I remember the feeling I had when my husband (fiancé at the time) and I were setting up our business. I was so full of excitement and hope. We were working with our financial consultant to put together a loan package to present to the bank. I was ecstatic that we were finally starting this journey. I admit we were so caught up at just getting our farm and getting it started that we really weren’t concerned about any of the little details. Details like whose name the business would go under and what type of business we needed. We said as long as we got our farm up and going we didn’t care about the rest. We’d figure out how to deal with whatever we had to as long as we could get started. Let me just say, I am so glad my parents and our financial consultant sat us down and made us understand the importance of all these details. These details can make monumental impacts on your business in the future. We were extremely lucky we had people stop us before we made mistakes that could have been detrimental to our business.
Deciding Business Ownership
If you are going into business with anyone else, rather it be family, significant other, or friends, please sit down and discuss how the business will be split between you. That is a crucial step that a lot of people don’t think about when starting a business. Most of the time they put the business under whoever has the best credit simply because it’s easier and more likely to get better financing. However, you have to look at things long term, especially with a farm. Sit down and talk about how the responsibilities will be split amongst you. For example, my husband handles the hands on, day to day running of our farm while I handle all the financials and paperwork. If one person is doing the majority of the work then it would make sense a majority of the business would go to them. If everyone is doing equal amounts of work then they should get equal shares of the business. Running a farm takes blood, sweat, and tears. If you are putting your blood, sweat, and tears into it then you deserve to own a part of it. I hear a lot of wives or girlfriends say they are fine with the farm or ranch being in their husband or boyfriend’s name. I hear all about how they will never split up and that they will always share the farm regardless of whose name it’s in. Guess what? You can’t tell the future. I have seen so many couples I swore would be together forever break up. I have seen wives that poured their blood, sweat, and tears into their farm lose it because it was completely in their husband’s name. So, please think about that when you are setting up your business. My husband and I had been together a little over five years when we started our farm. We completely love and support each other. I don’t have any reason to think we will ever get divorced. But, we still set up our business with each of us being fifty percent owners. This doesn’t mean we are expecting to have problems in the future. This means we are smart and covering all our bases because, like I said earlier, no one can tell the future. I understand there are exceptions but, if you are starting a new farming business together please sit down and discuss how the business will be divided between you. Another thing to consider when deciding how to divide a business is financing. Their are a few more financing options available for women owned farms and ranches now. This is to encourage more women to get into agriculture business. I personally think this is great. For our situation it wasn’t beneficial to go that route so we just split the business 50/50. However, I have heard of a lot of couples splitting the business 51/49 giving their wife majority ownership in order to receive better financing and grants. Please do your research and see what would work best for you.
LLC, Corporation, or Sole-Proprietorship?
To start a farming business you need to decide what type of business would be best for you. The research I did showed most small to medium farms and ranches chose to start an LLC or a Sole-Proprietorship business. Everyone’s situation is unique, so I would recommend talking to a financial consultant to see what would be best for you. From what I learned a lot of people chose a Sole-Proprietorship because they are easy and quick to set up, have little to no fees, and you don’t have to file a separate tax return for your business. If you are wanting to start a farm or a ranch on your own a Sole-Proprietorship may be a good choice. Farmers and ranchers that want to start a business with others often choose an LLC. An LLC lets you have multiple owners and flexibility on how you manage your business. The downside is that you will have ongoing filings and fees in order to stay in compliance. Corporations are more for bigger businesses. For corporations you have to have a board of directors and follow more strict rules. There isn’t as much flexibility with Corporations as there is with LLCs and Sole-Proprietorships. You can do your own research to see what would be best for you. Again, I would recommend asking a financial consultant for help to make sure you make the right decision. You can also find information to help you start your business at your state’s .gov page.
I know starting your farm or ranch is an exciting time. Please don’t try to rush over all the little details that go along with starting your business though. Don’t get to excited and try to rush the process. I promise if you take the time to set it up correctly you will never regret it. I’ve been in your shoes. I understand getting impatient and wanting to hurry up and get started. However, if you rush it and don’t set it up correctly it could come back to bite you. Discuss how you want it set up. Do your research and see what type of business will work for you. Don’t hesitate to reach out and ask questions. Remember, this is your dream. Don’t rush things in the beginning and make mistakes that could cause problems down the road.