Beekeeping as a business. lets talk business..
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  1. #1
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    Default Beekeeping as a business. lets talk business..

    Hi All,

    It started with a swarm and the next spring a hobby with a package and nuc for 2 hives and 180lbs of honey. The next year it was starting in the spring with 2 and going into the winter with 10 hives and 400lbs of Honey from 2 hives. I'm looking at atleast doubling that this year. Along the way about 3k has been invested in hiveware and equipment. At what point did you convert to claiming hobby as a business and how do you recommend structuring it? DBA or LLC? I know it's state dependent but are you doing ag exemptions for your personal property apiarys? I want to expand to selling honey, nucs, queens and possibly mead for extra money. Still have to research the local requirements for processing honey to sell and required labeling. Do you work a deal with an equipment supplier for discounts and what do you think the minimum quantity would be? What are the best ways to get started marketing honey? Bulk sales or try to get local shops to carry it or just farmer markets? I live about 20 minutes from betterbee. Is it possible to make a career out ofit or is this better being more of an additional income venture?

    You advice and experience is appreciated

    Pete

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  3. #2
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    Default Re: Beekeeping as a business. lets talk business..

    Following and very interested in the answers. I have had no luck with the LLC/DBA and insurance questions. As best I found after asking several beeks I respect is that everyone does it different for different reasons.

    I am about the same place you are Pete. I sold out last year just with word of mouth to family and friends. I am getting a ton of inquiries and "let me know" already this year. 2 just since I got off work last night. I want to take the next step but need to do a cost/benefit to see if it is worth the $.

    I'm not looking for a career or 2nd job. Less than a handful of events and word-of-mouth sales would be plenty for me.

  4. #3
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    Default Re: Beekeeping as a business. lets talk business..

    Quote Originally Posted by Boardrida20 View Post
    I want to expand to selling . . . possibly mead for extra money.
    To do that you will need a local, state and federal license to sell alcohol. The costs to obtain these licenses can be prohibitive unless you are selling a substantial amount of alcohol.

    And don't even THINK about selling alcohol without a license. The Man wants his tax and will come down on you hard if you leave him out of the equation.

  5. #4
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    Default Re: Beekeeping as a business. lets talk business..

    Don't go into debt and take it slow. The money I made from queens and nuc sales, went right back into the business for equipment, sugar, etc., after several years I began to show a profit, and no debt. My small business is strictly side line, and it takes up a lot of time, be sure you are able to put that time into it, while leaving time for your regular job and family. I also would decide on either honey or queen/nuc sales, I think it would be really hard to do both. Lastly, expect setbacks. They always happen, be prepared and able to recover. I had fifty hives destroyed one fall by vandals, set me back a couple of years. Oh yeah, be prepared for hard work, lots and lots of hard work! Good luck!

  6. #5
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    Default Re: Beekeeping as a business. lets talk business..

    Do you need info about ag exemptions for property taxes in NY , and other NY farm tax benefits? I can help you with that info. In a former life, I reported for local newspapers on town and village affairs and I have written stories on these issues dozens of times. (I also live on a farm in an ag district, so I know this from personal experience.)

    I can't help you with advice/information about business organiziation, honey house inspections, etc. But I can help on the property tax issues.

    Nancy

  7. #6
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    Default

    Thanks all good start on answering some of those questions.

    True about the alcohol license. Maybe i can partner with a local micro brewery or something to add a couple of tanks.

    Would love some advice on the ag exemption Nancy. I own 5 acres but could lease more if need be. Know smaller plots can be tougher to get approved as they have different requirements.

    I think I would focus on honey and then fit in the others as the opportunity appears. I would like to try establishing more of a farmer's market or health food store brand if possible. I just don't know alot about where best to focus on selling honey and to whom.

  8. #7
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    Default Re: Beekeeping as a business. lets talk business..

    Pete - Please don't take this the wrong way, but you're kinda all over the place in your OP. You can really sum it up by saying "Beekeeping as a business?" and waiting to see what responses come back. Not that I'm trying to discourage you, but if you want actionable answers, you have to ask actionable questions. It really sounds like you would benefit from spending a couple hundred dollars and meeting with an attorney. That having been said, I'll see if I can help you out with your questions one by one in the meantime.

    Quote Originally Posted by Boardrida20 View Post
    At what point did you convert to claiming hobby as a business and how do you recommend structuring it?
    Treat it as a business from the moment you first sell your first something (bottle of honey).
    You should be claiming all your income on your income tax return. If you treat it as a hobby, you put your income down as miscelaneous, but all your expenses down as itemized. Not really a good route. If you treat it as a business, you file a Schedule C or a Schedule F (really the same thing though), put all your income down and deduct all your expenses with the "net" being carried over to your return. You can even have a negative carried over (but watch out for the Hobby Loss Rule).

