I am 28 years old and married with a young son and a second child on the way. My wife works off the farm but really desires to be a stay-at-home mother. I grew up on a grain and beef farm in southwestern Wisconsin and attended a tech school out of state, where I graduated with an associate’s degree in agriculture business management. My parents are divorced and my dad sold the family farm shortly after I returned home from college because of some poor financial management. I live in town but work off of my mother’s acreage with a few pieces of older machinery that I try to do a little custom work with. I have a few beef cattle, about 100 tillable acres that I cash rent, and help regularly on a 200-cow dairy.

My dilemma is this: The dairy is owned by a couple who are in their early 60s. One of their sons is involved full time. To my knowledge, he doesn’t have any ownership interest in the farm, but works for a percentage and makes a fair amount of decisions. How do I get involved? They have too much to do, but I don’t want to insert myself into any family. I want to continue in agriculture, so I need to generate enough revenue to support my family if my wife stays home, but I can’t simply pull that kind of a wage away from this operation and expect it to survive.

How do I value my current assets when it comes to contributing to this operation? What steps should I take if/when negotiating? Thanks for the advice.

Tom Kestell: Congratulations on your education and your growing young family. You have asked some tough questions with not too many easy answers. To begin with, your greatest asset at your young age is you and your ability to contribute to the success of this dairy operation, both physically and through your daily input into the challenges that every dairy farm must face.

Begin with a frank and open discussion with the owners and all other family members. Maybe the son would welcome a chance to share the responsibilities of operating the dairy with a partner. Maybe the owner would welcome the opportunity to transition a new generation into their operation. Be careful that the farm is capable of generating enough revenue so everyone can make an adequate income in good years and bad years. Financial stress can strain the best relationships and eventually break them.

If the owner and his son are not interested in a long-term relationship, then move on to other opportunities. If they are interested, then maybe you can use your youthful enthusiasm to develop new revenue streams for the farm, such as direct beef sales, custom work, specialty products, etc. This is a chance for you to put your business management skills to work and prove YOU are your greatest asset.

Remember to keep a formal business relationship and have a written agreement detailing where you are now and where you want to go in the future.

Sam Miller: I appreciate your desire to own a farm business and that you have been building both assets and experience. Before approaching the family you are working for, reach out to the Wisconsin Farm Center at the Department of Agriculture, Trade and Consumer Protection, (Home Financial Consulting, wi.gov). They have specialists to assist in financial planning and transition management. They can help you put together a business plan and would likely have advice for how best to approach your employer. If that family is not interested in bringing in a non-family partner, you may get assistance for other opportunities.

Katie Wantoch: Passing down the farm to the next generation is not as common anymore. Nationwide, only 30% of family-owned businesses survive the transition from first generation ownership to the next generation. With this being said, if you are interested in having an ownership interest instead of only receiving a salary or hourly wage, you need to speak up! You should never assume that other people know what your interests or intentions are unless you have explicitly told them.

Take time to organize your information and list what you have to offer, not just the assets or money you may bring to the table. Develop your intentions and detail why you would make a good fit, such as commitment, work ethic, etc. Then, request a meeting with the owners, preferably away from the farm. This allows you to have their undivided attention while discussing what your priorities are and how they match with the owners.

Hopefully the couple is open to this idea, but if not, you can take steps to adjust your plans for the future. Communication is the key part in this step, but don’t wait. Take that leap and see where you land!

Do we need LLC for ag bagger?

My neighbor and I each milk between 180 and 200 Holstein cows, and we both farm about 300 owned and rented acres. We have been chopping our forages and putting them in covered drive-over piles, but we get a lot of spoilage. We are talking about buying an ag bagger together. We think it will pay for itself in a few years, especially with high feed prices. Do we need to form an LLC for this bagger? We think we could help pay for it by renting it out to a few neighbors when we aren’t using it. What are your thoughts? We plan to put all of our forages in bags as well as harvest our corn for high-moisture corn, which would save a lot on harvest costs and drying.

Tom Kestell: Congratulations on your idea of working together with your neighbor. The answer to your question about an LLC for your partnership, in my opinion, is yes. Just from a liability standpoint, this will give you protection from issues arising from the operation of a separate business.

If you are going to commit the future feed supply for your dairy operation to ag bagger storage, do it right. Tour dairy operations that have done this successfully. Start with a suitable site to store the bags on. Make sure you have a suitable base and that the area remains dry year-round. Make sure you have adequate access and proper equipment for the filling and removal of the feed. Size your bags so you get proper removal rates for each crop.

Lastly, be prepared for the expense of the bags and their disposal, and make sure you keep adequate supplies on hand so you are never caught short. Do your homework, plan ahead, and I’m sure this venture will work out great for you.

Sam Miller: The cost of equipment is substantial, so seeking a creative solution to make the cost reasonable, such as buying jointly with neighbors, makes a lot sense. If you were only buying the ag bagger and using it for your own operations, an informal partnership ownership arrangement might suffice. Once you indicated you may want to rent it out, it makes more sense to form an entity such as a limited liability company. As the name suggests, if something were to create a legal issue with an asset in the LLC, your liability would likely be limited to the assets in that entity. By forming an LLC, you may want to purchase additional joint assets in the future. Please consult with legal counsel.

Katie Wantoch: An LLC might be a good fit for your new farm business venture. I would caution you that an LLC does require some extra effort and expense. Start with an operating agreement between you and your neighbor. This is different from articles of organization that will be required to register your farm business as an LLC. A written operating agreement might save you time and money in the long run since it details who provided what at the beginning of your business venture and who will be taking care of what while you are operating this business together.

You both should make a physical inventory of all resources that will be used in this business, not just the ag bagger. Whose tractor or truck will you use to transport the bagger? How will you reimburse for use of that equipment?

Next, consider labor and management. Who will schedule use of the bagger? Who will review and conduct maintenance? How will labor and management be charged or reimbursed? Who will keep records, collect payments, etc.?

The operating agreement also should detail how the profits or losses from your farm business will be split. Will this be 50-50 or divided based on labor and management? Finally, the agreement should describe how you or your neighbor can exit this business venture.

To be successful, you and your neighbor should have a clear and detailed operating agreement before exploring which business structure might work best. Weigh the benefits and costs, and consult with your accountant or tax preparer and attorney before moving forward.

Agrivision panel: Tom Kestell, dairy farmer, Sheboygan County, Wis.; Sam Miller, managing director, group head of agricultural banking, BMO Harris Bank; and Katie Wantoch, Dunn County Extension agricultural agent specializing in economic development. If you have questions that you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919; or email [email protected].