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Discussion Starter · #1 ·
A friend's wife started a small business a few years ago growing and selling tomatoes and flowers in the spring. They garden anyhow, but have turned it into a business and enjoy the advantages of owning a small business.

The retired guy I've helped in the past with his 100-150 colonies has "Agricultural" plates on his truck.

When I buy new woodenware, or shop at the farm supply store, I'm asked if I'm tax exempt.

When is it worth looking into making this hobby a small business? I've gone from 3 colonies this spring to 20 and have a good sum of money invested in the beeyard. I'm not looking to quit my day job, but if there are advantages to starting a small business on the side, why not do it? I look at the money I've spent this year alone and wonder if it could have all been a business expense.

Where would one start?
 

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Personally I have found a great advantage in having your own small business if you have a decent job. I have a small farm business and wish I had started 30 yrs ago. There are so many legal tax write offs for agriculture here in the states. Find you a good tax account specializing in farms and have a long sit down with them so they can explain to you, they don't come right out and publish everything for you. The small amount of money you will pay them for their advise and their service will be well worth it.
 

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I'd look into getting registered as a DBA which, at least in the state I did this, got me a tax number which made my business purchases tax exempt. I could also open a checking account under the business name. Doing this was painless when I did it.

Edited to add, I operated under a DBA when I lived in NY. (I didn't notice your state until after I posted.) You can find the instructions on the NY State website.

Wayne
 

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I agree with Wyane, do it and keep everything legal, no pain no worries, with benefit too.
 

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Are you suggesting that a guy with 300 hives who takes in $45000 and reports it on his taxes is better off not to take advantage of writeoffs. depreciation. exemptions in Canada? If so taxation in Canada must be entirely different than here?
 

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Are you suggesting that a guy with 300 hives who takes in $45000 and reports it on his taxes is better off not to take advantage of writeoffs. depreciation. exemptions in Canada? If so taxation in Canada must be entirely different than here?
No. You can do both.
 

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Discussion Starter · #8 ·
I would suggest keeping it a hobby. Under 2 or 300 hives it's better to fly under the radar.
Well, that's getting to my point. Why spend $20,000 or $30,000 out of my own pocket to grow to 200-300 colonies and then start a business?

If I start a business now, I would think there would be many tax advantages to enjoy while the number of colonies increases. I don't plan on running 300 colonies, but then again, last summer I couldn't see myself with more than 4...:rolleyes:
 

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You may want to look into seeing if you have qualify as agricultural exempt. If you have your bees on the property that your home is located your real estate tax may drop.
 

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For those that have turned a hobby into a small business, what structure did you use? An LLC?

I'm not a tax specialist, but I have taken classes in income taxation, on the law school level. Legally, you can count your hobby as a "business" and keep it as a sole proprietorship. Under a sole proprietorship business model, the business is you and you are the business. All income that your business generates has to be recorded on your personal income tax return, and you pay tax on it at an individual level. You can still write off business expenses, as long as they were used for the production of income. You don't get "sales tax exempt", but if you pay sales tax on something you are going to write off as an expense, you can write off the tax too. Of course, you have to depreciate most of the stuff you'll get, as it has a useful life beyond one year, but I digress.

The main difference between a sole proprietorship and an LLC, and hence the benefit of structuring as an LLC, is that the debts of the LLC are separate from the debts of you individually. That means if you need to take a loan out to buy equipment, but you can't afford to pay it back (the bees die due to ccd, or whatever), the LLC goes under but you don't take the debt.

The downside to an LLC, however, is that the company pays income tax on profits, and if you take a salary or distribution, you need to claim income tax on whatever you take. In a sense, the added benefit of not having the debts in your name means you get double taxation on the profits.

Setting up an LLC is easy and very cheap. You just need to make sure that you file a yearly report (or quarterly, as your state may require), or you'll get some fines.

I've considered starting an LLC so that I can write off the expenses and depreciate the capital expenditures instead of taking it personally, however I only have 8 hives right now and havn't made a dime from my hives to date. You can only 'write off' so many losses without having any profits before the government gets pissed.
 

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Discussion Starter · #11 ·
You may want to look into seeing if you have qualify as agricultural exempt. If you have your bees on the property that your home is located your real estate tax may drop.
Things like this are helpful. I am zoned "agricultural".
 

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For those that have turned a hobby into a small business, what structure did you use? An LLC?
You don't get "sales tax exempt", but if you pay sales tax on something you are going to write off as an expense, you can write off the tax too.

In the state of NC if you file for your Ag Exemption Number you will not have to pay sales tax on purchases for your enterprise.
 

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In the state of NC if you file for your Ag Exemption Number you will not have to pay sales tax on purchases for your enterprise.
I'm not very familiar with an Ag Exemption Number. Is anyone able to get this, or is it just for LLCs? I'm assuming the Exemption Number is different from the organization you use to set up the business, and if so, which business structure have you chosen?
 

