Old Farmers, New Farmers Can Benefit from Limited Liability Companies

We are in a land tenure crisis. The number of farms is declining, and retiring farmers are having difficulty passing their land on to the next generation of succeeding farmers. Professor Carrie Scrufari has written extensively on tackling this problem with limited liability companies in an article she published in the Columbia Journal on Environmental Law.

To summarize her article, limited liability companies allow for the incremental transfer of ownership from a retiring farmer, whom we will call Senior Farmer, to Junior Farmer. Senior Farmer could get income from selling incremental interests in the farmland over time to Junior Farmer. For example, after one year, Junior Farmer could obtain a five percent interest in the farm as a reward for Junior Farmer’s labor on the farm. Junior Farmer could pay Senior Farmer for the ownership transfer, or Junior Farmer could receive direct “sweat equity.” Year by year, Junior Farmer obtains additional five percent increments in the farm. After a decade or this arrangement, the ownership of the farm is divided between Senior Farmer and Junior Farmer equally.

The relations between Senior Farmer and Junior Farmer are ultimately governed by the applicable state law, the articles of organization, and the operating agreement. In Florida, the operating agreement does not need to be made public, and it does not even need to be in writing. The operating agreement governs the relations between members, the responsibilities of members, company conduct, and the procedure for amending the operating agreement. However, the operating agreement may not interfere with several statutory requirements, enumerated in section 605.0105(3), Florida Statutes.

Unlike the operating agreement, the articles of organization are a matter of public record. The articles of organization must be filed with the Florida Department of State before a company becomes a Florida limited liability company. But the articles of organization do not need to say much. Section 605.0201, Florida Statues requires only the company’s name, address, and registered agent contact information, although the law allows for additional statements.

Limited liability companies are relatively new on the business formation scene. Florida did not recognize limited liability companies until 1982. Limited liability companies offer food communities a unique opportunity to ensure that small scale agriculture succeeds from generation to generation.