setting up a company

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knabe

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this is probably a shock, but where are some good places to start to setup a cattle, llc, whatever, company that one would partner cattle.  the company would not involve the partners, only the agreements would.  what does one need to keep track of and what are some thresholds for asset division as well as previously incurred expenses.  what type of lawyer and or accountant does one need to have. 

the object is to not do the "angus" model, but just to track expenses and income and pay appropriate taxes.
 

xxcc

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Apr 21, 2007
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Sun River, MT
a place to start might be sba.gov  also if you have access to a grass roots accountant, maybe one with ties to an attorney, that would be a good start.
 

yuppiecowboy

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Jun 3, 2007
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Delaware is the most friendly incorporation state. Any CPA should be able to handle the books. Wythe Willey in Cedar Rapids Ia is a former president of the NCA. And the only big attorney I know to be a stand up real man. You are out on the left coast, so do as you will, but for a midwest mindset like you seem, you might find it beneficial to put the fires out before they start and talk to Willey first. He likes cows so much he might put you in the right direction for free.
 

kimbaljd

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Alvin
I have been thinking along these lines as well. I am just starting out with the cattle again after a few years. I am a single dad, and want to find out what I need to do to know that if something were to happen to me, everything will go to my daughter without any kind of penalties or expenses. Also do I start some kind of business to get to buy anything I buy tax free, is that possible?
 

AAOK

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Now we're talking my game.  knabe, an LLC is the easiest (and usually cheapest) way to go when partners are involved. XXCC'c suggestion of SBA is good, but let's refine that somewhat.  You should have an SBA SbDC (Small Business Development Center) somewhere near you.  The director will be a local  person, many times an accountant or former business owner, who will work with you to help start and devleop your business.  The SbDC director will be able to refer Attorneys, Accountants, etc. with experience in your desired endeavor.

I what I believe you are proposing, partners with little, or no say in the business operations (Venture Capitalist) usually dictate their majority interest in the business.  They set the thresholds, and tell you what % of asset division, and profits you can count as your own.  They are not concerned with previously occurred expenses, and will seldom allow them to enter the balance sheet.

kimbaljd, your first question has to do with Wills, and/or Trusts.  If you don't have anything in place, you need to visit an Atorney.  Concerning taxes; all states play by a different set of rules.  Your State Tax Commission probably has a website which lists all permits and exemptions.  Depending on how you set up your operation, and your state tax structure, you may be able to purchase feed and farm supplies free of sales taxes.  The IRS has a section F for farm income and deductions.  Expenses such as feed, supplies, repairs, vet, fuel, marketing, utilities, etc. are deductible from your sales.  Assets such as land, barns, cattle, tractors, trucks, equipment are depeciable, and also deducted from your sales.  It's pretty easy to have a losing operation, no mater how hard you try to show a profit.  You too should seek out your area SbDC director. 
 

cowz

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Wow...AAOK!  Thank you so much for sharing that info.  I just went to the website for Colorado and found 4 really good free business classes about 50 miles from home.  Great info on resources I never knew existed.  Who said playing on the internet was a total waste?  (thumbsup)
 

chambero

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Unless you want to bother with incorporating, it's my understanding you just fill out a Schedule F on your tax forms.  Most places you just have to tell them you are buying something for ag use.  You usually just have to sign something.  We take advantage of that at Lowes/Home Depot and other places.  They don't advertise it, but they will do it.
 

AAOK

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chambero said:
Unless you want to bother with incorporating, it's my understanding you just fill out a Schedule F on your tax forms.  Most places you just have to tell them you are buying something for ag use.  You usually just have to sign something.  We take advantage of that at Lowes/Home Depot and other places.  They don't advertise it, but they will do it.

But each state's laws are governed by their Tax Commission.  In OK we have to apply for a Farm Tax Exempt permit.  Each place we use it to be exempted from sales taxes must have a copy of our permit on file.  We still have to sign.  The permit is good only for feed, and permissible supplies such as fencing, welding, etc.  As an example, no type of clothing is exempt, but some lumber yards will exempt building materials.  The exemption is also up to the individual business.  If they don't want to fool with the extra paper work, they don't have to accept my permit.  And,,,,,,,,,,,,,,,,,,I don't have to shop there!
 

dutch pride

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Sep 17, 2007
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SW Michigan
Filled out the schedule "F" for the first time this year, It did cost me about $50 in extra preparation fees. "Lost" about $5,000 this year so it reduces our taxable income by that amount.