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I'm not very familiar with an Ag Exemption Number. Is anyone able to get this, or is it just for LLCs? I'm assuming the Exemption Number is different from the organization you use to set up the business, and if so, which business structure have you chosen?

If you do a Schedule F (Farm income) as part of your Federal Income Tax you should be eligible - just contact NC DOR and ask for Ag Sales Exemption form.... pretty sure its available at there website. Now if you are already and LLC I'm not sure how it would affect you.
 

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If you do a Schedule F (Farm income) as part of your Federal Income Tax you should be eligible - just contact NC DOR and ask for Ag Sales Exemption form.... pretty sure its available at there website. Now if you are already and LLC I'm not sure how it would affect you.
Ah, ok, I understand how it all fits in now. Thanks hpm.

I don't generate farm income yet, so I don't use a Schedule F, so I can't get an Exemption form . . . but perhaps someday :D If I don't go with an LLC that is.
 

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Ah, ok, I understand how it all fits in now. Thanks hpm.

I don't generate farm income yet, so I don't use a Schedule F, so I can't get an Exemption form . . . but perhaps someday :D If I don't go with an LLC that is.

But you have or are about to have Farm Losses - right. You have a few years to show a profit - if not they come asking questions. On the Ag Exemption form I believe you would declare yourself a "New Farm".
 

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But you have or are about to have Farm Losses - right. You have a few years to show a profit - if not they come asking questions. On the Ag Exemption form I believe you would declare yourself a "New Farm".
Yes, I can carry over a loss for three years. After that I have to show profit. But I can do that without having an Ag Exemption. I can also count the sales tax as part of my expenses, included in my losses that I carry over.

But I can't get an Ag Exemption unless I report Schedule F income, which I havn't.

Ag Exemption isn't that big of a deal for me at this point in time. Setting it up so I don't have to carry all of these capital expenditures is though.
 

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Speaking as a Canadian ag producer, the Revenue Canada does very much care what income you make and where you made that income. If they decide you are filing a false return, they are going to be all over you like white on rice.

As far as Ag Canada, Ag Stability, CFIA, and Revenue Canada are concerned, bees and honey are an Ag commodity, and income and expenses must be reported as such. It is that "Statement of Farming Activities" form and the Ag Stability form that must be filled out tax time. things might be a bit more lieneant if you are a small time back yard say 1-2, maybe 10 hives. But once you start selling honey, with the intent to make a profit, you jump to a whole new class.

If you are part of the Ag programs, you are doing yourself a diservice by not filing properly....and you are hurting it for the rest of us if you file your Ag Stability improperly.

Sorry for the off topic


As for moving from a hobby to a small business, look at your possible business in three parts
Producer...the guy who produces honey and bees
Manufacture...they guy who "manufactures honey and jars it"
wholesale/retailer..the guy who sells the honey either by farm gate, in a store or in a booth at a fair or craft sale.
Producer:
Take the bees and production of honey, figure out your price per pound
Add up all expenses and add a % for "what if's". Decrese your potential produced honey by a % for your "what ifs" again then you get your base price for your honey. You do this at budget time, so you do not overspend or get caught off guard from a poor year. Here you account for your cost to extract to the barrel or the pail
Manufacture:
all costs associated with bottling the honey...extraction excluded, filtreing included. Add in labour and depreication of bottling equipment
Wholesale/retail
the costs associated here should be, your depreication of your vehicle when travelling to sell, business cards, anything associated with the retail side of things. Bags, booth space, invoices for wholesale etc.

Draw up a paper with three columns. Each column will represent a process in the business. Write down all potential inputs associated with each area. Beside it in a different pen color, mark "E" for expense, "C" for capital expense and "A" for asset. From there, set some $ values.
In Canada, a capital cost is any piece of equipment over 100.00 which will not be a consumeable. For example a 5 gallon pail for storing honey will be a small tool expense, where as an extractor will be a Capital Expense.
A Air nailer depending on the price can be either a small tool or a capital expense, depending on the price...if it is a $500.00 airnailer...capital. If it is $60, more like a small tool. Hive bodies, honey supers will be capital expense due to the fact it will last a really long time. Frames however can go either way since they are disposable. Hive tool, small tools. Mite treatments will be vet expense, jars, will be classed as small tools or containers...depending on your ag filing at tax time. Get my drift here....alot of paper work to get where you want to go.
Your expenses will range from feed, bee purchases, vet supplies, small tools, wooden ware (cap cost) equipment (Cap cost)

Small business potential lies in the use of the pencil and the paper and a good deal of an eraser.
 

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Best advice i can give you for getting started is to seek the advice of a small business accountant, better yet, a small business accountant with a very good or really good understanding of Agriculture tax laws...not all accountants do. The best money spent is a good accountant. There are some in the city who have a good handle on Agriculture, however they mostly belong to big firms and charge you the cost of your first born...so to speak. In some of the rural communities lie the best ag accountants. They have the letters behind their name, and they understand Ag laws pertaining to taxes. This is important.
the next best, advice, make the put the pencil to the paper, have a good eraser, and do the math.
 
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