The following are Frequently Asked Questions (FAQs) and answers for individuals interested in starting a farm. This resource was created by the 2020 Russell Brinsfield Interns, Harry Huntley and Liz Johnson. Anyone with additional questions, may contact one of the legal specialists at the Agriculture Law Education Initiative at 410-706-7377 or umaglaw@umd.edu.
Basics
Q: How do I form a farm business plan?
Writing a business plan is an important first step for any business. While it is not legally required, it is highly recommended, and some lenders will require it before giving a loan. The University of Maryland Extension (UME) has a farm business planning workbook to help you get started. The U.S. Department of Agriculture also has that resources can be found here. UME has resources to help you assess your farm’s business plan, cultivate entrepreneurship, and even test your understanding using case studies.
If you are having problems getting started, you can take your business plan to your local Farm Service Agency or UME office for review, to answer additional questions and for technical assistance.
Q: Do I need a business license to start a farm?
There is no simple answer to this question, and it is highly dependent on what your operation is going to produce and how those products are going to be sold. There are different permits for different products and sales outlets. See FAQs below for more information.
Q: How do I figure out which legal structure best fits my business plan?
It is important that your business structure matches your goals. In order to figure out what legal structure your farm should be, consider your long term goals. For quick help, you can go here or here. For a more in-depth look at business structures in farming: https://farmcommons.org/resources/farmers-guide-business-structures
Note: Some of these are free resources that you must sign up to access.
Q: Do I need to register my farm name with the State?
A farm name, or trade name, is an official, registered name under which someone chooses to do business. This is often referenced Doing Business As (DBA). Registered farm names are advantageous to have. They can be used to open bank accounts in the farm’s name, enter into contracts, and obtain business credit cards. Having a farm name also helps create a marketing brand for the farm enterprise. In order to register your business go to the Maryland Business Express website. Before you can register a name you will need to use the search a business entity function to ensure your desired name is not already in use. You can also use a simple Google search to see if the name is in use already by anyone else. After you have verified the name is not in use, you can register the name.
Q: Do I need to register my farm’s domain name?
A domain name is the web address typed into a web browser to go directly to a website. All websites have one and it will be necessary to register your desired domain name and set up a web hosting service. For more information on starting a farm website, check out this resource.
Q: What type of insurance will I need?
The kind of insurance you need depends on a variety of factors such as how your business operates and whether you have employees. Multiple forms of insurance should be considered to protect your assets and business. Farm insurance, product liability insurance, loss of use, and crop insurance are just a few examples of insurance of the farm.
For an overview on the kinds of insurance a farm could need, see:
- https://extension.umd.edu/sites/extension.umd.edu/files/_images/programs/newfarmer/InsuranceOverview.pdf
- https://insurance.maryland.gov/Consumer/Documents/publications/farmguide.pdf
Q: What types of farms need a nutrient management plan and how do I get one prepared?
Farmers with either gross income of at least $2,500 or 8 more animal units (1 animal unit is 1,000 lbs) are required to have a Nutrient Management Plan. These plans can be developed by a nutrient management advisor in your county Extension office or through private industry. Plans are updated annually. More information is available here.
Q: How can I sign a lease for farmland?
Leasing is a great option for those who are ready to farm but do not want to or are unable to buy their own land. The Agricultural Law Education Institute has many resources regarding farm leasing. Under “Farm Leasing” in their publications section, they have sample leases, fillable leases, as well as other resources that can help you learn about farm leasing in Maryland.
See Agricultural Leasing in Maryland by Paul Goeringer for a good overview of leasing in Maryland.
Financial
Q: Do I need a federal tax ID number?
To determine whether you need an Employer Identification Number (EIN), also known as a Federal Tax Identification Number, go to the IRS’s website. You can get additional information about EINs here. An EIN is free and often preferable to a Social Security number.
Q: How do I get a bank account for my farm?
Most banks will require an EIN (see the previous question) to open a business account, and some may require a business license, proof of address, proof of business name, and/or articles of incorporation/organization and bylaws if applicable. Many regional banks have a person on staff that assist with agricultural accounts. It should be communicated when getting established that the account will support a farm business. Banks often offer services for customers that accept credit cards, lines of credit and other conveniences.
Q: How can I make tax-exempt purchases for my farm?
Maryland has a specific tax exemption for “production activities.” Exempt purchases could include the equipment needed for the production activity and safety equipment, for example. A detailed explanation of sales and use exemptions for farm production purposes can be found here.
If you need to get a refund of taxes previously paid you must fill out a Form ST 205 which is the Sales and Use Tax Refund Application.
Q: What government loans can I get to set up my farm?
Loans for farms can be private (e.g. Commercial Bank, Farm Credit), from the federal government (e.g. Farm Service Agency), or through the State of Maryland (e.g. Maryland Agriculture & Resource-Based Industry Development Corporation, MARBIDCO). MARBIDCO is a quasi-public economic development organization. They offer a variety of loans for agriculture and similar industries. The federal government mainly offers loans through the Farm Service Agency, whose loan options are outlined in this guide.