    Quote Originally Posted by Boardrida20 View Post
    DBA or LLC?
    I'm giving a presentation on this at EAS in SC in July. It might be worth your while to attend. Plus the expenses are tax deductible (See above).

    I also did an article on insurance about 6 months ago for ABJ. If you think it would be helpful.

    Quote Originally Posted by Boardrida20 View Post
    Do you work a deal with an equipment supplier for discounts and what do you think the minimum quantity would be?
    Not really. You can buy in bulk if you can store it somewhere. But on your level that really isn't practical (can you store a pallet of deep boxes?). I've never been able to get a supplier to cut me a discount on orders less than 100 of anything. Learn to make equipment yourself, or shell out some more cash.

    Quote Originally Posted by Boardrida20 View Post
    What are the best ways to get started marketing honey?
    With a bottle of honey and a smile.

    Quote Originally Posted by Boardrida20 View Post
    Bulk sales or try to get local shops to carry it or just farmer markets?
    When I started, I had more honey than I could sell and less time than it would take to sell it. It was a rough situation to be in. Not enough time to sit at farmer's markets (you need to consistently attend), too much honey not to sell, but not enough honey to market to local shops. So I sold via word of mouth to family and friends to start with. Moved 200 lbs a year the first year that way. Then I put a roadside self serve stand out. Moved 400 lbs a year the first year that way. Put up a website. Moved 200 more lbs that way. Now, I put the stand out when I have honey and I move 1,000 lbs in 4-6 months, and take the stand down. I don't want to produce more than that, even though customers keep asking for more. Some ask me to quit my day job to produce more honey, but at a few dollars profit per pound it doesn't really make sense. At least not to me.

    I always had a deal - this year's honey was sold at this year's prices. If any was left over, I sold last year's honey at bulk prices (but you had to order 30 lbs or more). First couple years that worked. Then I stopped having any of "last year's honey" available. So I don't do it anymore. I still get calls and emails almost weekly asking me for bulk pricing. I used to ask how much they wanted. Most of the time they wanted like 5 one pound jars or something. And then I'd have to have a long conversation about how that isn't a bulk order, and bulk orders are 30 lbs or more, and the discount increases with increased volume and depending on how it's bottled (like if you wanted 30 one pound jars, I'd take $0.50 per jar off, but if you wanted 30 lbs in a bucket I'd take $2.00 per pound off). 99% of the time the person would be irate, asking what they were supposed to do with 30 lbs and demanding a lower price. It wasn't worth it. Now I just say "no" to bulk orders, unless they clearly identify that they want more than 100 lbs up front. Alot of people still get mad when I say I don't offer bulk pricing, and try and talk me into it. It's really kinda a hassle.

    Quote Originally Posted by Boardrida20 View Post
    Is it possible to make a career out ofit or is this better being more of an additional income venture?
    Yes.

    Seriously though, you can make negative money, a few dollars, a few thousand dollars, or a few hundred thousand dollars a year. It all depends on how much capital investment you want to put into it, how much work you are willing to do, and how well you run the business. Like anything else.

    Diversify your income sources. Watch your expenses like a hawk. Grow slowly. Do it for a year and use what you learned to make a business plan for the next year then project it out 5 years. Take that business plan and half your income and double your expenses. If you can still break even you have a potentially viable business. Operate under your business plan for another year, then repeat. After doing that for a few years you'll get the hang of it, and the business plan becomes less crucial.

    Good luck.

  9. #8
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    Default Re: Beekeeping as a business. lets talk business..

    I am little ahead of you on the time line and so far I am still in debt! The good thing is that this is my first hobby that partially pays for itself. I have done estimates on carrying the hobby forward to the business level and my assessment is it takes a LOT of work and/or labor to make very little income. Good luck.

    PS: I am in this for the tax exemption so I am maintaining the hive counts little over what is required by the state for tax exemption. Taxes saved is my biggest return from this hobby, at about $4,000. Now that's good return on my time investments!

  10. #9
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    Default Re: Beekeeping as a business. lets talk business..

    My take on the LLC vs. DBA is this: If you are a one-man-band, with no employees, you get very little if any legal protections from filing articles of org./inc. You do get the annual annoyance of remembering to pay the Business Priviledge Tax (or whatever your state calls it) and the fine for when you forget to pay it.

