What Does Payment Limits Mean for LLCs

OBBBA added a provision to make payments limits for LLCs similar to general partnerships, but what does that really mean?

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Before OBBBA, farmers who operated as an LLC were limited to one payment limit (currently $155,000) even if there were two or more equal owners. After OBBBA, farmers who operate as either an LLC or an S corporation will now have payment limits based on the number of actively engaged owners if the final rules from FSA are similar to the old general partnership rules.

But what does that really mean.

We typically say that an LLC or S corporation will qualify for the maximum payments based on the owners having equal ownership percentages. If ownership is unequal, the entity will qualify for maximum payments; however, each owner is then subject to their overall maximum payment limit which can reduce the actual payments allowed to the company.

Plus, if any of the owners are actively involved in other farm operations such as their own personal Schedule F farm, then the payments allowed to the entity may be reduced even more if the owner already received payments either directly or indirectly from those operation(s).

For example, assume you have four equal owners of an LLC or S corporation. The entity will qualify for up to $620,000 of payments. The company will receive their full payment assuming: