business as in a proprietorship or partnership business. 

 A corporation can also provide certain fringe benefits 

 to owner/employees tax-free to the employee and deduc- 

 tible to the corporation. 



For tax reporting purposes, there are two types of corpo- 

 rations: S Corporations and C Corporations. While both 

 are separate legal entities, there are significant differ- 

 ences in their tax treatments. An S Corporation is gener- 

 ally not a tax-paying entity, but allocates profits and 

 losses to its shareholders much like a partnership. This 

 can be an advantage to the shareholders, as they can use 

 losses to offset non-farm income. It also can result in 

 less total tax by splitting income among family members 

 who are stockholders. 



Corporations have some significant costs and complexi- 

 ties of operating that should be evaluated carefully be- 

 fore choosing the corporate form. A corporation, being a 

 separate entity, must keep separate books that are more 

 complex and difficult to live with than those of a propri- 

 etorship or partnership. A corporation can result in 

 significantly more cost in payroll taxes on shareholder 

 employees. For instance, owners' wages could be subject 

 to unemployment tax and workmen's compensation. 



The potential tax costs of liquidating a corporation can 

 be much worse than those of a proprietorship or partner- 

 ship as there is often double taxation upon termination. 



Legal and accounting costs of forming, operating, and 

 terminating a corporation are significant and should be 

 considered when the corporate form of business is chosen. 



The corporation, once formed, takes on a life of its own, 

 continuing until terminated. The corporation does not 

 terminate upon death of the shareholders. This can be an 

 advantage in certain situations to ensure continuation of 

 operation of the business. 



Whatever form — sole proprietorship, partnership or cor- 

 poration — you choose, it is important to research the 

 options carefully to make the best decision for your 

 unique business, f* 



Elizabeth L. Bayne is a Farm Tax Specialist and 

 Manager, Financially Related Services at Farm Credit 

 of the Connecticut Valley, ACA, PO Box 1009, White 

 River Junction, VT 05001. This farm credit office 

 services Grafton, Sullivan, and Cheshire counties in 

 New Hampshire. For further information, call Elizabeth 

 at (802)295-9127, 



Tina Sawtelle, principal ofSawtelle Marketing AlssocI- 

 ates, consults with agricultural direct retail businesses 

 on marketing and merchandising. In addition, she 

 teaches agricultural business management techniques to 

 students at the Thompson School at UNH. For informa- 

 tion, call (603) 659-8106. 



Newton Greenhouse 



32 Amesbury Road, Newton, NH 03858 

 603-382-5289 



Quality Plants 

 green and flowering 



(■rom2 1/2" to 10" poLs 



Holiday, bedding plants, and dish gardens 



year round snap, pot mums. 



Gloxinias, and Airican violets 



Licensed propagator 

 of New Guinea Impatienls 



DRAGON 



PRODUCTS COMPANY 



AGRICULTURAL LIMESTONE 

 "The science of sweeter soil" 



PO. Box 191, Thomaston, Maine 04061 



(800) 541-9127 



April/May 1991 27 