    However, once you start putting people in trucks or vehicles (paid or not) and start sending them on the roads, that is where I would file in order to insulate myself/family from exposure. Currently, I am a one-man-band and operate as a d/b/a. I am an attorney that does some business entity organization and could quickly do this myself. But I have not elected to do it . . . yet. Nobody will volunteer to help me and my "bee business" cannot support a laborer (or much of anything else) at this time.

    Specialkayme may have a different take on this, and I would like to hear it.

    As far as insurance goes, go back and read Specialkayme's article in ABJ. My memory is that he passed on the insurance, but it was a close call. Personally, I think I will invest in a farm policy before I will organize as an LLC. If I am going to lay out some annual money on this, I think I get more protections that way than by the thin veil of an LLC where you personally are the primary actor in 95% of all of the business activities.

  11. #10
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    Default Re: Beekeeping as a business. lets talk business..

    Pete,

    Good questions! I am still a newbie but thought I would share my thoughts...

    We too started with a single swarm 3 years ago. We do not purchase bees, but instead do lots of splits and also capture lots of swarms.

    Kinda began to grow on us. This year we actually took colonies to the almond orchards and for the first time made money.

    After the first year, we began to declare our bee yard work as a business due to the large costs of wood-ware, etc. Our CPA friend is now suggesting we go the LLC route, then if we grow even more, to go the C corp or S corp.

    I think a lot of these business decisions depend upon how large you would like to grow. If we were to remain under 20-30 colonies, then I would not venture to declare it as a business. But now our goal is a minimum of 200 colonies for next year, and if possible 500.

    Three years ago I would have never imagined having more than 2-3 colonies. But now things have gone vertical. It is possible that by the end of this year we could be over 500 colonies and if we choose to take our colonies north, we could be well over 1,000 colonies. So this has obviously grown far beyond a simple backyard bee keeping.

    Also, taking honeybees to the almond orchards and receiving rental income kinda forces us to turn out backyard bee hobby into a business.

    I encourage you to think about how big you would like to get...have both short term and long term goals. This will have a direct impact upon how you proceed with the business side of the beekeeping.

    Our goal is to eventually reach 5,000 colonies. So we are already hiring workers and setting up payroll and such.

    Hope this helps!

  12. #11
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    Default Re: Beekeeping as a business. lets talk business..

    Quote Originally Posted by pjigar View Post
    I am little ahead of you on the time line and so far I am still in debt! The good thing is that this is my first hobby that partially pays for itself. I have done estimates on carrying the hobby forward to the business level and my assessment is it takes a LOT of work and/or labor to make very little income. Good luck.

    PS: I am in this for the tax exemption so I am maintaining the hive counts little over what is required by the state for tax exemption. Taxes saved is my biggest return from this hobby, at about $4,000. Now that's good return on my time investments!
    Theres a tax exemption for keeping bees? sign me up!

  13. #12
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    Default Re: Beekeeping as a business. lets talk business..

    Quote Originally Posted by ifixoldhouses View Post
    Theres a tax exemption for keeping bees? sign me up!
    In Texas, we can get a use-based agriculture tax exemption on real-estate tax. Beekeeping is a qualified agriculture activity if land is between 5 and 20 acres.

  14. #13
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    Default Re: Beekeeping as a business. lets talk business..

    dang, everythings bigger in Texas, I lived in "the colony" outside Dallas once, too hot for me.

  15. #14
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    Default Re: Beekeeping as a business. lets talk business..

    When to declare it as a business? => As soon as you're making enough that you need insurance! Then go incorporate and insure it. Get your FBN statement, publish it in a locally-adjudicated periodical, call the IRS and get your Employer ID number, and a million other things.

    BEFORE THAT: Get your credit score up, take a couple of accounting classes, Business 101, write a business and a marketing plan, and a tax strategy. Gather up a sounding board - your CPA, your tax person, your attorney, your banker (probably your bank's president or loan officer), and a few veteran beekeepers (at least two commercial beek's!).

    Usually one considers the local area and your situation for type of beekeeping business: rural and tons of flowers, few beekeepers => honey production; price worth going to the almonds? => pollination $$$; already skilled at genetics and queen rearing? => queen production & royal jelly; good carpenter / beekeeper with a large workshop? => woodenware production; already own a sweatshop? => bee apparel producer; got a sheetmetal shop? => smoker manufacturing; etc.

