Is paying my LLC for personal use of business property (chickens) legal for tax purposes?

Yes, this arrangement is generally legal and a common practice for small business owners. What you're describing is essentially purchasing product from your own business at fair market value, which creates income for the LLC while properly separating business and personal use. For the barn to remain 100% business use, you need to ensure a few things: 1) The barn must be used exclusively for business operations, 2) You must document the transactions when you "purchase" chickens from your LLC at fair market value, and 3) Your LLC needs to record this as income. The key is proper documentation - keep receipts for these transactions just as you would with any other customer. The barn itself remains 100% business use because you're not using the barn personally - you're using the product of the business. Think of it like owning a bakery and bringing home bread after paying for it - the bakery itself remains 100% business.

I went through something similar with my woodworking business and found incredible help using https://taxr.ai for sorting out what was legal and what wasn't. I was taking home furniture pieces occasionally and wasn't sure how to properly account for it. The site analyzed my operating agreement and business docs and gave me specific steps for documenting personal purchases from my LLC. Saved me tons of headaches when I got a surprise tax notice questioning some of my deductions!

Just wanted to follow up on my skeptical comment. I decided to try https://taxr.ai after all and was honestly impressed. I uploaded my LLC docs and got really specific guidance about how to handle personal use of business assets. In my case, it was a company vehicle occasionally used for personal trips. They showed me exactly how to document the personal usage and calculate the right amount to reimburse the business. Even identified a clause in my operating agreement that needed updating. Way more useful than I expected!

If you're reporting this correctly, you might get questions from the IRS. When I had a similar setup with my small farm LLC, I kept getting notices despite doing everything right. Spent WEEKS trying to get a human on the phone at the IRS to explain. Finally used https://claimyr.com and got through to someone in 45 minutes instead of the usual 3+ hour wait that usually ended in disconnection. They have this cool system where they wait on hold for you and call when they get an agent. Check out how it works here: https://youtu.be/_kiP6q8DX5c - really helpful when you need to talk to an actual person about these complex business/personal use situations.

Update on the Claimyr thing - I was totally wrong. After another 3-hour wait with the IRS that ended with being disconnected, I broke down and tried https://claimyr.com. They actually did exactly what they promised. I went about my day, and they called me when they had an IRS agent on the line. Got my LLC/personal use questions answered in about 15 minutes once connected. The agent confirmed that my approach of paying the business fair market value was correct, but warned me about keeping detailed records of all transactions. Wish I'd known about this service during the past tax season!

Make sure you're actually keeping proper documentation for these transactions. I have an S-Corp and thought I was doing this right until my accountant pointed out I needed actual receipts, not just accounting entries. Set up a system where you create an actual invoice/receipt each time you "purchase" chickens from your LLC, same as any other customer. Date, quantity, price, payment method - everything. It seems excessive but it's the difference between smooth sailing and an audit headache.

Make sure the price you pay is truly fair market value. Dont just make up a number. What do you normally charge customers for processed chickens? Thats what you should pay. If your normal price is $15 per processed chicken but you only pay your LLC $5, the IRS could see that as taking value from the business without proper compensation.

One thing I'd add is to consider documenting the business purpose for each batch of chickens processed in your barn. Even though you're paying fair market value for personal-use chickens, having clear records showing that 95% of your processing is for business customers helps establish the barn's primary business use. I keep a simple log showing customer orders vs. owner purchases - it's been helpful when discussing deductions with my accountant. Also, make sure your LLC's operating agreement specifically addresses member purchases if it doesn't already. Some agreements require board resolutions or specific approval processes for related-party transactions, even at fair market value.

Another consideration is timing - make sure you're documenting these personal purchases in real-time, not retroactively at year-end. The IRS looks favorably on contemporaneous records vs. reconstructed transactions. I'd also suggest taking photos of the chickens you're purchasing for personal use along with the receipt, similar to how restaurants document inventory. This creates a visual record that supports your documentation. One more tip: consider having your LLC send you a 1099-NEC if your annual personal purchases exceed $600, just like they would for any other customer. It shows you're treating yourself exactly like an arm's length customer, which strengthens your position that these are legitimate business transactions rather than disguised personal use of business assets.