So you’ve started a new farm or have begun selling products from your family farm for the first time. There is a lot to consider, but let’s tackle the first question on your mind: do I need to register my farm as a business?
Why register your farm as a business?
Before learning how to register your farm as a business, you must understand the advantages associated with it. These may include tax benefits, access to small business grants, loans, and enhanced credibility. Recognizing these advantages can help guide your decision-making process, since farm business registration can be an investment of both time and money.
Registering Your Farm as a Business
Step 1: Define Your Business Structure
Determining your business structure is crucial before registration. You can register your farm under various business structures, including sole proprietorship, partnership, limited liability company (LLC), or corporation. Each business structure has its own set of advantages, liabilities, and tax implications. Depending on the nature and scale of your farming operation, the choice of business structure may vary. It’s advisable to consult with a legal or business advisor to understand the implications and choose wisely.
Step 2: Choose a Business Name
Having a unique business name differentiates you from others and helps with brand building. Make sure to do some research to ensure the name you desire isn’t already registered with your local and state authorities.
Step 3: Register Your Farm as a Business
To register your farm as a business, you will need to submit an application to your Secretary of State’s office, or the relevant department in your state. Documents required vary by state, but usually include your business name, business structure (as discussed in Step 2), and the name(s) of the owner(s).
Step 4: Obtain an Employer Identification Number (EIN)
An EIN is similar to a Social Security number for your business. It’s used by the IRS for tax purposes. Applying for an EIN is a free service offered by the IRS, and the number is unique to your business.
Step 5: Register with the Department of Agriculture
Depending on the scale and nature of your farming business, you may need to register with your state’s Department of Agriculture. Registering with this department is often necessary for applying for farm grants and loans.
Step 6: Apply for Necessary Permits and Licenses
Your farm business might require additional permits and licenses depending on your planned activities and your state’s regulations. Research and consult local authorities or a legal advisor to understand all the necessary permits and licenses you need to operate legally and avoid penalties.
Step 7: Get Your Tax Affairs in Order
Understanding taxes associated with running your farm business is key. You will need to register for state and federal taxes and adhere to all tax laws. Keeping detailed record of all income and expenses is critical. Consulting a tax expert might be beneficial to help you navigate the complex tax landscape.
Step 8: Set Up Your Business Bank Account, and Purchase Insurance
Separating your farm business financials from your personal accounts ensures clear record-keeping and simplifies tax reporting. It is a requirement for most business structures such as LLCs and corporations. Also, farm business insurance can protect you from various risks associated with farming.
Here are the types of insurance you will need for your farm:
- liability insurance
- property insurance
- crop insurance
- workers’ compensation, unemployment, and disability insurance
- health insurance
- life insurance
The Farmers.gov website will be your best resource. Check out their business guide here if you still have questions.
Start selling with Airmart
Once you have your registration, insurance, permits, and financial affairs in order, it’s time to start selling. Sign up for Airmart to offer a CSA subscription and/or sell individual farm products.