While the sun poured into our accountant’s office earlier this spring, my husband and I shifted the conversation from filing income taxes into a direction that many and perhaps most Country Guide readers have wondered about too.
Should we incorporate, we ask, or should we stay as a sole proprietorship?
According to the 2006 federal census, the vast majority of Canada’s farms are operated as sole proprietorships and partnerships. Although we often hear about the reasons to incorporate, only about 16 per cent of Canadian farms have actually made that transition.
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It prompts us to ask, are there downsides to incorporating? Are there good reasons why the other 84 per cent of farms haven’t (and perhaps shouldn’t) incorporate?
For that information, we need a team of professionals — an accountant, a lawyer and a financial adviser. In particular, we wanted a team that would bring broad and varied experience working with farms of all sizes, goals and structures.
Carl Moore is a farm adviser at Woodstock, Ont., with extensive experience helping farmers in his private practice as well as through government programs. Moore is a member of the Canadian Association of Farm Advisors (CAFA).
Geoff Garland is a chartered accoutant and tax partner with BDO Canada at Winnipeg, Man.
George Sinker is a lawyer at Strathroy, Ont., where he has helped nearly 400 farms incorporate over 35 years. Sinker is also a national CAFA director.
As we have described in previous issues of Country Guide, there can be positives to incorporating, but even on farms where incorporating might be the right thing to do — or where a corporation has already been set up — it’s good to know as much as you can about the downsides and to protect yourself from them.
Here’s what they said.
