# Taxes



## gehrenfeld (Sep 6, 2010)

I just started a new business (July 2011)for selling honey, wax, and pollen.

My question is.

Can I deduct the cost of the hives that I purchased in November 2010 for tax reporting?


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## fish_stix (May 17, 2009)

Not likely. But you could "start" new hives from the old ones and deduct that expense.


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## dixiebooks (Jun 21, 2010)

gehrenfeld and fish_stix: Do you use Schedule C or F? Thx. -James


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## gehrenfeld (Sep 6, 2010)

I never thought about that.
Thanks


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## gehrenfeld (Sep 6, 2010)

I am a LLC and being to new to this not sure what a Tax Schedule C or F are.


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## sqkcrk (Dec 10, 2005)

If you bought hives in 2010, you should have included them in a Depreciation Schedule Attatched to your Schedule F Profit or Loss From Farming. Check w/ an Accountant. I imagine you could either start the Depreciation Schedule next year, or loose a years depreciation or maybe refile.

Check w/ an accountant. Preferably one that knows something about Agriculture.


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## gehrenfeld (Sep 6, 2010)

I didn't start the business until last month this year. So maybe I will have to loose a year.
Thanks


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## hpm08161947 (May 16, 2009)

gehrenfeld said:


> I didn't start the business until last month this year. So maybe I will have to loose a year.
> Thanks


If you invested a significant amount in 2010 you may want to file an amended return. No doubt you will want a good ag tax man to work with you on this, but you will want to learn the ins and outs yourself, if for no other reason that you can then ask the accountant intelligent questions. The taxes are an important part of this business.


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## WLC (Feb 7, 2010)

Just keep really good records and let an accountant do the rest for both your LLC and your personal taxes. Your accountant will amend returns as needed.


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## dixiebooks (Jun 21, 2010)

So, I guess Mark uses Schedule F. I'd asked this general question before, elsewhere, and one person said the Schedule F is the appropriate one to use but gave no reasons. gehrenfeld: Schedule C is Profit/Loss on a business. It's the magic money maker when filing taxes and is why so many people make a "business" out of their hobby. Really, schedule C is the only reason to turn a hobby into a "business" from my past experience. (It's darn near impossible to make a living at a business that is just a hobby.) Pay close attention to the allowances for mileage for business travel. -james


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## WLC (Feb 7, 2010)

In an LLC, there can be quite a few more schedules that are involved. Let an accountant deal with it.

Gehrenfeld needs to bring along his records and returns to an accountant ASAP, and do what needs to be done.

That's it.


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## hpm08161947 (May 16, 2009)

What is it that Schedule C has that Schedule F does not? Must be something or you would not be so affirmative. IF one is an LLC filing a 1065 I think I can understand why. But if you will, go ahead and state your reasoning. I am always willing to learn.


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## dixiebooks (Jun 21, 2010)

hpm08161947 said:


> What is it that Schedule C has that Schedule F does not? Must be something or you would not be so affirmative. IF one is an LLC filing a 1065 I think I can understand why. But if you will, go ahead and state your reasoning. I am always willing to learn.


I am not sure to whom you directed your question, so I cannot answer for them. For me, though, I've never done a Schedule F simply because I've never had a "farm" for a business - until, that is, this bee thing. My enterprises have always been non-farm, so I filled out a Schedule C and always did it myself. It is rather straightforward, really. Just a pita because it takes so long to get the info together. To be honest, I just need to take the time to get a copy of Schedule F and it's instructions and other material and study it for myself. I've never really seen a need to pay an accountant (or anyone else) big bucks to fill out a form for me.


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## sqkcrk (Dec 10, 2005)

dixiebooks said:


> Really, schedule C is the only reason to turn a hobby into a "business" from my past experience.


I can't speak to reason to use Schedule C, but, if one is engaged in Farming, why wouldn't you use Schedule F, the Farm P or L Schedule? Or is what y'all are talkin' about a Business, but not Agriculture, because you are buying and selling honey and such w/out producing it yourself?

I used to fill out ther Sched. F myself and all the other forms too, until we got into depreciation and such and things got a little complicated for my brain.

One thing I learned this year is that you need to compare what your Accountant did this year compared to what she did last year. This year I forgot to tell my Accountant how many business miles I drove and she forgot to ask me. That's a big number under the Expensed portion of the Schedule F, considering I drove 36,000 miles at 55 cents/mile.


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## WLC (Feb 7, 2010)

The original question was can assets that existed prior to the formation of the LLC be deducted.

