A Recent Change to FSA Program Payments is Good for Farmers

The One Big Beautiful Bill (HB 1) has received both praise and criticism from many commentators. However, one change that is clearly positive for farms is the provision allowing LLCs, corporations, and other liability-limiting entities to be eligible for multiple payments. This eliminates the need for some farms to choose between multiple FSA payments and unnecessary liability exposure.

Under the old rules, which remained in place through previous Farm Bills, LLCs and corporations were treated as a single "person" for FSA payment limitation purposes. This meant they were capped at one annual payment limit, historically $125,000 for programs such as Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC), regardless of the number of owners or shareholders involved. To access multiple payment limitations, many farms had to operate as general partnerships, which increased exposure to personal liability.

In contrast, the new rules introduced by HB 1 treat LLCs and S corporations as pass-through entities, similar to partnerships. This allows each actively engaged member or shareholder to qualify for a separate payment limit, now inflation-adjusted to a base of $155,000 per person or entity.

An Example

The Jones family has five members actively involved in their farming operation. They farm a large number of acres and their FSA payments often exceed one payment limitation. To ensure eligibility for multiple payments, they operated as a general partnership. However, Ohio law holds each partner personally liable for the actions of the partnership.  The Jones’ accepted the additional liability exposure in order to have the opportunity to capture multiple FSA payments.

Under HB 1, the Jones family can now establish an LLC for their operation. Assuming each family member is actively engaged in farming, the LLC will be eligible for up to five payment limitations.  Additionally, the LLC will provide liability protection for the owners.

Safeguards Against Abuse

Importantly, these changes do not create loopholes for fraud or misuse of federal funds. The core requirement remains unchanged: each individual claiming a separate payment limit must be "actively engaged in farming," meaning they must provide contributions of labor or management and capital in proportion to their share of the operation.

FSA enforces this through detailed documentation, which tracks entity details, ownership attribution, and compliance with adjusted gross income (AGI) caps. Payments are attributed proportionally based on ownership levels to prevent exceeding limits, and the agency retains authority to audit and review operations to ensure genuine farming activity. These safeguards protect taxpayer dollars while offering flexibility to legitimate farm businesses.

Converting Partnerships to LLCs

For farmers currently operating as partnerships, this is an opportune time to consider converting to an LLC to take advantage of the new rules. The process in Ohio is relatively straightforward. File a Certificate of Conversion with the Ohio Secretary of State, which typically costs $99 and can be submitted online or by mail. Include details such as the entity's original name, the new LLC name, and the effective date of conversion. Once approved, often within a few business days, update your FSA records and other registrations. This process preserves continuity while adding liability protection, making it a practical upgrade for many Ohio farms. Be sure to consult with your attorney before making the change.

The Legal Shift

In the legal world, there has historically been only one main reason for a farmer, or any other business owner, to operate as a partnership instead of an LLC. That reason was to capture multiple FSA payments. The recent change in HB 1 now allows farmers to operate as LLCs and avoid unnecessary liability exposure or overly complex business structures.