multi-member llcs

The Limited Liability Company—or LLC—is a popular entity choice for small businesses. It allows for some of the tax benefits of a sole proprietorship or general partnership while also providing liability protections. LLCs can be owned by a single person, a group of people, a group of businesses, or a mix thereof. For the purposes of our resource library, we will refer to a LLC comprised of more than one person or business to be a multi-member LLC. 

Forming a multi-member LLC can be a powerful and flexible tool for different collaborative farming projects—it can be used to jointly own a farm, purchase land, share equipment, and more. Farmers can also set up different business entities for different parts of their business. For example, a vegetable farmer could establish a sole proprietorship farm to grow and sell their veggies, but establish a multi-member LLC with their farm as a member to jointly purchase and own equipment with neighboring farmers. 

Farmers who want to operate a cooperatively run business but do not wish to file as a legal cooperative can use the multi-member LLC model instead by writing cooperative principles into their operating agreement. There are countless ways to harness the flexibility of the multi-member LLC to organize different creative collaborative farming projects!

getting creative: a hypothetical

Let’s imagine a group of three small scale farmers who own three separate farm businesses: Sungold Farm, a mixed veg farm; Beefsteak Farm, a pig and chicken operation; and Bumblebee Farm, a cut flower farm.

The farmers are good friends who are looking for secure land access. Bumblebee Farm finds a listing for a property that would be perfect for their operation, but the parcel is too large and too expensive to lease alone. They realize that the parcel has qualities their farm friends might also value: pasture acreage for Beefsteak Farm, and a shed that could be converted to a wash-pack station for Sungold Farm.

They approach their friends, who are also interested in the property. However, the landlord does not want to separate out the land and manage three separate leases. Furthermore, parts of the property—like the shed—will be shared by all three lessees.

The solution? The three farms decide to form Tomato Farms, LLC: a multi-member LLC with all three farms as member-owners. They lease the land through this LLC, and each farm subleases their portion of the land from the LLC.

A multi-member LLC helps these three farms collectively access land, and also opens up the potential for new collaborative opportunities. Now that the farms are sharing a property, they might purchase equipment to share, or want to form a joint CSA to market their products. All such projects could be accomplished through their multi-member LLC.

Note that there are challenges to this model. If one farm fails to uphold their obligation to the lease, it puts the entire group at risk of losing their land access. Without a solid operating agreement, conflict could open up other risks and liabilities. Farmers should always consider all options and consult with a lawyer in order to make the most informed decision.

Curious about more ways to collaborate to access land? Check out the Accessing Farmland Together workbook by Land For Good.

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