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What are 2 of the most dreaded questions for farm business?

Road Warrior: The one thing that is clear: Don't mix business and personal expenses together.

David Kohl, Contributing Writer, Corn+Soybean Digest

June 19, 2024

2 Min Read
What are two questions that drive farmers crazy?
Getty images/MicroStockHub

There are two questions that are my favorite on my dreaded list of questions that people think will solve all of their problems very quickly.

2 Big questions

First, is “What is the next big thing in the agriculture industry?” I roll my eyes at this one as we have seen this over the years with catfish, broccoli, llamas, emu, hemp, and now everything green energy. These were all supposed to make participants in agriculture millionaires overnight, often failing to meet expectations.

The second question is, “Should I be an LLC or a corporation?” Some individuals think that by forming these business structures that your liabilities, estate tax, and family business relationships will be solved. Whether you design your business structure as a corporation or limited liability company (LLC), will start with your written family and business goals. This will provide structure and guidance to professionals in developing the documents.

Business records

Make sure you have a well-organized financial record-keeping system including a balance sheet with schedules of inventory, income statement, and cash flows. This can be useful in knowing how the business and legal structure could influence the existing and future direction of the business.

If one forms an LLC or corporation, make sure you follow the procedures to make it a legal structure. A certain number of meetings could be required with an agenda, minutes, and discussions pertinent to the meeting.

Next, transparency in the financials is critical, regardless of legal structure. Maintain separate business and personal financial statements. Be careful of commingling business and personal expenses. When developing the business structure, sometimes a simple LLC or a corporation can become very complicated with pitfalls that are not discovered until years later.

Customize the solution

Each business and personal circumstance is unique and needs a customized solution. A good agricultural accountant and lawyer can be useful and is a good investment in designing what is best for you. You may be required to pay upfront, but that could result in fewer headaches in the long term. On a side note, I highly suggest a facilitator that can assist in management transition, which is sometimes more important than the formal LLC or corporation.

About the Author(s)

David Kohl

Contributing Writer, Corn+Soybean Digest

Dr. Dave Kohl is an academic Hall of Famer in the College of Agriculture at Virginia Tech, Blacksburg, Va. Dr. Kohl has keen insight into the agriculture industry gained through extensive travel, research, and involvement in ag businesses. He has traveled over 10 million miles; conducted more than 7,000 presentations; and published more than 2,500 articles in his career. Dr. Kohl’s wisdom and engagement with all levels of the industry provide a unique perspective into future trends.

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