Yes, you can put assets into an LLC. But, you do want to speak to an accountant as to the best way to do that.

I think that fish stix had the right idea. Create new hives from the old ones (as many as reasonable), and transfer everything possible into the LLC.

The greater the value of what your transferring into the LLC, the greater the benefit (depending on who else is in the LLC) to you.


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## sqkcrk (Dec 10, 2005)

WLC said:


> I think that fish stix had the right idea. Create new hives from the old ones (as many as reasonable), and transfer everything possible into the LLC.


Unless one buys more equipment and queens and/or packages or nucs to put into the newly created hives, what does one have to deduct as an expense? Taking what one has and doubling it w/out any additional expense would be deductable anymore than what one already has, will it?

Ones equipment has a life span long enuf to distribute that expense over a number of years, right? I don't imagine one would want to write off what could be depreciated all in one year, unless there were an advantage to doing so. Would one?


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## hpm08161947 (May 16, 2009)

dixiebooks said:


> I've never done a Schedule F simply because I've never had a "farm" for a business - until, that is, this bee thing. My enterprises have always .


So I gather you feel that Schedule F is the only appropriate form for one engaged in raising bees and producing honey? I have always used Schedule F so maybe I am doing something right. I have taken a small amount of time to study over Schedule C and they look soooo similar, just wondering if there were any advantages to C. My original question was intended for DIXIEBOOKS... but I forgot to stick that in there.... no problem.


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## dixiebooks (Jun 21, 2010)

Mark - You answered one question for me re: the Schedule F - that is, that it has allowance to deduct mileage. Like I said, I've never used it so know nothing about it. You also pointed out the idea of depreciating everything in one year. I'd wondered about the comment earlier about depreciating hive, etc. I'd just assumed that I would count all that as a regular expense. But, I've only used a straight expense/income method of simple bookkeeping in my sole proprietorships. I've never done an LLC or or depreciation or any such thing. Plus, my understanding is that LLC's are so different from one state to the next that the experience of one beek may be totally opposite that of the other. I dunno. -james


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## dixiebooks (Jun 21, 2010)

hpm - I thought it may have been intended for me. My point was that Schedule C was the ONLY one with which I had any experience and that I know nothing of Schedule F other than someone had once mentioned to me that we as beeks should use that rather than the Schedule C. I had no idea, really, that they are very similar. I assumed they accomplished similar purposes but cannot address the differences between the two. I wish there were someone here who does their own taxes that has studied the pros and cons of each for the beek business. -james


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## WLC (Feb 7, 2010)

sqkcrk:
One needs to be aware that there are many different methods that an accountant can apply when doing taxes for an LLC and shareholders. One should also be aware that the accountant needs to select the best method for the LLC and shareholders involved.

Shouldn't one?

The method chosen for how expenses and assets are handled for tax purposes can change from year to year. That can involve amended returns as required.

I don't see any advantage in allowing wood to rot, and colonies to become deadouts before they are transferred into the LLC. However, I do see an advantage in transferring more colonies (nucs/splits). The equipment cost is somewhat more. But, the asset value/replacement cost has increased markedly.


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## sqkcrk (Dec 10, 2005)

Maybe so, but the Federal Return is the same across the Country. Don't know about individual states and what they allow. I ain't no accountant, for sure.

Basically, what I understand, last lasting items like extracting equipment, buildings, supers and hivebodies, vehicles and machinery aught to be depreciated. If not, you are going to loose the value by expensing them out in one year. What's the point of buying a truck, on credit, and deducting the whole $48,000.00, when you only took in $12,000.00 that year. Not an accurate example exactly. But see what I mean?

When I got into the Bee Business, I bought two outfits thru the FSA w/ a loan from them. The annual Interest is deductable. The expense for the bees, hives and extracting and bottling equipment went of a depreciation schedule to deduct a portion of their value each year. Along the way, things were added to the Depreciation Schedule. Like the new building.

As far as my trucks, mileage expense, not depreciation. One has to do one or the other, but not both. Start w/ one and stick w/ it. You can't do one one year and the other the next. Except, if you do mileage the first year and want to switch to depreciation the next, that's kosher. But you loose a year of dep.

Queens, nucs, packages, smokers and hive tools, beesuits, helmets and veils, jars, caps and labels, pretty much any item w/ a short life or that one turns over in the year one would deduct as an expense of that year. Keep receipts.

I don't do an end of year inventory, other than to tell me what I need to order for next years supplies. W/ an LLC, maybe you need to. I don't know.

Get w/ an Accountant this time of year when they have more time to give you. Do some interviews and pick one. If you think yourself smart enuf, maybe you can do it all yourself. You need to know enuf to check your Accountant anyway. You are responsible to Uncle Sam for any mistakes your Accountant makes, not them. They may go to court w/ you, but not to jail. Not that I'm trying to scare anyone.


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## sqkcrk (Dec 10, 2005)

WLC said:


> sqkcrk:
> I don't see any advantage in allowing wood to rot, and colonies to become deadouts before they are transferred into the LLC. However, I do see an advantage in transferring more colonies (nucs/splits). The equipment cost is somewhat more. But, the asset value/replacement cost has increased markedly.


Shareholders? We're talking about a bee business. Do you mean like President Me, Treasurer Myself and Secretary I? Who do you imagine the shareholders in a Honey Co. to be? Me and my wife, maybe?

Transfer everything into the LLC at once, for sure. What would be the advantage of hesitating. You'll have to explain better what advantages there are to expanding one colony count right before doing so though. And I don't know why anyone would let woodenware rought. Keep what you have full of bees and in use. Otherwise it isn't earning its' keep.

As far as taking 10 cols and making them into any more, how much more are they worth alive or dead? Let's say we have 10 dbl deep hives of bees and a bottom board and cover extra for each. We then split them, thereby dbling the number of colonies, but not the amount of equipment. So where is the increase in value of the assets? The extra added queens?


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## sqkcrk (Dec 10, 2005)

I'm still trying to wrap my head around this LLC thing. Please bear w/ me. I would like to know more than I do. even tho my Accountant doesn't see any reason which I should go that route at this time.

Let's start w/ some facts. I know next to nothing about LLC and Incorporation. Might as well say nothing. I don't know all that much more about being in Business, even tho I am and have been in Business for some years now.

So, let's keep this simple and talk in roundish numbers easily multiplied or divided.

Let's say I have 500 two story cols of bees, market value, according to research, $200.00 each for a total value of $100,000.00. Right? Y'all check my math now, please.

Market research shows that single story colonies are worth half as much, or $100.00.

Given that, what would be the point of making my 500 cols into 1,000, especially considering the expense of Queens and time and extra equipment? Are the 1,000 anymore valuable than the 500?

Therte is probably alot I am missing. Alopt I am not seeing.


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## hpm08161947 (May 16, 2009)

sqkcrk said:


> I'm still trying to wrap my head around this LLC thing. Please bear w/ me. I would like to know more than I do. even tho my Accountant doesn't see any reason which I should go that route at this time.


I can not get my head around it either. My son argues in favor of it, but I am not sure he has the "real world" experiences even if he was a business major. He says a partnership has significant advantages.... most of our equipment and land is mine.... most of the bees are his. LLCs seem so different from state to state.... quite confusing.

I wonder if there is a nice online tutorial? You know.. "LLCs for Dummies". Guess I need a "Link"... where is BYRON when I need him.


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## Hartz (Sep 4, 2010)

gehrenfeld said:


> I just started a new business (July 2011)for selling honey, wax, and pollen.
> 
> My question is.
> 
> Can I deduct the cost of the hives that I purchased in November 2010 for tax reporting?


You can do it 2 ways;
1) You can go back and amend last years return and start your business then and start depreciation on your equipment. The advantage here is that you can get a refund now (approx 4 months) instead of postponing it until next year. Or..

2) You can "convert personal items to business use" and convert them at "fair market value" and start the depreciation this year. The disadvantage to this way is that you can NOT take 179 deduction and if "fair mkt value" is less than you paid for it, you will lose some deduction.

The difference between shc C & sch F are the way the catagories are listed (the line items). Use which ever seems to fit your deductions the best. Tax will be the same.

Hartz


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## WLC (Feb 7, 2010)

sqkcrk:

The rub is this: will the IRS allow the fair market value, or is it something less? I think that you can get far more than 2 splits/nucs from what must already be 2 deeps at this time of year. The burden is on you to produce records/documentation to support your claims.

LLCs can do alot more than just allow expenses to pass through. However, what you're trying to do with an LLC depends on the needs of the members/shareholders. For example, those who are working can benefit from deductions while that won't help the unemployed.

The important thing is to make sure that you don't put limitations on what your accountant can do for you and your partners. Treat it like a business and be ready to prove due diligence and a desire to make it as valuable and profitable as possible.

It's a different mind set. If you ran your commercial operation as an LLC, you would do many things very differently.

Finally, I don't think that it makes sense to talk about schedules and forms since everyone's situation is bound to be different.


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## sqkcrk (Dec 10, 2005)

WLC said:


> sqkcrk:
> I think that you can get far more than 2 splits/nucs from what must already be 2 deeps at this time of year. The burden is on you to produce records/documentation to support your claims.


What records/documentatiopn other than expense receipts would be valid?

Certainly one could make many more splits at this time of year w/ the colonies I have. But to what point? Those colonies are needed for honey production to sell to make money. Were I to split what I have now and not make saleable honey what would be my source of income? W/out that I would need no deductions.

You keep on bringing up Partners and stockholders when refering to an LLC. The only Beekeeping LLC I am familiar w/ is the Kutik Honey Company. I'll have to ask Chuck about his Partners and Stockholders. I've never heard them mentioned.


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## WLC (Feb 7, 2010)

I don't know what the financial needs of the original poster are, or how viable it is for them to do increases of any kind.

I do know that they can either transfer the hives into the LLC based on previous records, or they can try to increase the value of the hives thay have before they transfer them. The decision is theirs based on consultation with their accountant.

You can consider photographic evidence as a basis for documentation. Bees don't leave records as they create more comb and new colonies, so you have to find a method, other than a sales slip, to document that. It's also important to document losses.

Unfortunately, if the bees die, and there's no expenses to speak of since there's no money left, then your final year's tax returns will be based on asset losses and liquidation of any remaining assets.

That's an important reason for keeping track of assets and maximizing their value.


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## sqkcrk (Dec 10, 2005)

WLC said:


> You can consider photographic evidence as a basis for documentation.


Do you really think that photographs would stand the attention of a Tax Auditor? How would one prove they were occupied w/ live colonies?


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## WLC (Feb 7, 2010)

Mark:

You take pictures when you assemble them. If they die, you take pictures too.

The photographs are for you and the LLC, your accountant, the auditor, AND tax court. You can go to tax court without a lawyer and show them why you should be allowed the deduction, if necessary.

You should also have serial numbers and your EID on your equipment. Doesn't have to be fancy. You can put alot of photos on a memory card these days.

It's one way of keeping inventory, and your written records should reflect that as well.

What you don't want to do is not give that kind of information to your accountant (asset gains/losses). They won't be able to use that information otherwise.

If you've had a disaster, and all that you have is no money, an LLC, and a whole bunch of empty hive bodies and drawn comb with perhaps enough live colonies left to try and start over...

then your only choice is an asset loss based tax return because you have no expenses for that year.

With luck, you can deduct the losses from your personal income taxes in time to recover.


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## Roland (Dec 14, 2008)

SQKCRK - the important L in LLC is the first, LIMITED liability. Speak with your attorney on the importance or lack thereof of limiting you liability. Christian(son) and I are Linden Apiary LLC, set up by my attorney.

Crazy Roland


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## fish_stix (May 17, 2009)

WLC gave the only correct answer on his first post on this thread. Find a good accountant and let them figure it out. Takes a huge load off you and IRS rarely questions them.


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## hpm08161947 (May 16, 2009)

Perhaps WLC or Roland would point out "one" advantage of the LLC other than "Limited Liability". I suspect it depends a great deal on the individual situation. This situation involves a partner that owns the equipment and land with the other partner owning all the bees. I know we need to find the right accountant to talk to, but for the moment we have not found the "right one".


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## Peaches (Jun 8, 2011)

sqkcrk said:


> Let's say I have 500 two story cols of bees, market value, according to research, $200.00 each for a total value of $100,000.00. Right? Y'all check my math now, please.
> 
> Market research shows that single story colonies are worth half as much, or $100.00.
> 
> Given that, what would be the point of making my 500 cols into 1,000, especially considering the expense of Queens and time and extra equipment? Are the 1,000 anymore valuable than the 500?.


Mark, You have 500 hives and can only put out 500 for pollination say at 100.00 ea but you split to make 1000 hives for pollination as 100.00 ea. Now how much are you hives worth? hmmm...?


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## CharlieN (Feb 23, 2011)

sqkcrk said:


> Check w/ an accountant. Preferably one that knows something about Agriculture.


I agree Mark. Very important... Difference like night and day using one who knows farming and one who doesn't.


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## WLC (Feb 7, 2010)

hpm:

If they form LLCs for their own individual assets, they can then form an LLP for their joint operations.


