How to Start a Solar Farm Business

Start a solar farm business by following these 10 steps:

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

We have put together this simple guide to starting your solar farm business. 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 a solar farm business?

Landowners should consider a number of factors when launching a solar farming business. You will need to gain permission from the local utility company to connect and run your solar project in parallel with the utility grid. The cost to gain permission to interconnect can run up to $30,000 in some states. 

On a large scale, your solar farm should be a minimum of one megawatt — enough to supply energy to approximately 200 households. Installation costs for a one-megawatt farm typically total about $1 million. This includes land, solar equipment, office setup, payroll, and marketing. 

For solar farmers with less start-up capital, leasing the land to a utility company is a more affordable option. The utility company you partner with pays the cost of installation and maintenance of the panels. While the profits are significantly lower with this option, so too are the initial expenses.

What are the ongoing expenses for a solar farm business?

Ongoing expenses for your solar farm include your mortgage, insurance, property taxes, licensing, and attorney and financial advisor fees. Those offering additional services beyond land leasing also must consider payroll costs, higher insurance expenses, travel costs, and continuing education fees. 

Who is the target market?

It’s a common misconception that only utility companies require the services of solar farms. If you don’t want to lease your land to a utility company, consider approaching these other types of organizations:

• Financial institutions
• Manufacturers and distributors
• Blue chip companies
• Real estate developers and contractors
• Public works departments 
• Sports facilities
• Television stations

How does a solar farm business make money?

The most effective way to make money is by leasing the land to a utility company. They pay you an annual lease payment in exchange for the use of your land — for an agreed upon period of time.

How much can you charge customers?

A number of factors will influence the lease rate your land can yield, including its size and quality as well as market demand and local land prices. On average, farms yield between $500 and $800 per acre per month.

How much profit can a solar farm business make?

If your 100-acre land lease yields $700 per acre per month, your solar farm could yield $840,000 in annual revenue. 

How can you make your business more profitable?

Solar farm business owners seeking to boost their profitability should consider using their annual profits to buy additional land. Continuing education and the proper certifications also could help a business owner expand their services, making them more valuable to current and potential clients.

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 solar farm business 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 Solar 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?

The ideal solar farmer owns a plot of land — preferably 25 acres or more. That land must receive plenty of sunlight, have stable soil, and possess the necessary infrastructure to connect the farm to the utility grid. Leasing land to an energy company is perfect for landowners seeking guaranteed income. This also ensures the maintenance of the property so a landowner can pass it on for generations. 

What happens during a typical day at a solar farm business?

After setup, a solar farm requires little work on your part. The utility company to which you lease the land will require full access to the property through a dedicated access road so its employees and construction crews may enter on an as-needed basis. Your role involves ensuring the land remains mowed and clean of debris. You also must maintain the fencing around your property to prevent wild animals and trespassers from entering. 

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

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

Utility workers will install and maintain the solar panels on your farm. You must only supply the land and possess basic negotiation skills to enter into a profitable lease agreement. A business background also would prove beneficial for farmers seeking significant long-term growth and expansion. 

Solar farmers who wish to take a more hands-on approach will need to obtain the proper professional certifications. The North American Board of Certified Energy Practitioners® (NABCEP® ) and the Solar Energy Industries Association® (SEIA) are both excellent resources for farmers planning to install, maintain, and repair their farm’s solar panels.

What is the growth potential for a solar farm business?

The solar industry is expected to experience record growth in the next decade, offering significant profits for landowners. Farm owners looking to expand their businesses and increase profits need only invest in additional land that meets the criteria set by utility companies.