    This is a very good year for it out here in the West, as we've had plenty of rain (and thus should have enough flowers!!!), but did you already prepare for it? Almonds (and the big money that goes with them) are over, as are avocados - well maybe some still but it's awfully late to get an avocado contract! You'll have to piggyback with a willing commercial beek the first year if you don't already have a truck, and I'd get a class A license as soon as necessary. It takes about 700 to 1,000 colonies at at least 75% strong colonies per person in the outfit to run a comfortably profitable operation.

    Here's a freebie - go to a "business breakfast" with some other beekeepers right near home each day, keep minutes of the "meeting", and keep mileage records. => All the rest of the mileage that day on that vehicle is tax deductible!

    Lots more to talk about, but give me a few minutes, I need to inhale and prepare to spout my sermon hahaha.
    Last edited by kilocharlie; 03-29-2019 at 12:28 PM.

  16. #15
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    Default Re: Beekeeping as a business. lets talk business..

    Quote Originally Posted by psm1212 View Post
    My take on the LLC vs. DBA is this: If you are a one-man-band, with no employees, you get very little if any legal protections from filing articles of org./inc. You do get the annual annoyance of remembering to pay the Business Priviledge Tax (or whatever your state calls it) and the fine for when you forget to pay it.

    However, once you start putting people in trucks or vehicles (paid or not) and start sending them on the roads, that is where I would file in order to insulate myself/family from exposure.

    Specialkayme may have a different take on this, and I would like to hear it.
    Generally I don't disagree with anything you mentioned. But I do think the decision goes a little further than those somewhat simple factors. The biggest being tax advantages to incorporating, namely another arrow to avoid the Hobby Loss Rule, but also filing Sales Tax records and some other tax records in an LLC's name has significant advantages over an individual's name, especially if you elect to discontinue the business at some point (no one plans on it when they start, but most operations will cease at some point). Some taxing authorities will hound you for years over unfiled returns for defunct D/B/A's, but offering them a copy of Articles of Dissolution stops most discussions. Plus the corporate form provides significant advantages to timing income, that only applies if you have income to time.

    Plus you actually get significant downside protection from not incorporating when you get larger, in exemption planning and business Chapter 13 filings. Not many people like to talk about those factors though, but they are big arrows to be able to pull out in downside protection.

    There are dozens of other factors, too lengthy to list here though, that might push you in one direction or another.

    Quote Originally Posted by psm1212 View Post
    Personally, I think I will invest in a farm policy before I will organize as an LLC. If I am going to lay out some annual money on this, I think I get more protections that way than by the thin veil of an LLC where you personally are the primary actor in 95% of all of the business activities.
    "Limited liability" is the white knight of incorporations that are usually associated with, but it's typically the least advantageous reason to incorporate. A good insurance policy will protect you significantly more than a corporate formality. The unsung heros of incorporating are the tax benefits and the perpetual existence.
    Last edited by Specialkayme; 03-29-2019 at 01:44 PM.

  17. #16
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    Default Re: Beekeeping as a business. lets talk business..

    Quote Originally Posted by soarwitheagles View Post
    After the first year, we began to declare our bee yard work as a business due to the large costs of wood-ware, etc. Our CPA friend is now suggesting we go the LLC route, then if we grow even more, to go the C corp or S corp.
    I'd be careful following this advice, if you've summarized it correctly. You can expense the woodenware costs just as well as a d/b/a as you can as an LLC/Inc. Plus, there is no difference between the "LLC route" and the "C corp or S corp" route.

    Corporations (Inc.'s) are created through Articles of Incorporation. When they set up their tax filings, they can be filed as a corporation (C Corp) or have flow through taxation (S Corp, if they qualify). LLC's can elect to be taxed as partnerships or corporations. If taxed as a partnership, they get flow through taxation. If taxed as a corporation, they can still choose to be taxed as a true corporation (C Corp) or as a flow through taxed entity (S Corp). Rarely do LLC's elect to be taxed as a corporation, then make the S election, as they could just be taxed as a partnership in the first place.

    All if this means nothing if the company is owned by a single individual (or married couple). In that instance the IRS treats the company as a "disregarded entity" and it files a Schedule C, the same as a d/b/a would. That's true if it was an LLC or an Inc (C or S). You can choose to file a separate return, but I don't know you would.

    Be careful taking legal advice from a CPA. I've seen it go wrong often enough to mention it repeatedly.

  18. #17
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    Default Re: Beekeeping as a business. lets talk business..

    Thanks all I appreciate the advise thus far!

    Also apologize my initial question wasn't structured. I blame big fingers and little cell phone.

    My approach thus far has been to just take it 1 year at a time and contribute what I can afford/justify to put into expansion each year.