Certifications
Q: How do I get GAP/GHP certified?
GAP stands for Good Agricultural Practices and GHP stands for Good Handling Practices. It is a program that was implemented to improve food safety for the production and packing of fruits and vegetables. Maryland has its own State GAP/GHP certification program. This voluntary program is designed to help direct marketers provide safe produce that meets basic food safety requirements. This certification may be required by buyers.
For more information see here.
Q: How do I get certified organic?
Agriculture producers who plan to sell, label, or represent products as “organic” must meet the requirements of the National Organic Program (NOP) and be certified. The certification process typically takes three years; however, there are exceptions.
More information is available here.
Sale Regulations
Q: What are the regulations around selling different products (veg, dairy, meat, value-added) direct to consumers?
Below are general Maryland regulations for selling different products. This is not a comprehensive list of all the applicable regulations as to how you sell the goods that may affect what is required of you. This is meant as a starting point for what you need to do to sell goods directly to consumers.
General:
Cottage Goods: Cottage goods are non-potentially hazardous foods, prepared in a home kitchen, sold directly to consumers with annual revenues not exceeding $25,000. You do not need a license to sell cottage goods directly to consumers unless you are also selling non-cottage items. You must follow proper preparation, processing, storage and sale regulations as applicable.
Dairy: All dairy facilities must be approved and permitted by The Maryland Department of Health before any sales are made. For a comprehensive guide on what is required to sell dairy products see:
Eggs: You must register with the Maryland Department of Agriculture annually. Cartons must be labeled correctly and all eggs must meet the standards that are required for the grade and size which they are labeled as. Eggs must be held at 45F or below ambient temperature.
See:
- https://mda.maryland.gov/foodfeedquality/Documents/farmermarketseggs.pd
- https://extension.umd.edu/sites/extension.umd.edu/files/_docs/Poultry-and-Egg-Regulations-in-Maryland.pdf
Poultry: If you have less than 20,000 chickens slaughtered annually and are selling directly to consumers you do not need a license or inspection. If you plan on selling to people in other states, you must meet USDA requirements. Other regulations include: the animals must be processed using potable water, you must have a disposal system for offal and other waste, you must clean and sanitize all food contact services, sick poultry must be excluded from slaughter and segregated from other animals, the meat must be chilled to 40F within a prescribed amount of time, the product must be properly labeled and stored, and records must be properly kept.
- https://extension.umd.edu/sites/extension.umd.edu/files/_docs/articles/EB372MeatRegulations.pd
- https://extension.umd.edu/sites/extension.umd.edu/files/_docs/Poultry-and-Egg-Regulations-in-Maryland.pdf
Meat: Non-USDA regulated meats (like bison and rabbits) can be sold on-farm without any inspections. Certain meats (cattle, swine, sheep, goats and equine; cured and processed meats) must undergo USDA inspection for slaughter, processing, packaging, and labeling. This can be done at a USDA inspected facility and then brought back to the farm to be sold.
To sell on your farm you must have a license. If you sell less than $40,000 annually and meet the other on-farm processing requirements, you can get an “On-Farm Home Processing License” by contacting the Center for Facility and Process Review at (410) 767-8400. If you sell more than $40,000 annually, you must obtain a Processing License by submitting plans to the Center for Facility and Process Review.
- On-Farm Home Processing Plan Review Guidelines
- COMAR 10.15.04.18 On-Farm Home Processing Licensing Procedure Step-by-Step
- ON-FARM PROCESSING GUIDELINES: MEAT AND POULTRY
- How to Apply for the Maryland On-Farm Processor License for Farm-Raised Meats
Unprocessed Vegetables/Fruit (typically consumed raw): No license is required for sale direct to consumers so long as sales are under $25,000 (as adjusted for inflation). If you sell over $25,000, you must register with MDA and take a produce safety course. If you grow produce in Maryland you must fill out the FSMA Produce Safety Rule Registration Form, which is a one-time registration (email to produce.safety@maryland.gov). Once this form is filled out, you may also need to file an exempt registration form if you meet any of the following: 1. You sell under $25,000 in produce (fill out Sales Value Exempt Form) 2. You only grow crops that are rarely eaten raw (fill out No Covered Crops Form) 3. You only grow crops that receive commercial processing (fill out Commercial Processing Form). If the status changes for the exemption, you must notify MDA. You may also fall under a Qualified exemption if you have less than $500,000 (as adjusted for inflation) in food sales with more than half of that food being sold to qualified end-users, but it is recommended that you speak with MDA to see if this applies to you (contact: Deanna Baldwin at produce.safety@maryland.gov).
Video on FSMA for Produce:
Flowchart for what forms are needed: