Should I change my farm operation from a partnership to an LLC?
Oct. 29, 2026
By Mary Hightower
University of Arkansas Division of Agriculture
Fast Facts
- Ballard describes changes in USDA payment limitations for LLCs
- Tidgren discusses IRS code changes that can help farmers
(750 words)
Download PHOTO of Grant Ballard and Kristine Tidgren
FAYETTEVILLE, Ark. — Farms that receive safety net or conservation payments from the U.S. Department of Agriculture need to understand changes in payment limitations due to the One Big Beautiful Bill Act before deciding whether to convert their operation from a partnership to a limited liability company, or LLC, or S corporation.
Grant Ballard, partner at Ark Ag Law, PLLC, and Kristine Tidgren, director of Iowa State University’s Center for Agricultural Law and Taxation, provided 2026 updates on USDA's Payment Limitations, Eligibility, & Ag Tax Considerations during the September webinar by the National Agricultural Law Center.
USDA payment limitations are the maximum annual dollar amounts a person or legal entity can receive directly or indirectly through conservation or federal farm safety net programs such as Price Loss Coverage and Agriculture Risk Coverage, better known as PLC and ARC.
“For many years, it has been accepted that partnerships and joint ventures could obtain multiple payment limits,” Ballard said. “For example, a partnership of three individuals, where each individual was actively engaged in farming, could collect three payment limits.”
However, the regulations treated LLCs differently. If three individuals were engaged in farming as a single LLC, it would be limited to a single payment limit.
The One Big Beautiful Bill Act changed that and Ballard said the change to treat LLCs and S corporations the same as partnerships probably grew out of “pushback from accountants and attorneys that wanted to organize farm operations in LLCs.”
“It was framed as one of equity,” he said. “Why are we treating these partnerships different when, in fact, the businesses operate the same way?
“That’s a big change,” Ballard said.
Another change “is a provision for annual increases to payment limits based on the Consumer Price Index,” he said.
“There’s a process now that hasn't existed in the past, where the payment limit amounts may increase annually, where in the past, the payment limitations were established, usually in a Farm Bill,” Ballard said. “And they were fixed until the next Farm Bill, so now there is a way for the payment limits to increase on their own.”
He also noted that recent regulatory changes include some exceptions to certain adjusted gross income requirements for certain programs.
The Working Families Tax Cuts Act broadened the definition of farming income, and, as a result, diversified producers may qualify for exceptions under USDA’s average adjusted gross income requirements.
Ballard said one of the most common questions he receives is whether a farm operation should change its corporate structure.
“I advise everyone not to make any changes to their current operation until they understand the payment limitations rules, and they need to understand why they think they need to make a change. That's the first thing,” he said.
While “an LLC may qualify for multiple payment limits, it does not mean that it certainly will,” Ballard said. “And that is the point that I've been asked about a lot. And I've heard questions like this, well, can I add my son as a 1 percent owner of my LLC and get another payment limit? The answer is no.”
Tax code changes
Tidgren discussed changes to the tax code affecting farmers.
A change to Internal Revenue Code Section 1062, which covers gains from the sale or exchange of farmland to qualified farmers, provides some relief to farmers.
“It allows certain sellers of farmland to pay their taxes on the gain in four equal installments, instead of all in the year after the sale,” Tidgren said. The election “allows sellers to hold onto their money longer and profit from it.”
Under the change, the first installment is paid by the due date of the return for the tax year of the sale or exchange. The additional installments are paid with the next three returns.
Tidgren also covered changes to the premium tax credit made under the American Rescue Plan Act of 2021 that significantly expanded the availability of the Affordable Care Act’s premium tax credit. Those changes were extended through 2025 by the Inflation Reduction Act.
The Affordable Care Act originally created the premium tax credit for taxpayers whose household income was between 100 and 400 percent of the federal poverty level.
The premium tax credit is generally paid in advance, which reduces or eliminates the premium that an individual enrolled in a Marketplace plan must pay, Tidgren said.
In 2025, taxpayers with incomes above 400 percent of the federal poverty level could receive a premium tax credit for any amount by which the premium for the second-lowest-cost silver plan exceeds 8.5 percent of their household income.
However, in 2026, there is a new list of applicable percentages of household income taxpayers are required to contribute toward the cost of the second-lowest-cost silver plan. The rest is paid for by the premium tax credit.
The new percentages start at 2.1 percent of the household income for households whose income is less than 133 percent of the federal poverty level. Households with income greater than 400 percent of the federal poverty level are not eligible for the credit.
“If you purchased insurance on the Marketplace, make sure your income does not exceed 400 percent of the FPL in 2026,” Tidgren said. “If it does, and you received advance premium tax credits, you may have to repay the entire advance credit.”
About the National Agricultural Law Center
Created by Congress in 1987, the National Agricultural Law Center serves as the nation’s leading source of agricultural and food law research and information. The NALC works with producers, agribusinesses, state and federal policymakers, lenders, Congressional staffers, attorneys, land grant universities, students, and many others to provide objective, nonpartisan agricultural and food law research and information to the nation’s agricultural community.
The NALC is a unit of the University of Arkansas Division of Agriculture and works in close partnership with the National Agricultural Library, a subsidiary of the USDA’s Agricultural Research Service. For information about the NALC, visit nationalaglawcenter.org. The NALC is also on X, Facebook and LinkedIn as @nataglaw. Subscribe online to receive NALC Communications, including webinar announcements, the NALC’s Quarterly Newsletter, and The Feed.
About UADA
The University of Arkansas Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, UADA conducts research and extension work within the nation’s historic land grant education system.
UADA is one of 22 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on three university campuses.
Pursuant to 7 CFR § 15.3, UADA offers all its Extension and Research programs and services (including employment) without regard to race, color, sex, national origin, religion, age, disability, marital or veteran status, genetic information, sexual preference, pregnancy or any other legally protected status, and is an equal opportunity institution.
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Media Contact:
Phillip Powell
ppowell1@uark.edu