A Family Farm Business Entity in Maryland: What You Need to Know
Updated: Jul 17, 2020
Maryland family farms have specific rules and statutes which apply to them regarding their operating as a business entity. You can read our recent publication on business entities here to refresh your memory on the different options, as well as pros and cons of each entity. We also have an entire business entity series on the blog which you can read here. Today, I will be discussing the areas of Maryland law that carve out specific rules applying only to family farms.
What is a family farm? To summarize the Maryland Code, Corporations and Associations, Section 1-209 a family farm must encompass each of the following:
1) A domestic entity which owns, or within 1 year after filing articles of incorporation, articles of organization, or a certificate of partnership, will own or take control of property qualifying for agricultural use assessment under § 8-209 of the Tax – Property Article (which basically means the State will use certain criteria to determine your land is, in fact, agriculture in nature).
2) Additionally, the entity must own only agriculturally or residentially assessed real property and personal property used for agricultural purposes OR owns only personal property is used for agricultural or agricultural marketing purposes.
3) The entity must also be controlled, managed, and operated by one individual who has an equity interest in the entity OR two or more individuals who have an equity interest in the entity and who share its assets and earnings.
4) Is declared in a charter provision to be a family farm AND has no assets other than those described in item (2).
If your farm meets each of the requirements outlined in the Code, your entity will qualify for reduced fees. For example, if your farm operates as a limited liability partnership (LLP) you must file an annual personal property tax report with the State Department of Assessments and Taxation (SDAT) by April 15 of each year and pay a $300 filing fee. This fee is reduced to $100 for a family farm operating as an LLP. If your farm is a limited liability corporation (LLC) in Maryland, it must file an annual report and personal property tax return each year and pay a fee of $300 in addition to any personal property tax. This fee is reduced to $100 for a family farm operating as an LLC. Every corporation, LLC, LLP, or limited partnership doing business in Maryland must file an annual personal property report with the SDAT, by April 15 each year, in addition to paying a $300 annual report fee but again, this fee is reduced to $100 for a family farm business entity.
If you have any questions about how to begin the daunting task of forming a business in Maryland, head over to my checklist for starting a business! Hopefully some of your questions will be answered. Feel free to send me an email at email@example.com if you have further questions and or need to be directed to resources.