Is My Farm Considered a Small Business?

Is My Farm Considered a “Small Business?”

Is farming considered a small business? A business, in layman’s terms, is an activity or series of activities carried out with the intent of profit. A business can be a profession, a trade, a manufacturer, or an undertaking of any kind with evidence to support the intention for profit. If your individual farming activities are carried out with the intent of profit, then yes – your farm is a small business.

As a business, your small farm needs business insurance. Any business owner strives to make their operations successful and puts in a great deal of time, money, and effort to make that dream a reality. You wouldn’t want that to go to waste if something were to happen. Here’s why small farm business insurance is imperative for your operations.

Small Farm Business Insurance for Your Bottom Line

Farmers are a breed apart. With farming, if it’s your regular occupation and you are practicing solely to generate a profit, you’re putting forth significant effort – and a lot of it. If something were to happen, you wouldn’t want all that hard work to go to waste. Enter small farm business insurance. Your policy can include coverage for a multitude of assets on your farm, activities, property, and so on.

Farm Property and Contents

Your homeowners’ insurance may cover your farm’s dwelling, but usually, coverage will be limited on business structures. A small farm business insurance policy may include your farm barn, outbuildings, structures – like silos, sheds, equipment garages – and so on.

Livestock

If your farm raises livestock, whether for butchering, showing, agritourism activities, you may need livestock insurance. This may include coverage for your livestock in transit, accidents and attacks by wild animals or dogs, or natural disasters. Covered animals may include cows, swine, poultry, sheep or alpacas. Separate coverage may be necessary if you have horses, as horses may be used for a wide range of activities and can vary in value.

Farm Equipment

Your farm likely uses a range of different equipment to carry out its operations. Farm machinery may require special coverage to reflect the unique value of the tools you use in your everyday operations. Insurable machinery and equipment may include boilers, automatic feeders, monitoring equipment, electrical panels.

Liability Coverage

As a business, farms need liability coverage. This will cover your farm if a visitor or guest is harmed on your property, or if your operations are the cause of damage to their property. Your small farm business insurance may include liability coverage for the following:

  • Accidental damages caused by you or your employees
  • Injured persons’ medical bills
  • Expenses to defend oneself in court
  • Legal liability for the ownership, occupancy, or use of your farm
  • Pesticide liability
  • Liability for your regular operations
  • Liability for damages to any farm buildings that are being rented

Depending on the activities you provide or the assets you own, you may also consider additional (optional) liability coverages, including animal show liability, farmer’s market liability, and agritourism activities liability. Discuss with a Hitchings Agency representative if you offer a special activity or service and are not sure if your policy covers it.

If your farm has workers, you may also be required to carry workers’ compensation insurance as state law may apply. Even if it doesn’t, it’s still imperative to have this coverage to give benefits to any injured or ill workers.

The only time a farm may not be considered a “small business” is in the case of hobby farms. Hobby farms still need insurance, but that insurance may look a little different.

What is hobby farming?

Hobby farming is recreational and holds no expectation for profit. Hobby farmers are generally individuals and families who live on acreages, spent their childhood on a farm, or inherited a farm from a relative and wish to conduct farming activities purely for pleasure. Most of the time, farmer hobbyists will have a source of income outside of their ranch or farm or they may even be retired. That does not mean, however, that hobby farms generate no revenue. Many hobby farms will gain some profit from the sales of their crop or livestock, but they aren’t putting in the work to market their products.

Hobby farmers may not have to report their farm income on tax returns, whereas full-fledged commercial farms do. Hobby farmers cannot deduct any farm expenses on their tax return, however. Additionally, your farm’s land may increase in value over time. If your farm is classed as a hobby farm, your land may not be considered “qualifying farm property” and, when you want to sell, it may not be subject to capital gains exemption. Business farmers, however, can benefit from this exemption.

It’s worth noting that even hobby farmers need insurance. While your hobby farm may not be a full-time business, it’s still an investment and an asset you’ll want to protect. Call on your friendly Hitchings Agency representatives to discuss acquiring insurance for your hobby farm.

Farming as a Business

Manning any agricultural operation is tough work, and too few recognize that farming is a business. The same rules of the economy stand for farming, just like they do with any other business. Farmers face similar – if not more – risks than other businesses, especially because their products (particularly crops and livestock) are significantly threatened by disasters, such as droughts, plagues, infestations, diseases, and floods. Farmers are having to learn how to adapt to changes in technology and alter their operations to keep up with the trends. So, bottom line – yes, your farm, which engages in activities with the intent to reap a profit, is considered a small business. Due to the wide range of different exposures your farm may face, it is imperative to purchase small farm business insurance.

Discuss with the farm insurance professionals at Hitchings Insurance Agency for more ways that small farm business insurance can protect your operation’s bottom line.

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