Converting a farm proprietorship or partnership into a farm corporation requires the filing of articles of incorporation with the state.
The decision to convert a farm proprietorship or partnership into a farm corporation is framed by many advantages and disadvantages that are particularly important to consider in light of a farm's frequent status as the place the farm owner lives and works. While the process of incorporating the farm is a straightforward matter of filing articles of incorporation with a state office, the tax advantages to farm incorporation are usually the main reasons for choosing to change the business structure. For example, active business income in a corporation is eligible for the Small Business Deduction and is taxed at just 17.6 percent on the first $400,000. An understanding of properly use the corporation once formed to obtain the best tax outcomes requires consultation with a tax professional.
Instructions
1. Visit the secretary of state's website for the state in which the farm is located. In most states, the secretary of state's office handles new business registrations, or, if not, the secretary's website will point to the right government website. You may already be familiar with this website if your farm has been operating for some time as a proprietorship or partnership and your state required you to register a trade name or obtain a business license. The state website will have a section called something similar to "business division" or "corporations division." If you access this section, you will find complete information for incorporating a business in the state, including instructions, fee schedules and fillable PDF templates.
2. Check to make sure the business name you want to use for your farm is available for use in the state. You may already have a name under which you've been operating the farm and have registered it as a trade name, also known as a "fictitious name" or "doing business as" or "DBA,"in the past. If you have an active name registration, you will be able to incorporate under it. If you don't have a name registered, you will have to conduct a name search to determine if the name is available for use. On the state website, there will be a link to a business entity search database. All states make this tool available for the public to look up information on businesses registered with the state. If the name seems to be available, the process of including it in the articles of incorporation will register it for your exclusive use.
3. Download the articles of incorporation, sometimes called "certificate of incorporation" or "charter" template from the state website. The website will have a "forms and fees" section where the templates can be found. All states provide a fill-in-the-blank PDF form of articles of incorporation that enables a business owner to provide the minimum amount of information to incorporate that is required by law. The state does not require you to use this form. You can draft your own articles, or have an attorney draft them, and include any provision that is allowable under the law. However, if you use the state template, you are guaranteed that the filing will be accepted by the state with no hassle.
4. Fill out the articles of incorporation. The format of the articles will differ from state to state, but all states require a combination of certain basic information, including the business name, name and address of a registered agent, number and value of the initial authorized shares of stock and the name and signature of the person filing the paperwork, the "incorporator."
5. File the articles of incorporation with the state. The articles of incorporation template will contain step-by-step instructions for filing the form, including the amount of the filing fee. Most states allow filing by mail and in person. Some states allow filing by fax. A few states have an electronic filing system on their websites that will enable you to prepare the articles and file them over the Internet. The incorporation goes into effect on the day the state accepts your paperwork.
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