Farm business seperation ???'s Please advise.

Dave from MN · Feb 7, 2009

Ok, let me explain. We have a large poultry operation which we recieve a good income. I also started into grain this last year as well as cattle. My cattle business is small right now. 6 bred cows, and 6 younger animals. I am in the process right now of trying to aquire about 80 40-60 acres of old pasture that I may rent if I can afford to repair the fence and pay a modest amount for the rent. Whicch would allow me to expand the # of cows I can have by quite a few. What I am wondering is there any advantage (taxes or otherwise), to having seperate "businesses" for example "Dave from MN Poultry", "Dave from MN grain", and "Dave from MN Livestock". Does any one do this on their farm? I know I need to keep inputs and income seperate on my spreadsheets so "I" know if I am losing or gaining on which, but are there any other benifits to have all listeed as seperate businesses. Such as "renting the tractor from the "Grain" business for spreading manure for the "poultry" business, etc, etc. Any advice out there. It took me till this year to realize I can give myself a salary from the poultry income.

TGIN · Feb 7, 2009

Off the top of my pointy little head I would think the cattle and grain operations could supply the poultry operation with some needed deductions if it`s making good money . All for one one for all .

IaGary · Feb 7, 2009

Whether it is a corporation, partnership trust or individual business all the income goes back to a tax id number. And since you are the owner it would all go back to you to report on one income tax form. No tax advantage.

I have 2 accounts one farming and one personal but they all get combined on one tax form. Only reason for it is so the wife writes checks out of one account and me the other but we can both write out of either. It's just easier to keep track of balances with one person writing out of each account.

With 3 business accounts you will be forever transferring money back and forth into and out of accounts so that one account or business doesn't have to borrow money.

Forget the accounting headaches and run it as a one farm operation. It all ends up the same.

Gary

Anonymous-0 · Feb 7, 2009

This is not advise, but we have a couple of neighbors that do something like that. Each of age family member has a piece and the machinery is split between the lot. They'll never fess up, but one told me after a gallon or so of beer that it was to keep from loosing everything if something failed and to show less profit.

different country and probably different rules.

Dave

kyplowboy · Feb 7, 2009

As the chicken houses around here have started to depresciat'n and intrest payments have gone down, balers, combines, and planters have gotten alot more shine to them.

Dave

RickL · Feb 7, 2009

nope just makes more of accounting nightmare. Can still keep seperate logs for each part of the operation but the operation is still just one number far as uncle sam concerned. Used to have four accounts give it up now just the two. Wife has hers and I have mine tax wise ends up all same.

thurlow · Feb 7, 2009

I'm no tax lawyer, but I think Dick and Gary have it right; only thing I could see would be to incorporate each entity, which would lead to a nightmare of record-keeping and I can see no tax advantage to doing that. Largest farmer operation (2 brothers) here in the county just sold a John Deere dealership, owns a trucking company, has property in South America, usta own a cotton gin, an elevator and country store.........in addition to their farming operation. Each business was separate and I'm sure there were tax advantages, but we're talking about a multi-million dollar enterprise.

Coloken · Feb 7, 2009

Don't see any advantages except to keep a book keeper busy. That said, it would be nice to keep records of profit and loss on each so you would know which to keep and which to throw away. You would have to pro-rate machinery cost, time spent, etc.
Kenny

Traditional Farmer · Feb 7, 2009

Unless you incorporate each one it'd be an advantage to leave them all together so you can take loses on one to offset income from the other.If each was Incorporated then if one failed all wouldn't be lost but it'd be a book keeping nightmare and probably a flag for an audit

JMS/.MN · Feb 7, 2009

No advantage at all, and you already maintain separate enterprise accounts. If the grain business "rented" the tractor from the chickens, you"d have to show rental income on the chicken side, offsetting the expense on the grain side. Important thing is that you already track expenses per each enterprise.

Vito · Feb 7, 2009

Dave,
Do they have LLC's in your state.Alot of developers I know have a main holding company ,usually incorporated, and then they setup LLC's that own the land and then their building LLC does the actual construction.
More bookkeeping but it limits your liabilty and you still have corporate type protection,if one fails, so they can't come after your personal property or other entities.Plus you can carry loses forward if you don't need them that year.Confusing but it worked for them.I would talk to a CPA or tax attorney.
Hope I didn't confuse you
Vito

RodinNS · Feb 7, 2009

Until you're at the size where you're running limited companies and have a lot of assets to protect, I suspect it's probably not to your advantage... but that depends on your situation.
AS an example here, it's gotten to the point where if you're enrolled in any government programs (risk management), you find yourself in the situation that one large operation that has profits on one side and losses on the other side will get nothing from the program because you don't lose enough gross income. If you had them set up separately, you can play ball.
Likewise, that works for some of the other investment programs they have... each separate entity is entitled to so much, so if you have more than one business, you can apply for each.

Other than that, I don't see any benefit to having more than one business... and even at that I'm not so sure it's a benefit.

Rod

Anonymous-0 · Feb 7, 2009

Is now a really a good time to get more cows, maybe to build up a herd, but here cow prices are way down. Got 3 bred dairy heifers were gonna move in a few weeks. I know prices will be lower than there were awhile ago. I guess if your building a herd and are gonna keep them than you will be ok. Last week beef was .50 a pound, and lower. just my thoughts

jose bagge · Feb 7, 2009

I beleive it is absolutely to your advantage to run them as the same "diversified" operation to gain the tax releif of your start ups' losses against the income of the other operation- but I ain't no tax guy, just thinking out loud. The $200 bucks you'd pay a good tax guy on this question would be money well spent. A great question, though- fill us in on what you find out!

Goose · Feb 7, 2009

Probably point them all toward the same bottom line, but if you treated each as a separate profit center, like most businesses do, you'd know which was profitable and which wasn't.

Then you could look at your options and either try to make the less profitable ones more profitable or expand the more profitable.

Mark-Mi · Feb 8, 2009

Yes greater versatility.Loan money back and forth.Spread the profits thus lower tax brackets.There are different types of corporations.Some can take deductions and pay out distributions another can't.You need a good CPA to do this all right.We use 2 different corporations and a partnership.Mark

Farm business seperation ???'s Please advise.

Dave from MN

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TGIN

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IaGary

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Anonymous-0

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kyplowboy

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RickL

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thurlow

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Coloken

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Traditional Farmer

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JMS/.MN

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Vito

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RodinNS

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Anonymous-0

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jose bagge

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Goose

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Mark-Mi

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