A business agreement is useful because an LLC is a flexible business entity. Although we will get into companies in subsequent blog posts, I`m simply saying that the company must abide by certain laws that define who can get what kind of profit from the business. In the case of an LLC, it is up to the members to decide. While it`s great that Espen can set up his farm to meet his exact situation, Espen and his partners need to address each of these issues and make many decisions. Because of the variability, it is really important to write things if they want these agreements to have any strength. Many farmers find it difficult to decide how they file their taxes. The first and best thing I can say about this is that there is no correct answer. Neither option is necessarily the best option. Both are sure to save money in Espen compared to each other. The right choice depends on whether Espen makes a profit, how much profit he wants to make with that profit, how much income he wants to pay to himself or other members, and what is his property and investment situation on the farm.
The best way for Espen to make this decision is probably to sit down with an accountant who can take a close look at Espen`s financial situation. Even if Espen likes to keep his own books and file his own taxes, a few hours at an accountant could be money well spent. If Espen finds, properly organized tables or work filing cabinets can bring to the meeting, Espen will go with a clear understanding of his tax return options, without spending much money. It is more likely that the quality of a farmer`s accounting is the choice of tax return status that will help him save money. Note that the benefits described above exist only with a properly structured LLC, governed by a detailed and well-thought-out enterprise agreement, and LLC members who manage and operate the LLC as a commercial entity totally independent of personal assets. How and if one or more LCs are used for land transfer is a highly individualized strategic decision that should only be made with the help of an experienced lawyer. How to manage conflicts between LLC members? What happens when a couple is involved in the transfer and a divorce occurs? What about the unexpected death of a member? In these situations, is mediation necessary? What state laws will apply and which court would deal with legal action? If older farmers plan to retire to Arizona while junior farmers are in Nebraska, the cost of non-governmental action could be prohibitive for either side. The Tribunal`s opinion cites that the lawyer used by Richard had never organized an LLC before, had not consulted a lawyer with LLC experience and had used a standard form for the LLC`s enterprise agreement. The lawyer was delayed about 10 months after Richard`s death, before consulting an experienced lawyer who first learned the distinction between takers and members. Further comments on the faults of the lawyer, wrote the court: A farm LLC should always carry operating insurance tailored to the specific needs of a farm. After his father`s death in December 2015, David told his siblings that the land was in an LLC. That same month, braland`s lawyer wrote them a letter telling them that „the three of you have managed to reach equal parts of all the ownership groups in the business,” suggesting that you meet for the issuance of property certificates to each of you and briefly discuss how the business works and answer any questions you may have.
Felt v Felt, No. 18-0710, 2019 WL 2372321 [Iowa Ct App June 5, 2019], includes a liquidation action between the three children of Richard Felt, owner of a third-generation third-generation farm.