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  1. #1
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    Apr 2005
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    Question

    I keep my bees mostly for a hobby but I'm thinking about making it a business for tax reasons. I plan on growing my bees from 5 to 20 hives to pollinate my sisters orchard and to produce some honey. If I continue to enjoy it as much as I do now then I plan on growing to 100 hives. I keep my bees on two sides of Washington State. This is because I have a job on one side of the state and family on the other so I would be making this drive regardless. I would like the benefit of writing off my GAS!! Writing off the other equipment and other costs to my beekeeping business would be great as well since I plan on buying lots of equipment in the next couple years. Hey and who knows with beekeeping being so profitable I may end up getting rich with my bee business.

    So what are your opinions on how to go about making beekeeping into a business? What kind of business have you guys started . . . sole proprietor, LLC, etc? I should probably talk to an accountant but you guys are free!!

  2. #2
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    Jun 2005
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    Greensboro, N.C.
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    Post

    Sounds like one of the biggest red flags you could send to the IRS, unless you show a profit 3 out of 5 years, including the first year.

  3. #3
    Join Date
    Sep 2004
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    Devils Lake, North Dakota
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    Post

    No tax expert here chief, but I know enough to recommend that you talk to a good tax consultant.

    The IRS can be fairly sticky about hobby/business classifications.

    Mine is sole proprietor at this time as I gravitate to it as my main income source.

    My real estate taxes are going from nearly $1400.00 per year to less than $30.00!!! Just because I will be agricultural.

    Good Luck

  4. #4
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    Sep 2004
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    Devils Lake, North Dakota
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    Post

    iddee is correct on that....... It is very unlikely that you will be able to write off trips across the state of Washington on a regular basis.

  5. #5
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    Jun 2004
    Location
    Clayton Indiana
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    Post

    I started with 1 hive two years ago. Last year had 6. This year after swarms and splits I have 17. Like you I hope to reach at least 50. I just do a schedule C on the Fed 1040 form as a Sole Prop. That way I can still do the taxes myself. I write off everything within reason and keep all receipts. So far I'm still in the hole, but after two years but it is still lots of fun. The less accountants and lawyers I have to talk to the better for me!
    Todd Zeiner

  6. #6
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    Jul 2004
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    Inver Grove, MN
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    Post

    I think there is a generally accepted standard in the industry that

    X number of hives is a hobbiest,
    some number above that is a sideliner, and
    some number above that as a commercial operation.

    I don't know what the numbers are. And I don't know if the IRS would use those numbers to define a business.
    Linux - World domination through world cooperation

  7. #7
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    Apr 2005
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    Auburn and Tri-Cities Washington
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    Post

    I knew a guy that raised coy fish in his back yard. He never made a profit and wrote off everything to the fish business. Every three years they made him shut down but he would simply start again with a little different name or different business goals. He was on his third one last time I talked with him. My sistersÂ’ orchard only makes them a few thousand a year but they write off all their trucks, tractors, equipment and anything even remotely related to it. And hey I really would like to turn a profit someday and I'm always glad to pay my taxes on a good profit! The problem is I'm young, single and make a decent wage. No dependents to claim so I get taken for all I'm worth by the IRS. Just looking for a little more than the standard deduction.

  8. #8
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    May 2004
    Location
    Indianapolis, Indiana, USA
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    407

    Post

    Hillside,
    As far as an IRS definition of a business...I don't think the number matters. One could run "one" hive and as long as there is the intention of making a profit I think it would be considered a business...and therefore entitled to all the benefits(deductions) and penalties(taxes) as any other business. Back in a more shameful time in my life I worked for that oganization. I left with the opinion that everyone should have a small business of some sort.
    Barry
    Barry
    KC9TER

  9. #9
    Join Date
    Apr 2004
    Location
    Macon, GA USA
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    942

    Post

    >Every three years they made him shut down

    Who made him shut down? Or did he do it simply to beat the 3 out of 5 year profit rule?

    >so I get taken for all I'm worth by the IRS

    Check out the fair tax at:
    http://www.fairtax.org/

    and the FAQs at:
    http://www.fairtaxvolunteer.org/smart/faq.html

    There is much discussion on this in the Tailgater section.

  10. #10
    Join Date
    Mar 2005
    Location
    Troupsburg, NY
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    Post

    Anyone know the numbers that define sideliner from commercial??

    How many hives does it take to make a decent living?


    peggjam
    "I reject your reality, and substitute my own." Adam Savage

  11. #11
    Join Date
    Jan 2005
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    FRASER VALLEY, BRITISH COLUMBIA
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    Post

    Chief:

    There's aguy in Yakima that is selling his outfit. He has 500 hives and contracts for 1000. If you really want to get in the bee business then buy an outfit. Otherwise you spend half a lifetime trying to get the numbers up. If you have the numbers from the start then you can make the payments and with some luck and skill it is paid off in less then 10 years. Almond pollination will sure help. I'm not sure on the costs of operating in the U.S. but if you get $130 U.S. on almonds, this should pay all your operating costs plus a small salary. Any honey could go towards paying off the capital expenses.
    If you have the confidence then just go for it. Take the plunge, do not look back.

