Common Questions From Farmers Regarding Legal Planning

This post was originally written after one of our attorneys, Megan Harris-Pero,had the opportunity to speak to a group of mostly beginning farmers at the NOFA-NY 2016 Conference (Northeast Organic Farming Association of NY) about legal issues.

Since then we have had the pleasure of presenting to numerous farmers through many groups: CADE, Saratoga PLAN, NOFA-NY, and Grow NYC to name a few. Here is a recap of some common questions and responses from these presentations:

(A) Should I use an attorney to form a business entity?

Yes,absolutely use an attorney who understands agricultural businesses. An attorney can help you determine (1) what type of entity is best (LLC, corporation, partnership...) and (2)how the entity (or entities) should be structured to best suit your business operations.Most importantly, an attorney can write the legal documents needed for running your business like a business.By having an attorney create these documents, you can end up with documents that: (1) make sense to you and (2) are customized for your business (rather than a generic agreement that might not make sense for your business).A business entity is like the creation of another person. In order to keep that other being in existence, you need procedures in place that you understand and are likely to follow.

If you have different types of operations the attorney may also recommend multiple entities and can help you understand how to keep the entities separate and how each entity can work together.

(B) When should I form a business entity?

This is a personal answer that depends on your business and your risk tolerance. Generally, when you are starting a business that is exposed to some type of liability or you are working with other people as partners or with investors, it is a good time to think about the legal structure of the business.At the very least when you are starting out and you have multiple parties involved in business operations, it is important to have a written agreement that records each person's involvement and how the profits/losses will be shared.

(C) How do you find an attorney?

If you are a farmer or working in a food business, I recommend finding an attorney who works with agricultural clients because it is good to have someone who:

(1) understands your business; (2) knows other professionals in the industry who can assist you as well; and (3) knows what tax benefits and programs you may be looking to qualify for.Your attorney does not have to be local to you. Wework with many clientsover the phone and computer. Wework with many clients remotely-sharing documents and having video conferences online.

(D) How can mediation help farmers (or anyone) with disputes?

The NY State Dispute Resolution Association administers the NY State Agricultural Mediation Program, which can offer mediation services at no cost to many farmers and agricultural businesses through community dispute resolution centers.These services can assist with neighbor disputes, contract disputes, family or business partner disputes.A mediator is a neutral party that facilitates a communication process and is not there to provide legal information or to be a decision maker.

As a trained mediator, mediation training has enhanced Megan’s skills in working with clients in my everyday practice. As an attorney I can prepare clients for mediation by informing them of the law, giving advice before they negotiate at a mediation, and/or participating in a mediation to support my client.An attorney can also out write an agreement in the appropriate form if necessary for a court proceeding or an agreement between parties.

(E) What are some of the common issues that new business owners run into?

1-Navigating Business Relationships -Clearly written contracts and other documents to protect your interests (business agreements, estate planning documents, etc.) can protect your interests. Many disputes arise from misunderstandings or from not thinking through potential consequences. Putting agreements in writing forces you to think through who will bear the risk in situations that could arise.Mediation can help parties in a dispute come to a solution that works best for them.

2-Permits/licensing -You want to start a farm, restaurant or have a farm store.Does your zoning allow you to have that type of business? Can you process your food product on site? Make a list of what you want to do with your property or business and do your research (or hire your team of consultants/experts to do the research before you get started).You can find help to these questions from contacting agencies yourself, asking your attorney (information, advice, advocacy), your Cornell Cooperative Extension agent (for information).3-Emergency and Estate Planning –A health emergency or death in the family can be devastating to any family but especially to a farm family when a key person is injured or passes away. Planning ahead for different possibilities and to avoid unnecessary legal delays under these circumstances is recommended.

(F) What issues do I need an attorney for, and what things can I do on my own?

This depends on your time, knowledge,and abilities.There is a lot of information out there (some of it wrong) that you can access and decipher on your own but sometimes it's worth it to have an expert guide you.Depending on our client's needs (including budget and time pressures) many times we charge a flat fee for a certain amount of services. Attorneys have a certain education and way of thinking and researching that allows them to spot issues and look up changes in the laws.If you have a good relationship with an attorney, he/she can let you know what things you can do on your own to support the attorney's legal work on your matter.Beware of just looking for the cheapest services, you often get what you pay for!Doing things by yourself to save money can also come back to haunt you if it's not done right. Many mistakes are not apparent at first and when you discover them it may be too late.

(G) What resources are available to prepare new farmers to deal with legal issues?

There are many, here are a few:

Annie's Project - Empowering Women in Agriculture

Business planning and an introduction to legal issues, providing a good background to prepare women to work with their attorneys, bankers, and others to make their business a success. Check out the link for upcoming classes in NY state.

http://www.cceoneida.com/agriculture/anniesprojectNYSDRA NYSAMP-New York State Agricultural Mediation Programhttp://www.nysdra.org/?page=AgMediation

NY FarmNet -Maintains a list of attorneys who work in agriculture.Use the contact form and ask for the list.Check out the other resources on NY FarmNet page as well.There are resources through NY FarmNet as well as information on other resources, such as Cornell Cooperative Extension.http://nyfarmnet.org/farmlink/contact-farmlinkNationwide’s Land as Your Legacy Program-A program created from an insurance perspective to help you navigate succession planning. https://www.nationwide.com/business/agribusiness/farm-insurance/farmer-estate-planning/