Central East River South Dakota | My wife and I have a dairy with 450 cows and 4 children. My oldest son returned to the farm after college graduation. At that time we built another freestall barn, our arrangement at the time was he could add 80 head to the herd and he pays yardage based on the additional building size to accomadate his herd. His cattle are mixed with ours and all expenses are charged to him based on his % of the herd. The income is split same way. All cattle are treated alike. This plan has a 5 year life and then he has the option of buying into the operation or get out, he has chosen to buy in. This is year 4.
We would like to setup a business entity that would allow us to sell our operation to him over time. There are several considerations. I would like to give other children the same opportunity. They would get an opportunty to add cattle for a period of 5 years and then buy in or get out. They would have to exercise this opportunity by age 30 so that son #1 doesn't have to always wonder what their intentions are. The other childred are girl 25 boy 24 girl 21. The 5 year plan is to insure that all parties can work together before committing to a buyin.
Our intent at this time is to setup a LLP with the cattle and machinery included. We may also include the farm site. The farm site is about 40 acres located on a !/4 and a 80. We own other land that would be leased to the LLP. We will be working with an accountant and lawyer. The LLP would pay my son, wife and I a wage and than residual income would be split according to share. My son would use his income to buy more shares from us.
Now for the questions. Are there other ideas of how to transfer a sole propriotership to a LLP without huge tax repurcussions? Is there another option other than a LLP? What are some of the pitfalls that I should think about? There are many other questions but i will stop here for now.
I am sure others here have gone thru the same process and I would appeciate any insight you could give us in what has worked well and what hasn't.
Thank you |
Bringing son into operation
