What are others paying for accounting per year for a farm corp. Just finished our second year end as a corp, understood that the first would be expensive with setting up and rolling in. But costs for the second year are nearly as astronomical. Might be time to shop around for different accountants?
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There is no way for me, nor do I want, to stay on top of the changes in the tax system.
A good accountant is worth his fees..... and you just might get what you're paying for.
I can't be everything! So I am willing to pay for professional advice. Taxes, succession, dividends versus salary, he sees things I have no idea exist!
I am like you.... email him pdf's of statements.... he does depreciation, agri-programs, filing, and the little bit of planning(advising) there is to do when you're a Sandbox Farmer from the Slum of the Ghetto.
Even though I see Incorporating as a form of tax deferral, there is no way you will grow a business faster, and if it ever needs to be wound down..... it has to be "managed". Probably the best thing we ever did as a business decision on this farm.
Don't forget, if you're paying taxes.... you're "making" money.
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Paying accounting fees is paying for protection. The government is collecting taxes from the accounting industry so it can leave you alone as it is getting your money in a round about way. If you are not incorporated, think long and hard before taking the plunge, as the actual savings are likely less than mentioned at the sales pitch.
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Food for thought, I would farm less than give forty some cents of every dollar of un-incorporated net income away(above a certain personal tax rate threshold) to Revenue Canada!
There is a line!
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Originally posted by farmaholic View PostFood for thought, I would farm less than give forty some cents of every dollar of un-incorporated net income away(above a certain personal tax rate threshold) to Revenue Canada!
There is a line!
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Originally posted by caseih View Postagreed , it is near impossible to grow a farm unincorporated . How could you pay for land on 40% taxed dollars ?
Anybody regret incorporating?
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I think you're on the right track with that line of thinking.
My accountant said you will pay more tax on the capital gain on the land inside the corp but it isn't as bad as I thought it would be....
Don't be intimidated by it. But it does require more planning and management depending on what you want to do or accomplish.
Remember what I said, I look at it as another form of tax deferral. Everything is accounted for and financial management and planning is essential.
caseih....is absolutely right in my opinion. Paying for stuff with low tax rate corporate dollars is alot easier than with high rate personal tax dollars.....just that all that is accounted for, and if need to unwind the corp, the piper needs to be paid, but manage it! I believe there's some benefits to succession planning too....but that may also be looked at as passing the tax liability on as well. So what!
It's great way to generate wealth.
Good luck.....I don't regret it.
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AAH how the worm turns,, not to long ago you were all up in arms ,the gov was going to tax corps different, you all declared there is no tax advantage to being incorporated and cried foul , hard to put much faith in what you all say, one thread is pro and the next is con.
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In my opinion there is nothing wrong with incorporating, just understand and make sure you are taking the right steps along the way. Below are my 3 key notes that were driven into my head from the meetings I had over the years with my accountant.
First, make sure you do the partnership and never let someone tell you to incorporate directly and if they are talk to another accounting firm that knows something about Ag taxes. If you have already incorporated, do you have a son that is starting to farm? Form a partnership with him so at least someone is taking advantage of this. The goal with the partnership is to use your capital gains exemption on everything else but your land. I cannot stress this enough!
Second, once you incorporate the partnership, you will create shareholder loan. Use this shareholder loan properly and one way is to make principle payments on personally held land. If you do this right you can keep a lot of land outside the company. Land outside the company can be gifted to next generation plus its another source of income from the company with no CPP contributions.
Third, make sure you take enough wages/rent or even dividends to cover your cost of living and then some. I would suggest always using the 2nd tax bracket (90,000 in sask). If you don't your shareholder loan will be gone fast and if you are taking out $100,000 you will need to be taxed on a $100,000 or keep selling land to the company. Not sure about most of you on this post, but I cannot live on $100,000 per year and don't want to either. As mentioned, a company is a deferral scheme (or at least what is over an above the value of the partnership) and doing a little bit every year with ease the pain for someone down the road.
I pay approx. $4500 a year and feel its is very fair. I know and understand what I am getting and what is involved. I think that is the biggest problem with those questioning cost. I am sure there are all kinds of stories of those advised incorrectly or by poor work done...or not doneLast edited by Richard5; Feb 24, 2018, 10:59.
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Originally posted by Richard5 View PostIn my opinion there is nothing wrong with incorporating, just understand and make sure you are taking the right steps along the way. Below are my 3 key notes that were driven into my head from the meetings I had over the years with my accountant.
First, make sure you do the partnership and never let someone tell you to incorporate directly and if they are talk to another accounting firm that knows something about Ag taxes. If you have already incorporated, do you have a son that is starting to farm? Form a partnership with him so at least someone is taking advantage of this. The goal with the partnership is to use your capital gains exemption on everything else but your land. I cannot stress this enough!
Second, once you incorporate the partnership, you will create shareholder loan. Use this shareholder loan properly and one way is to make principle payments on personally held land. If you do this right you can keep a lot of land outside the company. Land outside the company can be gifted to next generation plus its another source of income from the company with no CPP contributions.