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## hpm08161947 (May 16, 2009)

WLC said:


> hpm:
> 
> If they form LLCs for their own individual assets, they can then form an LLP for their joint operations.


Interesting. So besides the obviously important "Limited Liability" properties are there other advantages? Would one still do the Schedule F?


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## sqkcrk (Dec 10, 2005)

Peaches said:


> Mark, You have 500 hives and can only put out 500 for pollination say at 100.00 ea but you split to make 1000 hives for pollination as 100.00 ea. Now how much are you hives worth? hmmm...?


What something is worth, what someone can sell something for and what one can get for something are three different things.

I don't understand assigning value, beyond what was paid for something, to assets transfered into an LLC. I can say that everything I wish to transfer into an LLC is worth Mint Condotion Value or even better. I can say, if occupied equipment is worth more than comb filled supers, that each super I have is a hive of bees, so actually I have thousands of colonies. How does that do me any real good?

This is all just alot of mumbo jumbo false accounting and voodoo economics.

My assets are only worth what I paid for them less the depreciation.


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## WLC (Feb 7, 2010)

hpm:

Tax benefits. Let your accountant worry about which forms/schedules are required for your filings.

sqkcrk:

'My assets are only worth what I paid for them less the depreciation.'

Your accountant can help you understand why that isn't always the case.

Try saying, 'My company is only worth what I paid for it less depreciation.', and you'll understand why it's incorrect.

Think about all of your operations.


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## sqkcrk (Dec 10, 2005)

Well, I sorta see what you are saying.


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## Stevebeeman (May 22, 2011)

I am a CPA that specializes in Agribusiness. In addition to rice, almonds, row crop growers, and cattle, I have several commercial beekeeping clients, they range from 500 hives to 11,000 hives. If you are in the beekeeping business you are in a farming activity. For federal tax purposes you will (and want to) file a schedule F. Farmers have special tax treatments not available to other business. For example farming operations here in California get a tax break on our State Sales Tax when we purchase equipment and supplies. LLC or Corporations are a must, check with a CPA or Attorney in YOUR STATE. The states control the LLC's or Corporations. You will need to discuss with your accountant as to what election you make with the fereral government as to how your LLC or Corp will be taxed.

Don't be mislead by the limited part of the LLC or Corp. If you personaly cause injury to someone YOU AND the LLC or Corp will be liabile. If your employee causes and injury i.e. runs someone over with the company's bee truck, they too will be held liabile as well as the LLC or Corp, but you and your personal assets will be protected. 

For the beekeeper that bought the hive in November 2010 but started business in 2011. YES you can deduct the cost of the hives purchased in 2010. There are two rules 1) you begin deducting expenses "WHEN THEY ARE PLACED IN SERVICE" and 2) you use the COST or Fair Market Value when you place them in "SERVICE." I would agrue that all expenses in 2010 were to begin business in 2011. This happens all the time and is a common ocurrance in farming...i.e, I plant almonds in February, year #1 and do not sell any nuts until year #4, or the same with raising cattle.


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## Roland (Dec 14, 2008)

Stevebeeman - is there a difference tax wise on money paid out to the share holders between an LLC and a regular corporation? Like on is before taxes, and the other after?

Crazy Roland


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## Stevebeeman (May 22, 2011)

If the LLC elects to be taxed on the personal level you will be taxed on the net income of the LLC, it does not matter how much you draw out. If you are a Corporation or an LLC that has elected to be taxed as a Corporation then money paid out will be taxed to you as 1) salary or 2) a dividend.


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## Ben Franklin (May 3, 2011)

If you have a LLC maybe your company should buy the hives and equipment from you.
Also I agree with others that an accountant is the best answer.
If you have an actual farm you may qualify for discounts on your property taxes, check with your county.


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## dixiebooks (Jun 21, 2010)

Thanks, Stevebeeman, for the input. That is some useful stuff. I have bees in TN and in AL. Do you think maybe I should make two separate "businesses" or just lump it all together? TN has no income tax. Thx. -james


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## Stevebeeman (May 22, 2011)

Ben,
If you sell your equipment to the LLC or Corporation you will have a Capital Gains tax to pay. IRS code section 355 allows you to transfer the bee equipment tax free inexchange for ownership of the LLC or Corp.

dixiebooks, If you are doing business year round in TN and AL then yes (but check with a LOCAL tax attorney) you should set up an LLC or Corp. in each state. If you are just following the honey flow or on the pollination route and headquartered in only one state then just form an LLC or Corp in that state.


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