    I have grown organically since my first package and nuc purchase and plan to take on queen breeding this season for my own use. Last year I used swarm cells and what not for my expansion. I'm still in that learning the process stage and that's part of why my initial questions were more open ended. Still building out the skill sets required to do this successfully.

    As far as the business side of things it seems that you loose a lot of that initial capital investment as there isn't an income to offset. I have an accounting background so just dont do much in the side of setting up business and the tax consequences of setting it up one way vs another. But once I'm up and running the expense and income tracking or business plans are not an issue. Also Cornell has some resources for this I plan to look through along with what has been recommended here. https://pollinator.cals.cornell.edu/...ess-resources/

    Income from Honey: When you sell bulk who do you sell to I'm assuming by the 50lb barrels are more of a commodity market item?


    Thanks again for sharing your experience and ideas.

  19. #18
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    Default Re: Beekeeping as a business. lets talk business..

    Quote Originally Posted by Boardrida20 View Post
    Thanks all I appreciate the advise thus far!

    Also apologize my initial question wasn't structured. I blame big fingers and little cell phone.

    My approach thus far has been to just take it 1 year at a time

    Income from Honey: When you sell bulk who do you sell to I'm assuming by the 50lb barrels are more of a commodity market item?


    Thanks again for sharing your experience and ideas.
    I would do the take 1 year at a time. If you can double or a bit more with splits and swarm cells that is still going to grow fast. If you want to go big time I would consider a wood shop, you can make stuff cheaper than buying it all. The bulk honey goes either to a bottler or a baker, or mead maker, while small I would retail, the extra you can pour back into the "hobby or business" a booth at the end of the driveway or find a small store that would allow a you to place a stand, 2 foot wide 1 foot deep and 4 feet tall would allow a fair amount of product. fill it once a week. go slow, and find a few Apiary sites, that you can use for free. good luck, Even if you do NUCs and packages or pollination, an extractor to reuse comb is eventually going to be a nice feature.

  20. #19
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    Default

    Most of my bulk sales were done 60 lbs at a time (5 gallon bucket). I've sold some to meadmakers, some to other beekeepers, some to some store owners, but most was sold to people that repackage it for sale.

    Most popular were people putting it in 2 oz jars and selling them as wedding favors. Remarkably these people never seed to understand honey was a seasonal product.

    Realistically though the bulk honey buyers have a tendency of finding you. At least, they have a tendency of finding me.

  21. #20
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    Default Re: Beekeeping as a business. lets talk business..

    I think this comes down to taxes and insurance. Making it a business deduct your expenses including equipment and bees. You can also deduct things like a home office. but need to make a profit after 3 years or the IRS get grumpy if it is a business. I ran the numbers this year, that did not cover the cost of beekeeping insurance ~$400 for the policy I found. If it is a buesness your home owners plocy nolonger covers you in most cases. LLCs have addtional expensese and dont provided much prtoction for a singel individual becuse you are still persional liable for you work. I am told LLC only become usfull to to protoect parters (note, I am not a laywer). for personal proteciton aganst your owne actions as a bee keeper you need insurance (again, not a lawayer). LLC have expenses assocated with them, in MA it is $500 per year. My tax guy says most people are better off as sole propritors, but need to be proplery insured to manage liablity risk.

    I found my beekeeping insurance quote through Citadel Insurance Services based on a web search.
    www.citadelus.com

    hear were the terms for 3 hives:
    COMMERCIAL GENERAL LIABILITY

    Coverage Limits
    General Aggregate (other than Products/Completed Operations) $ 2,000,000
    Each Occurrence $ 1,000,000
    Product / Completed Operations Aggregate $ 2,000,000
    Personal and Advertising Injury $ 1,000,000
    Damage to Premises Rented to you (anyone Premises) $ 100,000
    Medical Expense Limit (any one person) $ 5,000
    Deductible per Claim including loss adjustment expense and defense costs $ 250

    SCHEDULE OF HAZARDS
    Location # Classification Class Code Premium

    Basis Exposure Rate Premium*
    1 Honey Extracting 55371 Sales 0 1.88 350.00
    1 Pest Control Services 43470 N/A N/A Excluded
    Total Premium* $350.00
    Commercial General Liability Premium $350.00
    Commercial Property Premium Not Covered
    Inland Marine Premium Not Covered
    Total Base Premium $350.00
    Massachusetts State Tax $14.00
    Risk Purchasing Group Fee $50.00
    Total Premium & Fees $414.00
    Alex Madsen

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