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What you should know about Farm LLC in North Dakota

On Behalf of | Jul 7, 2023 | Business Law

Like all other businesses, an agricultural company has specific needs and requirements to ensure its maintenance and success. This is why it is essential to determine what business entity is the best for it. If you have a farming business in North Dakota, here are some general things you should know about being a Farm LLC entity.

About the business

For a company to establish itself as a Farm LLC, its business must involve land cultivation for producing crops, livestock, fruits or horticultural products. The classification does not include the production of timber and forest products. Additionally, it does not involve providing harvesting and other farm services.

Does this mean the Farm LLC business can no longer engage in other activities? Not necessarily. The law allows the company to venture into other activities as long as at least 65% of its gross annual income in the past five years is from farming or ranching operations. Profits from non-farming activities and interests therein should not exceed 20% of the Farm LLC’s gross income.

About the members

Under North Dakota laws, the Farm LLC must not exceed 15 members and must be related within a certain degree of kinship. Non-related persons cannot be a member of the LLC, except in the following situations:

  • A trust for the benefit of a beneficiary related to every member of the LLC within a certain degree of kinship
  • An estate of a decedent related to the LLC members within a certain degree of kinship

Farm LLC vs. General LLC

In terms of operation and tax treatment, there is not much difference between a general and a Farm LLC. The Farm LLC just has some additional documentary requirements to submit to the Secretary of State, especially with respect to proving the members’ relationship.

It takes time and careful consideration to decide which business entity is right for your company. Revisiting your business goals, needs and aspirations may help you move forward with your decision.