Why Can't I Switch Our Farm to an LLC
We still need guidance from USDA before switching your farm general partnership to an LLC
We have received many emails and calls regarding switching from a farm general partnership to an LLC. Under previous rules, payment limits for LLCs and S-corporations were limited to one payment limit.
The One Big Beautiful Bill Act eliminated this restriction and now LLCs and S-corporations are treated the same as a general partnership. If you have four equal owners, you get four payment limits whether you are a GP or an LLC.
Under tax rules, you are taxed exactly the same. However, we have not gotten any formal guidance from USDA yet on how to implement these changes. For example, we still need to know the following:
When does the change occur? Is it effective for the 2025 crop year or is it effective for the 2026 crop year. The Form 902 that was filed for the 2025 crop year has only one box for a corporation. The local office does not know if you are an S-corporation or a regular corporation. Therefore, this may become effective for 2026, but we don’t know.
How does this affect the AGI calculation? OBBBA only changed the rules for payment limits. It did not make any changes to the AGI limits and both LLCs and S-corporations are subject to payment limits. Will this continue to apply, or will USDA treat them like general partnerships that have no AGI limits.
Let’s look at a typical farm general partnership with mom, dad, son and wife. All of the owners are equal, and the GP qualifies for four payment limits or at least $620,000 (4 X $155,000). Here is a chart showing the structure and the related adjusted gross income (AGI) for each:
