How to Start an Algae Farm

Start an algae farm by following these 10 steps:

1. Plan your Algae Farm
2. Form your Algae Farm into a Legal Entity
3. Register your Algae Farm for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Algae Farm
6. Get the Necessary Permits & Licenses for your Algae Farm
7. Get Algae Farm Insurance
8. Define your Algae Farm Brand
9. Create your Algae Farm Website
10. Set up your Business Phone System

We have put together this simple guide to starting your algae farm. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Business Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

What are the costs involved in opening an algae farm?

An open-air algae pond costs an average of $32,500 per acre, according to industry experts. A 100-acre algae farm would set you back more than $3 million. Due to the high start-up costs and niche market, successful algae farmers caution against starting off too big. Remember, slow and steady wins the race. Start small, perfect your system, get to know your market, and continually reinvest your profits to turn your algae farm vision into a reality. 

What are the ongoing expenses for an algae farm?

Spirulina algae farming requires pool and equipment repair, maintenance, and periodic replacement. It also requires a great deal of water and the replenishment of products used in the growth and harvest stages. Business owners also should consider other ongoing expenses, such as utilities, licenses, insurance, legal fees, continuing education, and related travel costs. Those with long-term growth goals also must factor expansion costs into their annual budget. 

Who is the target market?

The National Aeronautics and Space Administration (NASA) and other space exploration agencies work with algae to recycle human waste. Fish and animal farmers use algae as part of their feed. Pharmaceutical companies use algae in medicine and vaccines while cosmetics companies use various forms of algae in cosmetics and skincare products. In addition, scientists continue to discover new uses for algae every day. Aspiring algae farmers must thoroughly research the strains they plan to cultivate and define their target market based on their findings. 

How does an algae farm make money?

As an algae farmer, you’ll generate revenue from each healthy crop you sell to the public. The specifics depend on a variety of factors, including your location, the strain(s) of algae you produce, and your buyers. 

How much can you charge customers?

Like most products, prices depend on product specifics and demand. The Department of Defense reportedly paid $150 per gallon for jet fuel derived from algae oil while spirulina prices recently dropped to as low as $5 per kilogram.

How much profit can an algae farm make?

If your 100-acre farm earned 10 cents per gallon in profit and produced 15,000 gallons per acre per year, your annual net earnings would equal $150,000. 

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your algae farm is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate an Algae Farm Business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

Launching and managing a successful algae farm requires a great deal of vision, planning, and patience. This business venture best suits entrepreneurs with a passion for conserving the Earth’s natural resources and a dedication to developing long-term solutions. 

What happens during a typical day at an algae farm?

Regardless of if you choose to cultivate your algae crops in the open ocean or on land using a pond system, your farm will require great care and attention to detail. A spirulina farm uses open ponds in which the farmer must closely monitor the pH level and temperature. The algae needs regular feeding with a carefully selected culture medium, which helps the algae thrive and reproduce. Agitators then mix the nutrients, providing the perfect environment for algae growth. Once the spirulina is ready (on day 13), the farmer harvests the crop and starts the process all over again.

In addition to your farming duties, you’ll need to set aside time each week to tackle administrative and marketing tasks. You must return emails and phone calls, pay bills, and nurture industry connections. With new discoveries made nearly every day regarding the benefits of algae farming, your farm’s long-term success and growth will depend on your dedication to raising awareness and keeping pace with the latest industry news. 

What are some skills and experiences that will help you build a successful algae farm?

Because algae farmers have so many opportunities available to them, operating this type of business requires a focused and detail-oriented mind. Business owners must conduct thorough research to identify which strains best suit their needs and determine market demand. Strong business acumen and a willingness to learn also are essential for launching and growing a successful algae farm.

What is the growth potential for an algae farm?

As a fairly new industry, the worldwide algae market is poised for significant growth. Industry experts predict the open pond cultivation segment alone will grow by almost 7 percent by the year 2025. Farmers striving for long-term growth should leverage this opportunity by staying on top of the latest trends and regularly networking within the community.