    Jean-Marc

  12. #12
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    Apr 2005
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    Auburn and Tri-Cities Washington
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    Post

    GaSteve

    I like what I see on the fairtax. That would save me a bunch of money. Probably enough to start a beekeeping business!! There is no doubt in my mind that the income tax burden of this country is oppressing its economic growth.

    I'm not sure if they shut my friend down or if he did it on his own. I knew him in California and I know they have loads more laws than the feds do and he started a new business every three years for whatever reason.

  13. #13
    Join Date
    Sep 2003
    Location
    mountain home, ar, usa
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    378

    Post

    My opinion is to NOT buy a business out... but to start small and build up. The reason for this is because everyone has different likes in equipment. You will figure out what you like when building up, instead of being stuck with hundreds of boxes that you want changed.

    I file under Schedule F, I believe, which is for farming (beekeeping falls under farming). I think you only have to make a profit every 7 years, but I really am not sure. And, when I do make a profit, I'll make sure it's REAL small. I have another home business that does well, so the last thing I need is to add to my tax base.

    If you can get bees to pollination (especially almonds), then you can make money in bees. If you can't, then you'll be lucky to break even selling honey.

  14. #14
    Join Date
    Mar 2005
    Location
    Odessa, Missouri
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    629

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    Although those in the USDA & national organizations try to define the difference between sideline & commercial in numbers of hives the USDA does so so they can document everything because their main objective to document everything.

    Tell the USDA you have got a single apple tree and plan to sell the apples and here comes the paper work. If you don't return here comes the phone calls. Our tax dollars at work!

    The national organizations want money. The honey producers want a dollar a hive. Donations!

    Every commercial beekeeper I ever met lies about numbers depending on who he is talking to.

    The bottom line is the ability to make a profit. Most going into beekeeping spend and write off until they quit.

    Agriculture is looked at by the IRS a little different. I have friends which are farmers and have not made a profit in a couple decades. They do handle hundreds of thousands of dollars and pay theirselves a wage. Most operate as a corp.
    They are certainly trying to make a profit. Help with the food supply!Actually if not for the government handouts they would have quit a long time ago.

    Those beekeepers with a niche market (usually without employees ) can make money. Those commercial beekeepers which only produce and sell honey have been steadily going bankrupt. The last price spike prolonged their agony awhile longer.

    Beekeepers can only take care of so many hives by themselves. Producing and direct marketing reduces the number of hives one can care for considerably.

    Large beekeeping takes hired help! Hard to find and harder to keep! Your beekeeping success depends on your help. Beekeepers have found whole 100 packs of strips tossed in woods and not put on. Syrup dumped and not fed and many other problems concerning help. Those large beekeepers which have been successful have got excellent foremen & lead men (most are sons or sons-in laws).

    Family operations dominate the commercial beekeeping world.

    The best advice I could give is to think outside the box. Grow into a beekeeping operation and NOT BUY INTO A OPERATION.

    Get a job in commercial beekeeping for a year before leaping in! Commercial beekeeping is like doing chores all day! Always things needing done and most boring!

    Seems exciting as you get bigger and then you realize what you have created! The bigger you get the bigger the problems. Not many can take the stress!

    Timing is important! All hives need medicated at the same time. All need supers pulled. All are ready to be removed from California. All need moved onto a pollination and on and on!
    Bob Harrison

  15. #15
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    Apr 2005
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    Auburn and Tri-Cities Washington
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    Post

    jean-marc

    Do you have the info for the guy selling his hives in Yakima? If you do please send it my way. I would be interested in picking up what he may have. You can send me a private message. I am in no position to pick up 500 hives but maybe some part of what he has. Especially what he may have going on localy. Thanks.

  16. #16
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    Apr 2005
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    Rob,

    I guess I'm going to have to get married and have some kids so I can have some reliable help. I'm sure my dad would laugh if he heard me say that. I have a lot to learn before I would consider trying to do this as an actual money maker. But time will tell if I will stick with it but for now I want to milk it for all its worth.

  17. #17
    Join Date
    May 2005
    Location
    Whitefield, Maine USA
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    6,624

    Post

    I think it all depends on how you view your operation. If you think like a hobbyist, act like a hobbyist, and worry about making a profit 3 years out of 5, you're a hobbyist. If on the other hand you think like a business, act like a business, and sound like a business, you're a business. Plain and simple.

