by Amber Roberts, Extension educator
Transferring the farm business or woodland property to the next generation can be a daunting task. However, there are strategies and methods that can help simplify the process. When operating as a sole proprietorship, it can be challenging to establish a transition plan. There are many individual assets that need to be accounted for such as machinery, equipment, livestock, and land. It is difficult and time consuming to transfer separate, individual assets.
One possible solution is to establish a business entity such as a partnership or a corporation to accomplish the business transition. As members and owners of the entity, the parents are issued ownership shares or shares of stock in the entity. These shares can be sold, gifted or passed through an estate to the entering generation, over time, as a method of transferring the business. This does away with the need to transfer separate, individual assets. This also spreads out the parent’s income and thus tax obligations. It allows the entering generation the ability to acquire assets over time thus minimizing their need for large amounts of capital.
One possible solution is to establish a business entity such as a partnership or a corporation to accomplish the business transition. As members and owners of the entity, the parents are issued ownership shares or shares of stock in the entity. These shares can be sold, gifted or passed through an estate to the entering generation, over time, as a method of transferring the business. This does away with the need to transfer separate, individual assets. This also spreads out the parent’s income and thus tax obligations. It allows the entering generation the ability to acquire assets over time thus minimizing their need for large amounts of capital.
In this webinar, Agricultural Business Management Extension Educator Rob Holcomb discusses different business structures that can be used to help facilitate the transition process.
Read more about the use of business entities, such as a partnership or corporations, in the transition process. Woodland owners can also consider the financial implications of their transition and how different business structures could help to meet their transition goals.
