farm corporations?

[LEP]

Richard5 , I understand creating a partnership between you and your wife for two years before incorporating. But creating a partnership with the corporation? I am not following the logic.

I could never have grown to the level I farm at without incorporation.

Makes even more sense if there is a next generation.

Should be $2-5,000 to setup and an extra couple thousand at the accountants office annually.

[farmaholic]

Side note....

I found it so much less stressful managing this farm to make money instead of managing it to avoid paying income tax. Imagine two vertical lines parallel to each other. One line was prebuying expenses to avoid tax and the other line was deferring income to avoid paying tax. Those two lines were diverging and showed no signs of coming back together with the attitude of never paying tax.
Always cash poor and managing cashflow was a nightmare. Today... earn it and give up 13%....as good as it's going to get.

If I had to go back to the old way, I would never work as hard as we do to give away nearly 50% of the income in the higher brackets. Punitive tax policies...

[Ache4Acres]

Farm corps are a no brainer.

The one thing to consider though is that if the land is in the corps name, if you try to sell land and later get the money personally for your retirement it can have some negative tax consequences since there is no capital gains exemption for corps.

[farmaholic]

A4A... I thought my accountant said it wasn't as bad as some people think because the tax on the capital gain is only on about half of the actual gain...some small convoluted formula applied to the gain that makes it smaller than most think.

[Richard5]

LEP, its because a single guy needs someone to partner with so thats why a company

My friend did this and the split was 95-5 so that most of the value is still in the hands of the individual when you transfer to the company

For those of you that went to a corp with out this step, especially in the last 15 years left a lot of permanent tax savings on the table. Now with million exemption it is completely a no brainer.

A lot of you make great comments about benefits of a company and i do agree with them. Its a great way to build equity and focus on profit.

As farma says, manage the money.

I would say manage how you get into the company and have an idea how you are going to get out.

For those of you that didn't do the partnership, you will have a company with a bunch of cash when you quit but no access to it in any large sums with out incurring 22-35% personal taxes

I guess what i am saying is make sure you know what your other options are because if your accountant has or is wanting to put you directly into a corp, they are doing absolutely nothing for you

[caseman]

should have mentioned have a wife and 3 kids.

been prebuying inputs and deferring grain the last few years, has finally caught up to me. 2015 will be manageable tax wise, 2016 will be harsh if I file as an individual.

[Oliver88]

Very informative thread.

[Richard5]

Caseman, if you deferred to 2016, thats your income and cant go to the company,

If you were in a partnership then the deferred tickets are assets of the partnership and then would be taxed by the company

[LEP]

Richard5, you are viewing this from the point of view of someone with a sizeable operation that has significant assets looking toward incorporation.

When I incorporated 20 years ago my operation was a fraction of today, but I was looking at a big year on top of my off farm salary. Didn't make sense not to incorporate. I didn't have $100k of equipment and not much land.

But in caseman's situation I can see the benefit completely.

[farmaholic]

Our Corp is 14 years old in 2016. Can't image being shackled by high taxes and slower growth.

It may not have been done absolutely correctly but...but at the time, with the current circumstances.