The Complete Legal Guide to Homesteading - fairwaystables.com (2024)

This website is the one I've been searching for, for years; a compilation of knowledge on all things horsemanship, including practical advice on how to start an equestrian business.

No matter your experience level with horses or homesteading, I hope this is a place you can get lost in, and learn something along the way - we welcome everyone from vets, to lifelong ranchers, trainer, to nonprofits contributing.

Everything a homesteader needs to know to legally run a homestead.

So many opportunities come from owning a homestead- land and maybe a few animals. Here, we’re breaking down everything you need to know about homesteading, such as:

• What does “homesteading” mean?
• How to keep any homestead legal
• What you need to know about “setback laws”
• What you need to know about permits
• If you have farm animals, here’s what you need to know about animal liability
• Want to make money from your land? Here’s how to turn your hobby into a business
• How to incorporate your homesteading business
• How to run a your homesteading website (legally)
• Every contract a homesteading operation needs
• How to protect your homesteading business name with a trademark
• And finally, how to preserve your homestead through estate planning

What is homesteading?

I once asked my grandfather, a lifelong cattle rancher and farmer, what a homestead was, and he said “wasn’t that what Laura Ingalls Wilder had? A home on land, some farm animals?”

Well, I can’t argue with that!

Today, though, “homesteading” is a more commonplace term. It’s become a catch-all phrase for people who have acreage, often with farm animals, a garden, and more. These are also sometimes known as “hobby farms”, or “farmettes”.

Here’s the wonderful thing about homesteading: there’s no set amount of acres or specific purpose you need to have for the land. Your “homestead” can be a half acre flower garden, or a 20 acre horse farm. There’s no strict definition! At Fairway Stables™, we define a “homesteader” as anyone who derives use from their land. And sometimes, that use of land starts bringing in money.

Every now and again, homesteaders turn their hobby into a business and begin making money from their land – selling cut flowers, maybe breeding some of their farm animals, you name it.

With that, I have a few common questions that come up with the homesteading clients at my law office. That’s where Fairway Stables™ comes in. We teach homesteaders everything they need to know about homestead law.

How to keep a homestead legal

No matter how much acreage or prior knowledge you have, there’s no barrier to entry when it comes to homesteading. But, there are a few things you need to know to keep your homestead legal.

Luckily, homestead laws are very straightforward. If you have a homestead (whether you consider it a business or not), ask yourself these questions:

1. First, are there “setback laws” or zoning laws around your homestead or hobby farm?

If you want to have fencing or animals on your property, what setback laws do you need to know about?

First, what are setback laws? Setback laws are property ordinances that govern property lines and boundaries. In other words, a setback is the minimum distance from a property line that a building can be built. They may also govern a landowner’s access to ventilation and light (for example, they may say you can’t block a neighbor’s access or view.)

How do you know what setback laws apply to you? Google will be your best friend. Google “setback laws in [your city]” to find a clear answer. But, know this: it is possible for cities to put regulations in place that can restrict property owners from building fences, structures, or having animals within a certain distance of another structure. Ideally, you would research this question before you purchase your property.

2. Second, ask what tax exemptions or permits you need for your homestead or hobby farm.

As soon as you purchase your property (or preferably, before), check to see if you qualify for a farm exemption permit. Finding out is easy; just google, “what permit do I need for my homestead?” for your own state.

In Oklahoma, you can benefit from filing for this permit because you won’t have to pay sales tax on your farm supplies, equipment, or fuel purchased for use on the farm. A link to the exact form to fill out can be found here.

Also, make sure you find out what permits are required if you have any sort of animals, particularly farm animals, on your property. For example, you can have a half-acre homesteading operation with a cut flower garden and a chicken coop. But, one day, you get a notice on the door that says the chickens have to go. Isn’t it your prerogative to have your coop?

Well, maybe, depending on what your governing permits say. For example, your homeowners association could dictate what farm animals you’re allowed to have, as well as your city/municipal/state ordinances. Again, Google what applies to you, or ask an attorney familiar with homesteading laws.

3. Do you have any farm animals on your homestead or hobby farm?

As an equine lawyer, I see questions on this topic all the time. Did you know that having farm animals on your homestead means having more legal requirements, such as a legal duty to keep them properly fenced in?

