FB—Lancaster Farming, Saturday, April 7,1984 Should I Incorporate? This is a question I often receive when discussing ways to enter a farm business. It is not an easy one to answer because there are a number of advantages to farm families if they form a corporation. Unfortunately there are also many disadvantages. Before answering the title question a number of factors must be considered. These factors would include reasons for incorporating, problems with incorporating, property to go into the corporation, shareholders, and tax consequences. What it can do for you A corporation could save some IMPROVE FEED PALATABILITY AND PROFITABILITY BY USING y LIQUID AND DRY MOLASSES PRODUCTS IN YOUR FEED jg=~-V» FORMULATION FOR ANIMALS FROM ZOOK * * MOLASSES CO. • Liquid Feeding Cane Molasses • Liquid Molasses Blends • Honey Brook Brand Dried Molasses - 50 lb. Bag • Z Brand Dried Molasses - 50 lb. Bag • Honey Brook Energiblock - All Natural 20 - No. Urea • Energiblock -.Hi Protein 36 ZOOK MOLASSES CO. WEST MAIN ST., BOX 160, HONEY BROOK, PA. 19344 Phone 215-273-3776 or 717-393-3987 Call toll free in PA; 800-662-7464 GOLDEN fT/ft BARREL Household Molasses, Syrup and Edible Oil ★ BAKING MOLASSES ★ BARBADOS MOLASSES ★ BLACK STRAP MOLASSES If your local store does not have it, contact: GOOD FOOD INC. WEST MAIN ST., BOX 160, HONEY BROOK, PA. 19344 Phone 215-273-3776 or 717-393-3987 Call toll free in PA 800-662-7464 Brockett’s Ag Advice By John E. Brocket! Farm Management Agent Lewistown Extension Office taxes. It could make estate planning easier. It would help you to bring a third generation into the business, pay some personal in surance expenses, own your automobile, and borrow money. What Taxes? If properly formed and if the business is profitable, a corporation could save Federal income taxes. How? A corporation is an “entity” or a “person”. As such, it becomes the employer of everyone who works on the cor porate farm including the shareholder owners. An employer can deduct as a business expense certain fringe benefits it pays for hired help. Thus items such as PRODUCTS ★ PANCAKE SYRUPY COCONUT OIL ★ CORN SYRUP ★ CORN OIL ★ SORGHUM ★ SOYBEAN OIL SYRUP ★ PEANUT OIL ★ TABLE SYRUP ★ SHOO-FLY ★ HONEY PIE MIX premiums from health insura) retirement plans, or buy person life insurance can be paid by the corporation as a business expense. These would reduce the taxable income of the corporation and ultimately you if that corporation was a sub chapter S corporation. Estate Planning? Sure you can sell, will or gift shares of the corporation to children or a spouse (or anyone else). This makes it easier than a partnership or sold proprietorship when it comes to reducing the estate. Borrow Money? Yes a cor poration can borrow money if the asset value is high enough to warrant it. However you may have to co-sign the note. ~X V ( I 330 FONDERWHITE RD.. LEBANON, PA 17042 VVLr- J 717 274-1483 POWER ★ RADIO OISPfIICHED TRUCKS ★24 HOUR SERVICE What it can’t do for you A corporation can not make your business profitable. It also may cost you more in other areas such as taxes, social security payments, workmens compensation, records and tax preparation. What Taxes? Pennsylvania taxes may be higher unless the state chooses to let family cor porations off the hook, (at present, Pennsyvlania only recognizes one class of corporation so all cor porate net income is taxed at corporate rates - 10.5% in 1983). The Federal government allows a sub chapter S corporation to pass profits and losses through to stock holders the same' way a part nership does, (investment credit is “El Instal OOD tody intry i 'slot Wei lodels iF 10 Mon >39 also passed through to the shareholders). Therefore even if the corporation has a loss, the shareholders will pay more Pennsylvania tax with it than with a partnership because they can not deduct the loss for Pa. taxes. Transfer Tax: If you sell, give or transfer real estate into a cor poration, Pennsylvania will charge a 2% transfer tax on market value. Social Security: In time this will no-longer be a factor because self employed social security taxes will be the same as employer-employee social security (FICA) taxes. However they are lower now (1984 - self employed people will pay 11.3% whereas the total of em (Turn to Page F 9) We Specialize In Aerial Work Using Our Twin Bucket Boom \f Truck ELECTRICAL \ Extends 1 CONTRACTING \ 55 F < I Specializing In \ \ / AGRICULTURAL Tgjjb/ WIRING / Also Residential Industrial J t And Commercial Work / Free Estimates / s C. M. HIGH CO. 320Kin«St We Have Poles In Myerstown PA 17067 Stock 25 30 35 *45 Phone 717 866 7544 •Water Cooled Units: 7.5 - IfiOQJSSST •mafic >sfer id State mtrol ogle