The first thing to be aware of is that all the legal structures are used on family farm businesses, and sometimes some families even use a combination of them. For example, it’s possible to have the farm operations incorporated but the land kept outside of the company and owed personally.
With regards to tax, it’s possible to incorporate the farm operations, so that the company is then paying corporate tax rates. In Alberta, the corporate tax rate on the first $500,000 of income is 14%. For personal income, it’s 39%. So, when you have individuals with significant income, often the level of tax becomes a driving force for incorporation. Once incorporated you have 86 cent dollars to pay debt or expand. However, a downside to incoroporating is the complexity and extra administrative costs.
Whether or not your farm business fits into one structure or another is dependent on the type of farm business. There’s no magical answer to what structure fits for any given business or type of farm, simply because there are so many factors to consider.
This workshop was funded in part by the Agriculture & Food Council of Alberta