Farm Incorporation

[fjlip]

Anyone go through incorporation lately? What is your experience? Which accounting firm did you use? Ball park cost? Talked to Hergott, Seidel and Associates in Humboldt. Heard Retiring Farmer workshop. We are a farm partnership already, first big requirement as I understand.

[farming101]

An excellent strategy if:
You are under a heavy tax load
You are sick and tired of deferring income
You want to simplify bringing someone new into the operation

Selling your inventory and machinery to a farming corporation can kick start your retirement fund and leave the land base intact for future retirement income.

Big things to remember.
It can get tricky if your goal is to wind down operation.
Make sure you preserve lifetime capital gain exemption.

It has been a win win for us. Way less stress.

[Richard5]

Anyone go through incorporation lately? What is your experience? Which accounting firm did you use? Ball park cost? Talked to Hergott, Seidel and Associates in Humboldt. Heard Retiring Farmer workshop. We are a farm partnership already, first big requirement as I understand.

Incorporated my farm partnership 14 years ago and yes a huge advantage. At that time, my wife was still living and she and I used almost all our capital gains exemption at that time since we were a formal partnership most of our farming days. Now I am 3 years into a 2nd generation farm partnership with my son in order to allow a succession of our farm to him and his wife and take advantage of my additional capital gains I have plus the amounts my son has.

Talk to many people that have formed partnerships in the last 3-5 years to get in on this tax advantage or are transferring to a partnership now. All I am going to say is if your so called accounting firm is first doing this stuff with you now then it sounds like you might be with someone behind the times a bit. and if anyone was advised to incorporate without a partnership, wow, too bad. Its like selling canola for $4 a bushel.

From my experience of going through this twice, the key things are more than just the tax stuff. Many of the things during meetings I went through had to do with profitability of the farm and relationships of the family members both involved in the farm or not. Some of the other things talked about are the during the whole process is the bookkeeping requirements. Scriblers don't work for partnerships or corporations.

This is a very big step and its a bit like Scotiabank's theme... "Need a second opinion"

[fjlip]

Accountant suggestions are to use part of Capital Gains exemption selling inventory and machinery to the Corp. Then when Corp assets are sold, take back the share holder loan, TAX FREE retirement.
The exemption is there at the whim of politicians, no guarantees. Fiddling with quota this year. We are not big enough to run out of 2 million exemption.
Been doing all our accounting and tax returns for 30 years, on AgExpert since 1999, confident there.
I said we are a partnership for 20 years all assets owned jointly.

[Richard5]

My only comment then would be do you know the value of your partnership. We are holding back for one more year or two to build the value higher and make use of as much of the exemption as we can. It is a bit of juggling to control personal taxes within the 2nd tax bracket but managing.

Looking at my notes from meetings, do you have any deferred tickets to 2017 yet? If you do, make sure they are deferred a couple extra days as the partnership cannot have any income the day you move to the company otherwise they will be income of the partners and not the corp

[Richard5]

Accountant suggestions are to use part of Capital Gains exemption selling inventory and machinery to the Corp. Then when Corp assets are sold, take back the share holder loan, TAX FREE retirement.
The exemption is there at the whim of politicians, no guarantees. Fiddling with quota this year. We are not big enough to run out of 2 million exemption.
Been doing all our accounting and tax returns for 30 years, on AgExpert since 1999, confident there.
I said we are a partnership for 20 years all assets owned jointly.

If in a partnership for 20 years did you buy any land during that time? If so, do you have a partnership and personal GST number? If you don't or have not listed the correct GST number of land purchase agreement or did that self assessing for GST bs step when buying land then your land will be assumed owned by the partnership. I did this wrong on a couple qtrs bought a few years back and I had to go back and correct

[farmaholic]

Sure makes growing the farm much easier.

I've come to the conclusion it seems like another form of tax deferral. But at least the process of winding down seems more manageable.

[fjlip]

If in a partnership for 20 years did you buy any land during that time? If so, do you have a partnership and personal GST number? If you don't or have not listed the correct GST number of land purchase agreement or did that self assessing for GST bs step when buying land then your land will be assumed owned by the partnership. I did this wrong on a couple qtrs bought a few years back and I had to go back and correct

Thanks will check on that. Same with deferred. Did change some titles to joint about 2 years ago. No comment from accountant. Have a partnership GST now.

[Richard5]

Thanks will check on that. Same with deferred. Did change some titles to joint about 2 years ago. No comment from accountant. Have a partnership GST now.

If i know anything changing titles to joint is fine and no issues. Its a problem if you bought land as you say you only have a partnership gst. The cra could rule you own it in the partnership and that would me that land would drag into the partnership unless you buy it back.

May be a good idea to call around to an actual CA or firm who does alot of farms. I would think anyone would be open to an hr or so at no cost

[fjlip]

When all land was purchased I had a personal GST, so should be good.