Entity Selection: Business and Tax Planning Considerations

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Presentation transcript:

Entity Selection: Business and Tax Planning Considerations Farming for the Future Conference January 19, 2017 Donald C. Timmins, CPA Timmins, Jacobsen and Strawhacker, LLP 10550 New York Ave Des Moines, Iowa 50322

Thanksgiving Dinner, 1956

CHOICES

Who will be involved in the entity? What are your goals for the entity? Why are you forming this entity? When will the entity begin operating? Where will the entity operate?

Who? Yourself only? Yourself and Spouse? Generations? Unrelated persons? Unrelated entities? Your banker (hope not)?

What are your goals? Build and improve on current operation? Build a legacy for future generations? Tax savings? Become ridiculously wealthy?

Why? Because you need a job? Provide a living for yourself and your family? Need a change in entity due to change in circumstances? Because I always wanted to farm?

When? Beginning of operation Changes Proper timing may be crucial Expansion New partner Succession (generational transfer) Proper timing may be crucial

Where? Local operation only? Multi-county operation? Multi-state operation? International?

Tools for the toolbox: Sole proprietorships Partnership Corporations General partnerships Limited partnerships Corporations S Corporations Limited Liability Company (LLC) Multi-owner Single member https://www.irs.gov/businesses/small-businesses-self-employed/business-structures

Comparisons Sole Proprietorship Partnership Corporation S Corporation Limited Liability Company Income tax Form 1040 Form 1065 Form 1120 Form 1120S Self-employment tax Yes Yes, if an active partner No (W-2 Employee) member Estimated tax Not if filing by 3-1 Not if filing by 3-1 Corp may need to pay estimates Owner may need to pay estimates Employment taxes on employees Yes (not child Under 18) Yes (Partners are not employees-no W-2 wages) Yes, including owners Yes, (Members are not employees-no W-2 wages) Information returns (1099s) Single member LLC Similar to sole proprietorship

More tools for the toolbox: IRS publication 225 Farmers Tax Guide IRS publication 51 Circular A Agricultural Employer’s Tax Guide Good reading A Thousand Acres by Jane Smiley

Thanksgiving 2056

Quote of the day There’s a lot of money in farming. Sometimes it is a little hard to get it back. George Timmins, Jasper County, Iowa