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Show UTAH FARM BUREAU 968 INCORPORATING THE is the most popular deration of a farm. A partner-ishi- p. It s 2111 association of cotyho will carry on, as ihip 5 profit. decide to farm in partnership, nsibility for furnishing capital it fiimish capital and the other tributes of a partnership are: (2) sharing in management; of assets; (3) joint ownership e; (5) keeping a single set of account for irtog a farm bank i partnership is that: (1) r what he contributes, or for contribures to the farm bus- -i of a expenses are paid out of a aunt; and (3) any balance of expenses are paid is divided, according to the agreement, lership is helpful in preparing of the family to assume manlier retires. It also tends to However, if there are the partnership may family rnd this could result in losses. 10 is the sole owner of a farm irtnership, he must be pre-n- e control over the farm of the enterprise can is possible for one party to i for the other to retain con-- p property by the terms of the ony. as-nagem- ent More farm families are forming corporations. This is especially true where there are other sons and daughters in the family, and one son wishes to wrork with his father on the farm. The advantages of the corporate form of farm organization are: (1) It may provide a better way of handling the farm business than a partnership; (2) it may provide for a better transfer arrangement for keeping a large farm in the family; (3) it may lessen individual liability; (4) it may help take care of unequal indebtedness against several farms; and (5) it may serve as a means of equalizing the equity of child- ren. Some of the disadvantages of a farm corporation are: (1) The weak position of the minority stock holder; (2) the book work involved; (3) the initial cost at the state and federal levels; (4) the tax consequences in case of dissolution; and (5) the loss of individual rights, if all of ones taxable property is put into the corporation. Within the last few years, a far reaching provision has been added to the Internal Revenue code of the United States, Sub Chapter S, which now makes Tax-Opti- on Corporation. It is now pos- for proprietorships and partnerships to insible corporate, retain substanially the tax advantages they now enjoy and, at the same time, gain the many advantages inherent in the corporate form of business organization. Consideration should be given to the Tax Option Corporation, if we are thinking of changing our farm organization. Some of the advantages in choosing to operate as a Corporation instead of a regular corporation or partnership are: (1) Double tax on (2) limited liability to crediprofits is avoided; tors; (3) easy transferability of interests; (4) income is easily split among family members; (5) perpetual existence; (6) no accumulated earnings tax Tax-Opti- on inion About Partnerships ? and (7) fringe benefits are available to owners, such as pension and profit sharing, indiviaccident and sickdual deferred compensation, ness insurance, group life insurance, $5,000 tax problem; OME free death benefit. iEMENTS plan an the is a good be- son is not sure that he home farm. This plan is also tions where the son does not incially involved. the father furnishes O How Practical Would Incorporate Our Farms? it Be to time, and receives a the are: (1) It is a good really wants to farm, and if together; (2). it gives the son son a basis of interest iness; and (4) it is an easy way way to stop - no jointly owned We need to be concerned about having adment. equate liquid funds to pay the costs at the time of death. Estate settlements costs cannot be avoided, but with proper planning they can be minimized. Costs ranging from 4 to 5 percent of the deceased gross estate are not uncommon for funeral and administration expenses. State and federal estate taxes must be paid. There are numerous methods by which we can reduce estate settlement costs, and protect the interests of those who are farming with us. A properly-drawn will is the most important single document through which we can make plans for an es- tate transfer which will distribute our property fairly to our heirs. well drawn partnership agreement will provide for. the possibility of death or disability by a partner and the continuation of the business by others without the dissolution of liquidation. UnA less some provision is made, partnership will end by law, at the death of one of the partners. An advantage of a corporation is that stock is more easily transferred than the assets themselves. The father and son in a farm partnership or a corporation should enter into a buy and sell agreeto insure the continuation of the business. ment Such an agreement should provide the terms for the survivors. the most practical Life insurance provides means of offsetting the inevitable settlement cost in every estate, and in avoiding further shrinkage through forced liquidation. Life insurance matures automatically at the time estate settlement costs come into being. A life insurance plan can avoid the need for sale of farm property, stock or at the time of death of one of those equipment farming together. Life insurance guarantees the necessary cash to avoid a forced sale at distressed This is particularly important for the price. existence of a farm where a son or continued relative has an agreement with the older other of the plan are: (1) The ay be in the monthly pay check; rages does not encourage sav-3-S 3 not acquire an equity in the a plan may not increase the sense of responsi- - ty. or his od farm records is essential king of joint farm operations. THE DEMANDS GREAT Agreement ? steps that conserve our estate. We should protect our property from unnecessarily high taxes, and other costs arising fron an estate settlewe can take now to the purchase of the deceased partners share in the business through the aid of life insurance is recommended. The son would be well advised to carry enough life insurance to pay his short term debts and a fair portion of his long term debts to take care of the most pressing needs in his family in case of his death. 3S the 7 We need to be concerned about the Financing guar-an- d this plan ir Pinion of a Wage and consider how the eventual transfer of our farm can be of maximum benefit to our surviving family members. No matter what kind of an agreement we have with our relatives, or others, we must consider realistically what would happen if either party of the arrangement dies. by the by i We also need to to buy the partnership interests or stock of the deceased parties. The agreement a should establish a price or procedure for determining the price of the property to be purchased a share of the net farm te probably will be comparable for similar services hired in Let us turn our attention from agreements for joint farm operations to plans for estate transfer. Many of us have failed to devote enough thought to how we can convert the investment in our farm to retirement income. survivors his son, all the farm personal i labor and management. All laid 1jy the father. The son 11 5 ESTATE TRANSFER FARM BUSINESS possible a Page NEWS THE REWARDS GREATER farmer. O Have We Given Enough Thought to The Transfer of Our Estate? |