The laws governing farm ownership and operation have undergone significant changes. The changes affect how farms can be owned and operated, and they may impact the decision to convert a farming partnership to a limited liability company (LLC) or S corporation.
Agricultural real estate ownership is subject to various issues, including state limitations on ownership. Some states, such as South Dakota, have policies against corporate or LLC ownership of agricultural land. Other states, like Iowa, have laws governing “family farms.”
Agricultural Real Estate Ownership Issues
At the federal level, acquisitions and transfers of agricultural land interests by foreign persons trigger reporting obligations. Failure to comply with these obligations can result in civil penalties.
Farm support programs, such as the Price Loss Coverage and Agricultural Risk Coverage, have determined payment eligibility based on who is “actively engaged in farming.” Until recently, partnerships received separate payments for each partner, while corporations and LLCs were treated as single farmers.
Changes Under the One Big Beautiful Bill Act
The One Big Beautiful Bill Act introduced a new category of entity, the “qualified pass-through entity,” which includes partnerships, S corporations, and limited liability companies that do not elect to be treated as corporations. Payments made to these entities are now subject to a look-through provision, allowing for more flexible payment structures.
Regulations issued on June 2, 2026, provide further guidance on this change. The rules aim to provide equitable treatment for qualified pass-through entities under payment limitation provisions.
The Planning Opportunity
The changes in the law represent a significant loosening of limitations on owning and operating agricultural real estate as a limited partnership, S corporation, or LLC. This may yield benefits such as limited liability and more streamlined planning frameworks.
For instance, a farm operated as a corporation or LLC can now take advantage of limited liability, which can help with issues related to partition of property owned in joint tenancy or partnership. Additionally, the new rules may provide estate planning opportunities for LLC- or corporate-owned farming operations that were not previously available.
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In practice, these changes will allow farm operators to focus more on their core business activities, rather than entity-level compliance. This shift can lead to more efficient operations and better decision-making, as farm operators will have more flexibility in structuring their businesses.
However, every situation is unique, and the business and tax laws at issue will need to be carefully considered before any reorganization is undertaken. The new rules will likely require farm operators to reassess their current structures and consider whether converting to an LLC or S corporation is the best option for their specific circumstances.
Farmers must comply with the new rules.
They will need to review their current structures.
Agricultural land ownership is complex.
State laws vary.
One key issue is corporate overreach in agricultural land ownership.
Experts recommend seeking professional advice.
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