    The IRS *wants* you to make a profit 3 years out of 5 so you'll pay taxes and if you're a hobbyist, well, all your investment and expenses are taxable anyways. Either way, they win. That is of course, bogus. The 3-out-of-5 deal is a rule of thumb, not a legislated part of the Tax Code. It's a litmus test, not a definition of a business! Not all businesses make money, and not all businesses make money 3 years out of 5. The IRS may QUESTION whether your operation is a business, but they can't just declare your operation a hobby if you act like a business and look like a business. Also, farming operations as has been pointed out are looked at differently by the IRS. If you produce product, pay your bills, invest in your operation, but fail to show a profit, you are still a business.

    Imagine growing christmas trees- a time honored activity here in Maine and something I'm considering doing on a small scale (as a business of course). You buy the trees, prepare the field, and plant. Then for the next 7 years you mow the field, prune the trees, treat them for pests, pay the property taxes, and incur other expenses. Not only do you not make a profit 3 years out of 5, you lose money hand over fist until you cut the trees! Can the IRS say it's not a business? I don't think so!

    I've always laughed at the distinction made between hobbyist, sideliner, and commerical beekeeping operations. They're totally arbitrary divisions and were thought up by and are promoted by the commerical beekeepers. They mean nothing to me. Furthermore, I think they're insulting. If they were utilized to allow discussion of different sized operations, that would be one thing, but they're not- they're used to denegrate and dismiss the smaller operators: "Him? Oh, he doesn't count. He's a sideliner". "He does WHAT? Well, he can afford to, he's a sideliner. I'm commerical. I got a business to run". "Excuse me, but you're a hobbyist. Your experience and understanding is worthless to me. I have 100 thousand hive-years of experience. Go play with your bees."

    Do you really think a hobbyist can have 50 hives and still call it a hobby? Do you think a sideliner with 150 hives doesn't treat their operation as a business?

    I've got 25 hives and I'm treating my operation as a business. Next year I plan to have 50+ and if all goes well, I'll double again the following year. I keep scrupulous records, I document most everything, and I didn't make a dime this year and don't expect to show a profit any time soon. I'll be filing a Schedule C, perhaps a Schedule F instead (I have a tree farm too). Will I fully support myself on my beekeeping operation? Probably not. Does that mean it's not a business? I think not! Does holding down a part time job mean your other activities are necessarily hobbies? I think not!

    Finally Chef, my advice is NOT to buy an existing business. If you do, you'll be living with and dealing for YEARS with the business and management decisions the former owner made when it was his operation. If you're like me, you'll want to make your own mistakes and not struggle to live with someone else's.

    George-
    Dulcius ex asperis

  18. #18
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    Jun 2005
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    Greensboro, N.C.
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    If you will reread my post, I didn't say 3 out of 5 was required. I said it is a red flag. If you know anything about the IRS, you know they look for red flags. It is something that they know is used to escape taxes often when it really shouldn't be. The hobbist versus business is one of the most often looked at situations there is, right up there with home offices. These red flags are used to choose who gets audited. I try not to send them.

    >>The IRS may QUESTION whether your operation is a business, but they can't just declare your operation a hobby if you act like a business and look like a business.<<

    That statement is TOTALLY false. They can pull an audit and declare your business a hobby and go back for years and make you pay back taxes on it.
    It happens every day.

  19. #19
    Join Date
    May 2005
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    Whitefield, Maine USA
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    Idee, I won't argue that the IRS can and does make determinations about an operation being a business or a hobby, but I maintain they can't just declare it so, without due process and if the do make a determination, it's not without warning. There is an audit, correspondence, etc., and the 3 years out of 5 rule isn't the primary basis for a determination. I'd maintain that most operations that posture as business and are subsequently found to be hobbies, probably ARE hobbies and were from the start.

    You also said "including the first year" and THAT is IMHO totally false. It is a rare business that shows a profit in the first year, nobody expects it, including the IRS. Also, most business fail in the first 3 years and if/when that happens, it doesn't mean you weren't a business.

    I agree, red flags aren't to be waved at the IRS any more than they are to be waved at a bull unless you were looking for confrontation anyways. However, NOT waving a few red flags is almost impossible and doesn't guarantee the IRS won't look into your operation. I'm not going to live in fear. This country was built on entrepreurship, entrepreneurs take chances. You can't escape the attention of the IRS by maintaining a low profile and paying taxes on legitimate business expenses because you're "scared" of an audit.

    I'd certainly recommend anyone considering starting up a new business contact the IRS to discuss it- keeping in mind that the best source for erroneous tax information is, ironically, the IRS itself...

    George-
    Dulcius ex asperis

  20. #20
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    Jun 2005
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    Greensboro, N.C.
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    George, like so many threads,"arguments" here, I am saying 6 and you are saying it's a half dozen.
    If you give them an eyebrow raiser, they are apt to audit. If you don't, they will "probably" not audit. Neither is concrete.
    If they audit, they WILL find something. That is concrete. The tax system is set up to be without clear answers and "they" can interpret to their advantage, knowing you will not pay a lawyer more to fight it then you can win.
    Now let's switch. You say 6 and I'll say a half dozen. [img]smile.gif[/img]

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