Should I Start an LLC for My Community Garden?
Starting a limited liability company (LLC) for your community garden 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 community garden, lawsuits can arise from things like a fire breaking out in your garden and spreading to adjacent properties, as well as from employment law and medical damages claims.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your community garden seem more credible.
Interested in getting started? More than 84% of our readers form their LLC through a specialized LLC formation service in order to save time and avoid potential penalties.
Tailor Brands ($0 + State Fees)
Do I Need an LLC for a Community Garden?
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 Community Garden
By starting an LLC for your community garden, 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.
Community gardens will benefit from liability protection because of the risk of lawsuits for personal injuries and property damage.
Example 1: When an employee fails to properly clear a pathway through the garden, a member gardener trips over a rock and breaks a leg. They sue you for the damages. Your personal assets are protected as the owner due to limited liability from your business’s status as an LLC.
Example 2: Your business takes out a loan to help grow the garden but begins defaulting on the payments. Since your business is an LLC, limited liability keeps your personal assets from being repossessed for the payments. The lender can only recover payments from the business itself.
Example 3: A fire breaks out in your community garden and spreads to neighboring buildings. The owners of the buildings demand you pay for the damages. Your business assets could be used to pay for this but not your personal assets. This is because the business’s LLC status protects your personal assets.
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 Community Garden
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 community garden 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
Community gardens 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.
Launch Your LLC With Tailor Brands
More than 84% of our readers form their LLC through a specialized LLC formation service like Tailor Brands in order to save time and avoid potential penalties.
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
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
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?
All LLCs require insurance because the assets of a business are not protected by being an LLC alone. Limited liability only protects the personal assets of the owner. Community gardens need insurance because of the damage operating outside can cause. Inclement weather can lead to property damage or injured customers, both of which insurance will help you with.
Common Situations Business Insurance May Cover for a Community Garden
Example 1: Your client gardeners suffer unintentional exposure to harmful chemicals in the soil and develop numerous symptoms over time. General liability insurance should cover the cost of their medical bills.
Example 2: When an employee fails to properly clear a pathway through the garden, a client gardener trips over a rock and breaks a leg. General liability insurance would help cover the cost of fighting the resulting lawsuit or settling out of court.
Example 3: A client gardener accidentally destroys a valuable part of the land used for the community garden. General liability insurance would help pay to restore the condition of the land to its original state.
Other Types of Coverage Community Gardens 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 community gardens should obtain.
Business Interruption Insurance
More exposed to the elements than most businesses, a community garden may need to close for weeks or even months to make repairs after a fire or major storm. Business interruption insurance would cover some of your lost revenue, helping to ensure you don’t go out of business before you can reopen.
Commercial Property Insurance
Your land is the most important part of your community garden. Commercial property insurance would help protect it from storms, vandals, and fires. This coverage also would cover the cost of repairing or replacing any damaged greenhouses or tool sheds on your property after an accident so you can recover quickly.
Workers’ Compensation Insurance
Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident — including chronic injuries like muscle pain from the job’s required stooping, bending, and kneeling. 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 Auto Insurance
Any vehicle you or your employees use primarily for business — such as to transport plants or tools — requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured but also sufficient protection for any business-related equipment you carry in your vehicles.
Commercial Umbrella Insurance
Community gardens can pose many potential hazards, depending on the tools and equipment your client gardeners use. 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 Community Garden Business Insurance article for more info.
A community garden’s startup costs are between $3,750 to $7,500. Costs include establishing the garden near a source of water, maintaining city fees, insurance, and contractor wages. A large community garden can even cost as much as $30,000.
Visit our How to Start a Community Garden guide to learn more about the costs of starting and maintaining this business.
The primary ongoing expenses include insurance, rent, and the maintenance of garden plots not rented by current members.
Learn more about running a community garden.
Community gardens make money by selling memberships, operating gardening shops, and providing gardening classes.
Learn more about starting a community garden.
Community gardens provide a place in which community members can rent a plot to grow and harvest plants. Volunteers or dedicated members often watch over community gardens and provide services such as weeding and watering.
The profitability of a community garden will depend on its size, the number of memberships it sells, and its overhead costs.
Learn more about starting a community garden.