This is for two main reasons:

• First, you’re liable for what could happen if they get out. For example, I grew up on acreage, and when I was young, my neighbors had sweet little goats. However, these goats were escape artists, and found out they could get through the fence connecting our properties. They had great fun chasing 6 year old me and head butting me for sport. No harm came from it (I don’t want to disparage the goats!), but, if they had instead run down the road and caused an accident, my neighbor would’ve been responsible. Why? Homesteaders, or owners of any farm animal, are responsible for keeping them fenced in to prevent the farm animals from causing harm to anyone else.
• Second, owners of farm animals don’t just have a duty to protect people from their animals, but children, in particular. The best way to protect against either of these situations? Make sure you have a good fence with a child-proof lock.

In other words, common sense reigns supreme: don’t let your animals out, or wanderers in!

A note specific to equine law: if you have horses on your homestead, look at getting equine insurance. This will protect against both big vet bills and accidental injuries caused by your horses.

Are you making any money from your homesteading?

Here is one of the easiest ways to avoid legal problems that can naturally crop up:

Let’s use a common example. You have a few acres of land, maybe some chickens, a small garden, and some honeybees. Friends and family begin asking if they can buy some honey from you, or some eggs, or even some flowers or veggies from your garden.

As your operation grows, people start reaching out to see if they can buy some crops, eggs, and honey from you, too. At this point, are you running a hobby farm, or a business?

Here’s what you need to know: you can monetize your hobby, without turning it into a full-fledged business. But, you need to know three things in order to keep your hobby farm legal:

1. You need to consider your tax and insurance requirements. A sole proprietorship provides no liability protection, so you need to make sure that whatever you are selling falls under your general liability homeowner’s policy. For example, if someone had an allergic reaction to something you sold, you wouldn’t want to be (and shouldn’t be!) on the hook for anything. But, if the insurance company considers you selling the eggs, honey, or veggies a “commercial enterprise”, it may not cover any liability that could pop up from selling your products.
2. If you’re selling anything from your homestead or hobby farm, you need to get an EIN number.
   1. What’s an EIN number? Essentially, this is like a social security number for whatever you’re making money on. This is a legal requirement (anyone who sells goods or services for profit must have one) that becomes very important at tax time!
   2. How do you get an EIN number? Luckily, it’s easy and even free! Go to irs.gov, fill out the form for applying for an EIN number, and you’ll get one immediately.
3. If you are making any profit from anything you’re selling or accepting any form of compensation from your hobby farm (including trading goods or services), you’re what’s called a “sole proprietor” in the eyes of the law. This is not a legal formation that offers any protection; it’s just the government’s way of saying you’re making some money. But, if you decide you want more liability protection, think about forming an LLC. Even if you want to keep your hobby farm a hobby, you may want to form an LLC to create a barrier of protection between your products and your personal liability.

So, in summary, it’s completely fine to keep your hobby farm just that–a hobby! Just make sure your general liability insurance covers your activities and you get an EIN number (you can ask your accountant for more information on that!).

But, what if you’re ready to take your homesteading ventures and turn them into a business? Here’s exactly what you need to do to turn your hobby farm into a business:

The business behind homesteading:

Once you’ve started selling goods (eggs, veggies, etc.) or even services (like animal training), it’s time to consider whether or not you should turn it into a “business”.

What do I mean by a business? I’m not talking about a fancy marketing plan or a fancy website. I want to teach you the legal basics you need to know to protect yourself, and your homestead, in the process of starting your business.

After all, whether you have a homestead, a farmette, a farm, or a ranch, there are laws you must follow. There’s no use investing your time and effort in building something with a legacy, if it is not legally protected through common business failings.

The good news is, many of the legalities to keep in mind are extremely easy to satisfy! Use this as your “homesteading legally” checklist:

1. Incorporate your homesteading business

Once you’ve taken the steps to legally turn your homestead into a business, you’re ready to start operations! However, in the same way your crops need tending to each day, and your animals need care each day, there are a few ongoing legal needs you need to keep in mind:

Your homestead, farmette, ranch, or farm most likely needs to be an LLC.

• Why? When you start selling any goods or services, you’re a sole proprietor by default. This means that you have no legal separation between your business’ liabilities and assets, and your own.
• How? There are several types of business formations, and your accountant or attorney can help you find the right one for you. Generally, the best starting place is to form an LLC for your homestead.

An LLC is a legal entity that completely separates your business from yourself. In other words, if your LLC were sued, your personal assets would be safe (and vice versa). For homesteaders, farmers, and ranchers, especially: your business and personal lives are going to be naturally intertwined. After all, you’re literally living where you’re making a profit!

At the end of the day, you do NOT want your family or your personal assets to be on the line for anything that could happen to your business. When you have an LLC, or a corporation, your personal assets and liabilities are separated from your business’ assets and liabilities.

