Business classification?

Discussion in 'Dairy Goat Info' started by ldoran, Nov 12, 2008.

  1. ldoran

    ldoran Guest

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    Hi,

    I'm completely new to this forum so I apologize if this question has been asked before...

    In a nutshell, I just purchased some property with great income potential from all kinds of flora and fauna. I will be getting two goats in the spring, and by the end of next year I would like to have a small business up and running. My husband will have cattle, and I will be marketing organic, gourmet specialty produce -- and of course goat milk cheeses and raw goat's milk. We are thinking of splitting up our farm in two directions: his cattle operation and my stuff, each with a different name and marketing approach but financially everything goes into the same pot.

    I have gotten conflicting advice on whether to become an LLC, a partnership, or a sole proprietorship... or even a corporation because of the separate ventures. I had been under the impression that an LLC was the best way to go, but recently have heard differently from a variety of sources. I still think an LLC is most appropriate because of liability issues, but I am looking for advice from y'all.

    Thanks for your help!

    Best wishes,
    Lisa
    McDade, TX
     
  2. Daniel Babcock

    Daniel Babcock Member

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    Lisa-

    You really need to speak with an attorney who is familiar with the licensing requirements for your state. In most states an LLC offers similar protection as a corporation or an S Corp. There are so many more advantages to having an LLC or S Corp than just liability.

    For liability and other purposes I am a member/owner of a business (LLC) which owns all of the assets of a particular business. Call this business (A). I am also a member/owner of another LLC (business B) which runs the business, and leases the assets from business A. If entity (B) faces liability beyond what insurance would pay, I am personally protected, and the assets (because they are owned by company b) are also protected. I have two layers of protection using this model.

    In your situation, you could potentially have an umbrella company (company A) which owns the land, fixtures, equipment etc. And then you and your husband could have separate LLCs for your separate businesses, thus protecting 1- your business from any culpability incurred by your husband or his business, 2- your husbands business from any culpability from you and your business and 3- your land, fixtures equipment etc from the culpability from both businesses and individuals.

    The tax advantages to an S corp (more complicated than an LLC) or an LLC are huge as well. You can expense travel costs (goat shows), meals and entertainment, a corporate trip the Hawaii, equipment, feed etc. Financially it can be a real boon!

    Good luck with this venture!


    Umbrella Company A (Owns assetts)

    / \
    / \
    / \
    Your Company B Your Husbands Company C
     

  3. NubianSoaps.com

    NubianSoaps.com New Member

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    Welcome to the forum and excellent advice from Daniel.

    I would also tell you to spend the money to speak to someone in the know. What you will find is that most do nothing, they just talk about what you should do. I chose a LLC because it worked for what I do, my liability insurance and my farm (homestead). My husbands construction company is sole proprietorship.

    Starting with a business plan first with the help of a CPA or a professional business manager (the biggest growth I ever saw was after a meeting with one, and now I have one who does my books part time) was key. Vicki
     
  4. ldoran

    ldoran Guest

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    Thank you so much for your input! It was so much more helpful than anything I've heard before -- even from friends and family who are either attorneys or businessmen! I will sit down and try to find an affordable business lawyer.

    I found out that the SBA website has some interesting information and free online classes (30 minutes each) for beginning small businesses, if anyone else is interested. I had started a business plan but I'm going to put it on hold til I do the online tutorials... Vicki, I'm glad to hear it will really help in a material way.

    Have a great day,
    Lisa