Should we Switch from a GP to an LLC
With the new rules, there is no reason to be a GP
Only a general partnership and joint venture was allowed to have multiple payment limits as compared to any other entity such as an LLC or corporation.
However, beginning with the 2026 crop year, any qualified pass-through entity is now granted the same ability to have multiple payment limits. USDA finally issued the final rules on this change and the one thing we were worried about was AGI limits for S corporations or LLCs.
The good news is that these entities now have no AGI testing just like GPs and JVs.
Therefore, there is no reason for a farmer not to convert a GP to an LLC or similar entity after receiving our guidance this week.
We have seen many farm operations structured as a GP with multiple two person LLCs as the partners in the GP. Therefore, instead of simply having one tax return, we end up with three, four, five or even more tax returns just to simply get multiple payment limits.
This created additional compliance costs and burdens and finally OBBBA fixed this. Here is a chart showing how this may end up looking for many farm operations:
