Should I Start an LLC for My Christmas Tree Farm?

Starting a limited liability company (LLC) for your Christmas tree farm can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a Christmas tree farm, lawsuits can arise from things like sharecropping agreement disputes or a tree falling over and injuring an employee or customer.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your Christmas tree farm seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

A fully decorated tree surrounded by other trees

Do I Need an LLC for a Christmas Tree Farm?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Christmas Tree Farm

By starting an LLC for your Christmas tree farm, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Christmas tree farms will benefit from liability protection because agriculture and farm businesses, including Christmas tree farms, face a variety of risks associated with guests visiting the farm location.

Example 1: You enter into a sharecropping agreement with a farmer who later claims that he has not received 50% of the revenue generated from your sales (as previously agreed). If he were to bring a lawsuit against your LLC in order to get compensated, your personal assets would remain safe as long as the sharecropping agreement was made between your LLC and the landowner rather than between the landowner and yourself.

Example 2: After a storm, a small tree tumbles over onto one of your employees, who breaks his right ankle as a result. Since you refuse to compensate him, you find yourself facing a medical damages and compensation lawsuit. Here, you will not have to personally compensate the claimant — regardless of how the lawsuit progresses — if your Christmas tree farm is registered as an LLC.

Example 3: You acquire a large business loan to purchase additional land and expand your Christmas tree farm. Since you made sure that you didn’t personally guarantee the loan, the lending party will not be able to sue you if you are unable to pay them back in the future.

Example 4: While helping a family transport a Christmas tree, your employees slip, causing the tree to fall onto a family member and injure them. The family asks you to cover the resulting medical expenses.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Christmas Tree Farm

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a Christmas tree farm owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Christmas tree farms rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a trusted LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

You will need business insurance if you want to protect your business’s assets (e.g., land, Christmas trees, etc.) in addition to your own. This is because the limited liability benefit of an LLC structure applies to its owners’ assets only.

Some types of business insurance are required by law, while others are simply a good idea to obtain.

Common Situations Business Insurance May Cover for a Christmas Tree Farm

Example 1: While a family shops for a Christmas tree, one of the children trips and falls as he runs through the trees. The child breaks an arm and his parents ask you to pay for his medical treatment. General liability insurance would cover the child’s medical care.

Example 2: While loading a Christmas tree into a customer’s vehicle, an employee loses control of the tree, and it knocks the customer to the ground. The customer breaks an arm and decides to sue your business. General liability insurance would pay for your legal defense costs.

Example 3: One of your competitors sues you for slander. While you disagree with the claim, you want to hire an attorney immediately. General liability insurance would pay for your legal defense costs.

Other Types of Coverage Christmas Tree Farms Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all Christmas tree farms should obtain:

Commercial Property Insurance

You made a major investment to establish your tree farm. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building(s) as well as your trees, equipment, and other business materials.

Product Liability Insurance

While you strive to ensure your Christmas trees make customers happy, there’s always a chance someone might claim your product caused them harm. In the event of a lawsuit, product liability insurance would cover your legal defense costs and any required settlement.

Workers’ Compensation Insurance

If you have any employees at your Christmas tree farm, most states will require you to carry workers’ compensation insurance for both part-time and full-time workers. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a work-related accident.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance and commercial property insurance.

Read our Business Insurance for Christmas Tree Farms article for more info.

Starting a Christmas tree farm can be quite expensive, but this will ultimately depend on how you acquire land (e.g., purchasing, leasing, sharecropping, etc.). You will also need to prepare the soil and purchase enough seedlings.

If you already have land and a tractor that you can use, you will be able to start your Christmas tree farm on a relatively small budget.

Visit our How to Start a Christmas Tree Farm guide to learn more about the costs of starting and maintaining this business.

The main ongoing cost you’ll incur is the cost of purchasing tree seedlings each year to replant. Additionally, you will need to pay employees and pay for materials needed to maintain the health of growing trees.

Learn more about running a Christmas tree farm.

Profit is made by selling Christmas trees to customers. Some Christmas tree farms make money by selling other seasonal products or offering activities like tractor rides.

Learn more about starting a Christmas tree farm.

Christmas tree farms grow trees and sell them to customers. Some Christmas tree farms allow customers to cut down the trees themselves. Since the business is seasonal in nature, most Christmas tree farms average an annual profit of $20,000 a year.

Learn more about starting a Christmas tree farm.