For example, if you remain a sole proprietor (your default status when you make any money), someone could theoretically sue you if, for example, they have an allergic reaction to the eggs you give them. It sounds crazy, but it’s true. Let’s say our made up scenario gets crazier, and you lose the lawsuit. The judge says you have to pay that person thousands of dollars. If you were just a sole proprietor, you would have to pay that, and a judge would make you “liquidate your assets” to do it. In other words, a judge could make you sell your entire homestead to satisfy the judgment.

On the other hand, if you had an LLC, only your LLC would have to satisfy the judgment, meaning your home, your family, and your land would be safe. (Plus, a good accountant can find tax write-offs for you).

Takeaway: Protect your home, family, and land. Incorporate your homesteading business.

2. Make sure your website is legal

Here’s one of the most common (and easy-to-fix) mistakes I find when it comes to homesteading legally: if you have a website, make sure it’s legal.

This is probably the easiest step on the list. It can be knocked out in about 15 minutes, following these two steps:

1. Make sure you have a privacy policy. Did you know this is a federal requirement, meaning you’re actually breaking the law without one? Now, the FTC, California, and the European Union also have requirements for what they need to say.
2. Have terms and conditions for your website. This is the contract that governs your website. In other words, when people are on your site, they automatically agree to be bound by those terms. For example, this means they can’t copy photos, wording, etc., from your site.

3. Have the correct homesteading contracts

This one won’t be a surprise, but when you have a homesteading business, it’s critical that you use the correct contracts.

1. You need to have contracts in place, whether they relate to equine law, cattle sales, or general liability forms=
   1. Why: In the past, many homestead and small farm businesses have relied on verbal agreements, but these can lead to misunderstandings and even people taking advantage of the law.
   2. How: head to this link to find lawyer-drafted contracts. (Coming Soon)

4. Do you have a name for your homesteading business? Trademark it (to keep it).

Do you want to protect your business name? You have to trademark it.

3. Why: It’s rarely something that’s on people’s radars when starting a homesteading business, but I want you to stay a step ahead in the game. In short, unless and until you get a trademark, you don’t own your business name. This means that if somebody comes along and thinks your business name is great, it doesn’t really matter how long you’ve used it or how much brand identity you’ve built around it. They can force you to change your name, or worse, they can sue you for infringement.

If you want to own your brand name, you have to own the trademark first. Reach out to a trademark attorney at hello@paigehulse.com

4. How: your trademark attorney will run a due diligence search to make sure there are no conflicting marks, and then file the application for you. When it comes to trademark names, it’s generally “first come, first serve.” If you wait too long to trademark, you can lose your rights to your name, but if you act quickly, you can secure your brand’s legacy.

5. Finally, your homestead must be protected by an estate plan.

It’s hardly the first thing people think of, but how will your homestead, farmette, or ranch be protected for the future without an estate plan? In the same way we plant seeds in the fall with the faith they’ll bloom in the spring, we must put the pieces in place now to preserve our legacy for the future.

This isn’t just an abstract idea. At some point, think to yourself: what happens to your homestead when you’re no longer able to operate it? This applies whether you’re homesteading just for pleasure or for profit.

In other words, this is something that you must do, whether your homestead is a business or a hobby. A plan must be in place for the care and legacy of your property (and farm animals) to continue on after you.

What is an “estate plan”?

An estate plan is all the “the documents you need to have in place to secure your estate.” Typically, this means a trust (the document that holds all of your assets) and documents such as an advanced directive and power of attorney.

Why does every homesteader need an estate plan?

No matter how little we like to think about it, we can’t predict how the future will play out. So, we better take care of our legacies before someone else does.

If you don’t have your own estate plan, your state has set, uniform procedures for what happens to your estate (i.e., everything you own). This means your loved ones will have to go through the heartache of hiring an attorney to fight for your rights in court after the fact. At this point the judge can essentially decide anything. This isn’t just a heart wrenching process, it’s an expensive one. An estate plan not only ensures that YOUR wishes are honored, it protects your loved ones, too.

The legacy of your land must be protected for the future, in the same way you would protect it now. Creating an estate plan for your homestead will secure the legacy you’re dedicating time and energy to, for years to come.

Mentioned in this Post:

• The Best Business Structure for Your Farm
• How to turn your homestead into a business
• Trademarking Your Homestead Business
• Do You Need Equine Insurance For Your Horse?
• How Zoning Laws Can Affect Your Farm

Read Next:

• 3 Tips On How To Name Your Horse Farm (Legally)
• Should You Trademark Your Business Name and Logo Together?
• The Horse Owner’s Complete Guide to Liability