On a related note, did wonder about setting up a LLC just to limit liabilty claims. Not sure how that works.

DLZ
 

blackwellfarms

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Venus
AAOK has good ideas on getting started.  In my spare time when not look at this site,  I am a tax accountant and CPA. 

Different types of entities:
C-corp - income/loss stays at the corp level and pays the tax on income (Sch 1120).  Double taxation can occur if you take cash out.

S-corp - a C-corp but elected to treated as an S for federal income purposes.  Loss/income flow to shareholders return picked up on Sch E of 1040. 

Partnership- Files a Form 1065 but income and expenses flow to partners return (Sch E).  Can be limited (LP) or general partner (GP).  GP makes all decisions but on the hook for partnerships liabilities. 

LLC- Can be taxed as a corp if elected or default is taxed as a partnership.  Can be a single member LLC (one member) which for federal income tax disregarded, no Form 1065 filed just picked up straight on your personal return.  Or multi-member and if treated like a partnership then all can manage and none be personally liable for the debts.  This is good just case the car hits the cow and the lawyers show up.  They can take the assets but not the house.

The above must be treated as a business to be respected for liabilities.  Also must file paper work with a state to be formed.  If you do nothing you can be a sole proprietor.  Filed on you sch F of your individual return. 

For any of this to be tax deductible you must be in it for a profit motive.  Not making one but have that in mind. 

This is just federal state income, franchise and sales is another subject for another late night. 

Hope this helps.  The setting up and getting started in not hard but can be a little confusing.  Talking with an accountant or lawyer is not bad idea.  Once it is up and running it should not be a big deal.  But set it wrong and it can be a headache.  Also file a return every year even if no activity. 

I learn a lot from this board and will help any one that needs help on the tax side.  But, like some have done with giving vet advise, on here and other boards - you are not my client (yet) and I cannot give too much advise before I could get in trouble.  So the above is not tax advise.  Email me if you ever think, it does not sound right or just want to bounce ideas off someone.  I do not know everything about taxes but I can usually find it in my book.   

I have even bored my self so good night.

 

xxcc

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when filling out my schedule F, I contemplated renaming my self proprietorship to Red Ink Ranch
 

JbarL

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an attorney and an accountant is something that  i would "not" try do with out especially @ start up.....they is a fine line of choice/advantage/disadvantage at the conception of any "business"....the choice of  s corp / c  corp  / sole perpriator / llc  is a delicate balance of tax/income/and most importantly "your" specific 'situation"...the most important advice i can offer is that if you use "your"  real estate (farm/home/barn/ ect )  and begin to depreciate it ( as yoiu should)...your real estate will have a "depreciated value" vs  capital value.....so if you should happen to sell that real estate....the write offs and depreciation you use to day is computed against your property value/...hence if you should happen to sell the "prpperty"  farm/rental/ect....it will have a "depreciated value" that will have to be factored into the selling price and the taxes/depreciation/ ect that you enjoyed while in "business"  will be adjusted to reflect a caital gain.....that will have a direct impact on that years "income".....liability and personal property protection against losses or lawsuits would be the main concern for me if "starting" a "new" business, and of course all the tax benifts are jsut that... benifits...", .....for that ...all the corps...and the llc will give you that......but "protection"  and "seperation"  of your own "personal" property are what your are protecting ....especially @ startup.....and "especailly" with "partners"......seperating "your" stuff "from" the corp/llc ect is just as important/( if not the most important)  as the "stuff" you have included  "in" your corp.....          " corporate partners =  "you".....  a finacial or liabiliaty issue by a "partner" holds the same responsibility to you as well....think of it more of a " personal asset protection" move...than a tax advantage......that may help you decide which corp/llc choice may suit you best....if its simply a tax shelter sceniero you are creating  ........you will definatly need some direction and advice of a cpa/ attorney combo..... ;)......jbarl
 

aj

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Jul 5, 2006
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western kansas
I think there are instances where a llc in Kansas would not be recognized in say Colorado. It has been a few years but I think state lines and llc's aren't good. I don't rememberif it was a liability deal or what? :)
 
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