We own and operate a choose & cut Christmas tree farm. It's set up as a sole proprietorship (no LLC). We set up a separate business for REI as an LLC, but I wonder if it would be better to roll the 2 businesses into one to facilitate obtaining credit for REI. The tree farm has been in business more than 10 years and shows a modest profit (a VERY modest profit).
But, it's a very different kind of business for tax purposes. For the farm, we use a Schedule F, which is for reporting farm income and expenses. For REI, we are starting out with a vacation rental, a tiny house which will be located on the farm property, but we hope to also move into buy & hold.
I am also concerned with asset protection for our land if someone were hurt here. The combination of hayrides, camp fires, and kids makes this a definite possibility. Should we get the farm and REI business into an entity which would lease the land from us to provide some degree of separation?
What kind of professional could advise us on this? An accountant, attorney, other? If an attorney, what specialty?
Look at insurance too = like an umbrella policy. But separating the farm (actual growing of trees) from the hospitality (hay rides, tiny house rental) just seems like a good idea both for legal reasons and tracking reasons - you want to follow as closely as possible where your money is coming from and where it is going...
@Leigh Ann Smith from the insurance perspective, it will be difficult finding a competitive insurance program that is comfortable insuring both. I have a few xmas tree farms insured and I know that all of those insurance carriers would not be willing to have the policy overlap into a real estate biz.
If the RE biz leased back the farm to you as a tenant, that could work. This may be a way to show greater revenue in the RE biz. BUT, you would still need to buy a policy covering you and the tree farm exposures
Since we have an LLC for the REI business, would it provide any protection if we survey out the parcel of land on which the cabins will sit and have the LLC lease the property from us?
I would imagine that we'd have the normal difficulties with truly keeping the LLC separate from ourselves and having it provide any legal protection.
I'm fine with keeping it as one business and upping our liability insurance if it would help us obtain financing for REI.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you