MYFB — Ep. 30: When and why to incorporate the farm

Perhaps more contentious than the buy versus rent debate is the question of when and why to incorporate the farm.

The federal government proposed sweeping changes to how taxes were calculated for corporations last summer. The changes were met with significant push-back from the farm community, as the new rules would have a significant impact on business planning, farm retirements, and succession, and Ottawa has since backed off on some of the changes.

However, the question on incorporation remains.

In this episode of the Mind Your Farm Business podcast, Dean Klippenstine, from MNP, joins Shaun Haney for a thorough and thoughtful discussion on when and why to incorporate.

From using litmus tests on how assets would be taxed, to turning the question around to ask when it may be prudent to NOT incorporate, to a discussion on passive income (see more below the player), this episode is a don’t miss for any farm business, full of real-world examples you can use for your own evaluation.

The 2018-19 federal budget was announced February 28. While it didn’t have a lot in it for agriculture, it did lay out the new rules involving passive income as it relates to corporately held investments. These rules apply to all investments generating passive income held in a corporation — GICs and mutual funds, yes, but also land.

To summarize, the passive income changes mean as a corporation builds passive income, the amount of business income eligible for the small business tax rate will decrease. Starting when passive income reaches 50,000, income is indexed to the point where there’s no small business tax rate benefit when passive income reaches 150,000.

As with any taxation questions, consult a tax expert to find out how these new rules may impact your business.

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.

Leave a Reply

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Privacy Preference Center

Necessary

Necessary cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.

gdpr, __cfduid, PHPSESSID, wordpress_test_cookie, woocommerce_items_in_cart, woocommerce_cart_hash, wp_woocommerce_session, wordpress_logged_in, wordpress_sec, wp-settings, wp-settings-time, __cf_mob_redir, wordpress_cache, realag
__cfduid

Marketing

Measuring interactions with the ads on the domain.

__gads,fsk_ut_2317
IDE

Statistics

These are used to track user interaction and detect potential problems. These help us improve our services by providing analytical data on how users use this site.

_ga,_gid,_gat,_cb,_chartbeat2,_chartbeat4
_ga,_gid
metrics_token

Preferences

Preference cookies enable the website to remember information that changes the way the website behaves or looks, like your preferred language or the region that you are in.

chartdefaults, comment_author, comment_author_email, comment_author_url
JSESSIONID, _os_session,anonymous_votes,csrf-param,csrf-token,user,user-id,user-platform,intercom-session,intercom-lou,intercom-session
personalization_id, tfw_exp

 

Register for a RealAgriculture account to manage your Shortcut menu instead of the default.

Register