Third, make sure you take enough wages/rent or even dividends to cover your cost of living and then some. I would suggest always using the 2nd tax bracket (90,000 in sask). If you don't your shareholder loan will be gone fast and if you are taking out $100,000 you will need to be taxed on a $100,000 or keep selling land to the company. Not sure about most of you on this post, but I cannot live on $100,000 per year and don't want to either. As mentioned, a company is a deferral scheme (or at least what is over an above the value of the partnership) and doing a little bit every year with ease the pain for someone down the road.
I pay approx. $4500 a year and feel its is very fair. I know and understand what I am getting and what is involved. I think that is the biggest problem with those questioning cost. I am sure there are all kinds of stories of those advised incorrectly or by poor work done...or not done
Merle Good had a FCC sponsored succession planning seminar in Humboldt a couple years ago, he stated that new land should be purchased within corp, had a detailed description/reasons I can't tell you now.Last edited by fjlip; Feb 24, 2018, 12:06.
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Originally posted by fjlip View PostAgree with you, the Capital Gains exemption on all but land to create the shareholder loan which pays out TAX FREE, especially beneficial if exiting farming. Plus will the CG exemption remain? The tax saved usually covers most of incorporating costs. Firstly you MUST be a partnership to get 2 million CG exemption. The land can be personally rented as long as you wish and passed on tax free to next gen who will use THEIR CG exemptions upon sale. 2 million does not exempt a large farm from CG tax. If you are receiving OAS, must pre-pay tax NOT to get clawed back.
Merle Good had a FCC sponsored succession planning seminar in Humboldt a couple years ago, he stated that new land should be purchased within corp, had a detailed description/reasons I can't tell you now.
New land is being bought by Corp. I believe it is nearly impossible to make payments privately at these prices 3500/4000 per acre. But maybe I’m missing an opportunity to get more land held privately without paying huge personal taxes. Any thoughts on that Richard. You obviously have accounting/tax background.
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Originally posted by Richard5 View PostIn my opinion there is nothing wrong with incorporating, just understand and make sure you are taking the right steps along the way. Below are my 3 key notes that were driven into my head from the meetings I had over the years with my accountant.
First, make sure you do the partnership and never let someone tell you to incorporate directly and if they are talk to another accounting firm that knows something about Ag taxes. If you have already incorporated, do you have a son that is starting to farm? Form a partnership with him so at least someone is taking advantage of this. The goal with the partnership is to use your capital gains exemption on everything else but your land. I cannot stress this enough!
Second, once you incorporate the partnership, you will create shareholder loan. Use this shareholder loan properly and one way is to make principle payments on personally held land. If you do this right you can keep a lot of land outside the company. Land outside the company can be gifted to next generation plus its another source of income from the company with no CPP contributions.
Third, make sure you take enough wages/rent or even dividends to cover your cost of living and then some. I would suggest always using the 2nd tax bracket (90,000 in sask). If you don't your shareholder loan will be gone fast and if you are taking out $100,000 you will need to be taxed on a $100,000 or keep selling land to the company. Not sure about most of you on this post, but I cannot live on $100,000 per year and don't want to either. As mentioned, a company is a deferral scheme (or at least what is over an above the value of the partnership) and doing a little bit every year with ease the pain for someone down the road.
I pay approx. $4500 a year and feel its is very fair. I know and understand what I am getting and what is involved. I think that is the biggest problem with those questioning cost. I am sure there are all kinds of stories of those advised incorrectly or by poor work done...or not done
I'm a bit scared of the additional paperwork and forms and costs but seems to be the way to go.
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Originally posted by Bowerpower View PostAgree with rich and fj completely. Corp didn’t pay enough wages first few years and shareholders loab was being used much faster than anticipated.
New land is being bought by Corp. I believe it is nearly impossible to make payments privately at these prices 3500/4000 per acre. But maybe I’m missing an opportunity to get more land held privately without paying huge personal taxes. Any thoughts on that Richard. You obviously have accounting/tax background.
My thoughts would be if you are borrowing for the land regardless it may work to keep outside. The second would be your feeling on if the land is at a high or if it will be personal sentiment (right beside your yard). If its way out there (not close to home) any may be sold (if no son to take over, etc) then it may be fine in the corp. A conversation with my lawyer outlined a number of problems they have with their clients "you cannot will what you don't own". Once the land is in, its owned by the shares.
The growth of your farm over an above the value you put in over your partnership is like an RRSP. Manage it wisely and the end will work out or be prepared for a hit
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Originally posted by GDR View PostThanks for the advice. The partnership thing makes sense and that was the initial recommendation before they had closer look at my books, now they think maybe direct change might be better cause of the tax rate and the 2 yr lag time. I'm gonna get another opinion also. Fee wise $5500 to change to partnership and then $12000 to go to Corp. Or $5000 straight to Corp.
I'm a bit scared of the additional paperwork and forms and costs but seems to be the way to go.
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