We live in a litigious society. If you’ve ever made the wrong person mad or done them wrong, even unintentionally, I’m sure you heard, “I’m going to sue you for all you’re worth!” But have you ever really thought about how much you’re worth?
If you don’t have your farm legally structured correctly, it could be a lot.
“Studies show that 85% of the farms in this country are not structured as a legal entity,” says third generation farmer and agricultural law attorney John Schwarz, aka “The Farm Lawyer”. “In other words, they’re just a sole proprietor or they’re two brothers that farm together in a loose partnership.”
Schwarz says that setting your farm up as a legal entity, like an LLC, is the cheapest form of insurance you’ll ever buy.
“If you’re out there living your life as a sole proprietor, you’re a farmer and you own land and you own equipment and growing crops and everything else that a farmer owns, all that is at risk. You cause an accident or you’re in an accident out on the road with your combine or your semi-truck or whatever, all your assets are going to be at stake if they go above your insurance limits. Some people have only a $500,000 or $1 million insurance coverage for liability, which in this day and age isn’t a lot. Then if they go above that, that is all the insurance company is obligated to pay out.”
Even if you do have your farm set up in an LLC, Schwarz says there are different ways to go about it to help protect you even more.
“I like to break the farm up a little bit. We put an LLC together for the land, we may put an LLC together for the trucking, and then the farm LLC, the farm operation, is its own entity. And that way it’s kind of the one out there. It’s the one operating. It’s asset light, so if it is sued, there’s only so much people are going to seek from that if it doesn’t have assets.”
This method can also help significantly with estate planning. Schwarz goes into more detail in our full interview found below, or you can reach out to him directly to help get your farm set up at TheFarmLawyer.com.
