There are sound reasons to incorporate the farm — significant financial reasons, operation benefits and very real long-term business planning implications. But if incorporating is so beneficial, why aren’t most farms carrying the Inc. behind the business name?
In this episode of Mind Your Farm Business, Shaun Haney asks veteran farm management advisor Merle Good to hammer out the top three reasons farms should incorporate, how to leverage the most out of incorporating, and how to avoid some very significant and perhaps unexpected pitfalls of incorporating.
Right off the hop, it’s easy to see some very real financial benefits to incorporating, as corporate income tax rates are the best you’ll find.
But the full-scale benefits to the farm finances are much more complex than that, and in this audio interview, Good delves into a myriad of ways you can use corporate vehicles to buy or transfer land, expand the farm, use your capital gains exemption wisely and more.
Hear more from this series here!
Of note, Good wants to get farmers thinking more about putting land in companies — and he explains his reasoning below.
The bottom line, Good says, is that incorporating adds business flexibility. But there are trade-offs, especially because creating a company requires a re-commitment to financial discipline and some very serious talks about what’s a business expense and what’s personal.
Good also warns of at least one little-known pitfall of having an incorporated farm: losing the family farm corporation status by holding more than 10% of assets as non-farm assets. He explains why this isn’t entirely fair, but is a rule nonetheless, and how to manage for it.
Ultimately, incorporating the farm is a benefit right now, but it’s nearly necessary for a successful farm transfer, Good says. Incorporating the farm means you can best handle transferring the farm business and distribute your wealth (these are not the same things!) when the time comes.
Never miss a post from RealAgriculture! Claim your free subscription here.
Disclaimer: Royal Bank of Canada and its subsidiaries are not responsible for the information provided in this podcast, and this information does not necessarily reflect the views of Royal Bank of Canada or any of its subsidiaries. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its subsidiaries.
Subscribe: Apple Podcasts | Google Podcasts | Spotify | RSS | All Podcasts
Please register to read and comment.