Five Legal Considerations for Your Farmer’s Market Business
New businesses are flocking to Vermont farmer’s markets. From soap-making to prepared foods and traditional farm produce stands, today’s farmer’s market is the best micro-enterprise incubator.
Farmer’s markets are ready-made storefronts for your goods or products. You can sell your products and build a customer base with little upfront capital. Farmer’s market businesses (“market businesses”) generally benefit from low or non-existent rents, regulatory and permit exclusions, and inexpensive start up costs. Opening your business in a farmer’s market lowers your initial costs and risk of failure significantly, while at the same time providing a trial run for your business strategy.
Market businesses are, however, still businesses in the eyes of the law and the tax authorities. Being small will not shield you from certain legal obligations and risks. Business owners must make sure that they address several fundamental legal issues when starting up and operating a farmer’s market business.
Five important legal issues to consider:
Farmer’s markets are ready-made storefronts for your goods or products. You can sell your products and
What's in a name?Choose a good name, but make sure its legal to use. Sole proprietorships operating under another name require trade name registration with Vermont's Secretary of State's office, and even corporate or LLC entities operating under catchier trade names need to register that name as a dba. Before choosing a name make sure someone else is not using it or you may be infringing on their trademark and face a nasty cease and desist letter or legal action.
Sole proprietorship vs. other forms of business entityMany small businesses start as sole proprietorships. Sole proprietorships have lower start up costs, less annual compliance, easier accounting and tax preparation. Some small businesses may be better off setting up as a limited liability company (LLC) or other form of business entity providing liability protection and other benefits. Liability protection is, however, never absolute. An LLC or Corporate entity will not protect you against personal wrongdoing committed while operating your business. You must also adhere to legal formalities and rules relating to your entity on an ongoing basis or a claimant could pierce the veil of your business and reach your personal assets. The lesson here is: do not simply set it up, and forget. Ultimately your business structure should be determined by, amongst other things, the set up costs you will incur, your liability protection needs, tax considerations, and your tolerance for taking on additional paperwork and "administration". Consult a qualified attorney or tax advisor before you choose a business form. Remember, too, that incorporating or forming an LLC is never a substitute for adequate insurance.
Yes, you are an employerVermont and Federal labor and employment laws apply to small farmer's market businesses and farms if you have employees. If no agricultural and non-agricultural worker exemptions apply than you must comply with all applicable laws. As an "employer", you must adhere to federal and state labor and employment laws and regulations including the documentation for new employees (W-4's, I'9s, etc), withholding taxes, unemployment, workers compensation, and other requirements. Remember, as an employer you are also liable for any violations of state or federal employment practices.
Health and tax regulations applyDifferent health rules and regulations apply to you depending on the size and type of business. You will need to obtain the right permits--many are specific to farmer's market businesses and cost less and follow simpler requirements. Food, meat, and vegetable businesses, for example, must follow State and Federal food preparation and safety regulations. However, there are several exemptions that attempt to help the small farmer sell their products direct to consumers or through farmers markets. In Vermont, you will need to obtain tax id numbers and normally sales and meals tax is collected and remitted quarterly to the state's tax department. There are also steps that you should take to comply with the IRS at start up and at the end of the year. Make sure you carefully investigate all the applicable regulatory and tax requirements for your business, and stay on top of them.
What if I succeed?Consider the future of your business. If you intend to grow into an Internet or brick-and-mortar business then consider the best structure for your company. If you one day hope to sell the company, putting in place the right documentation, permits and an appropriate legal business structure will add value to your business and perhaps one day, make it more readily saleable.