner of that business. With today’s farms being more susceptible to liability claims than ever before, liability protection is a key component of any farm management plan.

The use of multiple LLCs in a farming operation is often necessary to maximize risk protection. By placing different assets in different LLCs, some assets can be insulated from the liability created by other assets. In particular, holding farmland in an LLC, separate and apart from other farm assets, is a common and effective strategy to protect the most valuable assets to most farming operations. The design and management of multi-LLC farm business structures will be discussed in detail.

While LLCs are valuable tools in liability risk management, they are not perfect. In some situations, the limited liability of LLCs is circumvented by overlap of operations or inadequate management of the entity. The limitations of LLCs will be discussed along with the need to maintain adequate liability insurance.

To provide a comprehensive overview, other characteristics of LLCs will be discussed as well. These attributes include protecting farmland for future generations, consolidating machinery ownership and transitioning ownership to the next generation. LLCs are flexible business entities that can be used effectively in many ways within the farm management plan.