Episode 43: The Best of AgCredit Said It, Season 2
The AgCredit Said It podcast has become an incredible resource for farmers who enjoy listening in to conversations that make a real difference in their day-to-day lives. As Season 2 of the podcast comes to a close, we take a look back at our hosts' favorite moments from the show. Highlights include structuring your farm business entity for tax advantages, marketing your agricultural operation and products through social media, and setting a vision for the future of your family farm.
Check out this recap episode for a quick listen to the conversations you’ll hear throughout the season, then go back and dive into the entire episode for the topics you enjoy.
Phil’s Pick: Ep. 22, Structuring Your Farm Entity with Jon Stoller
Whether you’re a new farmer, or it’s time for your family business to take a new shape, the legal structure of your entity can make a difference in how you do business. In particular, it plays an important role in how your business, and you as an individual, are taxed.
In Episode 22, Certified Public Accountant, Jon Stoller, shares everything new farmers need to know about their taxes. One feature of the episode was a discussion on how to decide which organizational structure to select for your farm.
“Self-employment tax is another 15% on top of your income tax rate,” says Stoller, who indicates the different types of legal entities have both varying advantages and degrees of complexity.
“You try to find ways to maybe reduce self-employment tax depending on the choice of the entity you form,” says Stoller. “But then you weigh that against, how much complexity do I want?.”
Self-employed, Limited Liability Corporations, S-corporations, and C-corporations are all valid paths depending on your business and the resources available to manage the complexity of the entity.
Matt’s Pick: Ep. 34, Farming and Highway Laws with Barry Thompson
In Episode 34, Barry Thompson and Anthony Lester of the Ohio State Patrol and the Ohio Motor Carrier Division shared a wealth of information about farm vehicles and how to share the road to protect both farmers and other drivers.
An interesting point in that conversation was the rules around utilizing ATVs on the road. Today, almost every farmer has one, however, the rules of the road for these vehicles might surprise you.
“It (an ATV/UTV/side-by-side) can be used as a farm tool, just like a tractor,” says Thompson, “but they're not used for normal transportation.”
In Ohio, it’s legal to utilize your ATV on the road to go from field to field, but not for a casual ride around the neighborhood. There are some circumstances where using your side-by-side for regular travel is legal, so you might want to listen in to this segment for the details and catch the whole episode to hear about combines, tractors, farm trucks, and other helpful insights.
Libby’s Pick: Ep. 33, Promoting Your Farm through Social Media with Kayla Laubacher
As Marketing Coordinator for AgCredit, Kayla Laubacher works with social media daily. For many farms, having a social media presence, and knowing what to do with it, can be a challenge. In Episode 33, Laubacher shares marketing solutions for all sorts of farm operations, but one special highlight was a segment about promoting farm products that are sold directly to consumers.
“People want to see the product,” says Laubacher. “They want to know what you have available.”
Laubacher indicates posting regularly helps your content reach your entire audience and varying the creative used for your posts can be key in reaching different audience members, so don’t be afraid to share often.
If marketing your farm operation is important, check out this segment, then hear the entire conversation in Episode 34.
Brenna’s Pick: Ep. 36, A Vision for Your Family Farm with Matt Thayer
Many farm families have found diversification to be the key to creating opportunities for the next generation to join the farm. In Episode 36, Matt and Dawn Thayer share the story of pursuing their farming dreams.
“It's my dream that everybody can come back,” says Matt Thayer. “It's really not about me at this point, it's really about keeping my kids close if we can. You cannot do that if you're not profitable.”
Listen in to the preview of this conversation on this week’s episode, then dive into the full show if planning the future of your farm sounds interesting.
Here’s a glance at this episode:
- [02:24] Jon Stoller talks about entity structure and the tax implications for your farm business.
- [08:57] Barry Thompson and Anthony Lester of the Ohio State Patrol and the Ohio Motor Carrier Division discuss farming and highway law.
- [12:17] AgCredit Said It podcast producer, Kayla Laubacher, shares tips for using social media to promote your farm and execute direct-to-consumer marketing for your farm product.
- [15:08] Matt and Dawn Thayer discuss farming with family and having a vision for the future of your farm.
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Brenna Finnegan (00:08):Welcome to AgCredit Said It. In each episode, our hosts sit down with experts from all parts of the agriculture industry to bring you insights and must-have information on all things from farming to finances and everything in between.
Phil Young (00:28):Welcome back to another episode of AgCredit Said It. We are on the... I guess we're putting the cherry on top of season two here. We got all four of us in the studio here and we just wanted to provide another... We did this last year with season one, a recap episode of all of our favorite maybe scenes or episodes that we did over the last year. All four of us are here. Hey, everybody. Welcome.
Brenna Finnegan (00:52):Hello.
Libby Wixtead (00:52):Hello.
Phil Young (00:53):How are we doing, everybody?
Brenna Finnegan (00:54):Good. I think this is the first time this season, isn't it? And obviously, it's going to be the last time this season too.
Phil Young (01:00):Yep. It's good to have the gang back together again.
Libby Wixtead (01:04):It is. It's been so rare that all of us have been together or at least seen each other throughout the season here.
Brenna Finnegan (01:10):Yeah. Other than meetings about this stuff. That's about it.
Phil Young (01:17):Yeah. So like I said, we did this last year, end of season one. We sat around and we've done a ton of episodes this year, we've had a ton of great guests. We've talked about a lot of different topics and we'd like just to go around the table and just share maybe some of our highlights, some maybe of our favorite points on some of the episodes that we've done, and so I can kick us off here.
One of my favorite episodes and guests that we had, it was on episode 22 and Jon Stoller was our guest. So he's a tax accountant near our branch near Van Wert, Ohio. And I'm a nerd, of course.
Brenna Finnegan (01:49):You picked the most interesting.
Phil Young (01:49):I knew you were going to say that I am a huge nerd.
Matt Adams (01:52):You said it.
Phil Young (01:53):And so I picked the tax topic. Jon would agree with me that that was the best episode, I'm sure. But we had a great discussion, Brenda, I think you were my co-host on that episode. And we talked a little bit about entity structures, tax implications with entity structures, and how that can affect an operation. And just the simplicity of maybe not having one to the full complexity of having one and how you operate it within that and the pros and cons of that. So here's that clip, and here's Brenna and I chatting with Jon Stoller.
Jon Stoller (02:24):I'm still waiting for the day when I'm at a social event and someone comes and asks about the differences in operating entities, still hasn't happened. There are differences, and there's different advantages and disadvantages to the different types. The advantage of a Schedule F, schedule F sole proprietor, is that it's simpler. It's easier to follow, easier to understand. If you don't like paperwork, that might be better for you. There are different options with a Schedule F that you can do to try to reduce self-employment tax. Usually what people don't like about Schedule Fs is, if a farmer makes a hundred thousand on a Schedule F, you pay the income tax on that and then you pay self-employment tax. Self-employment tax is another 15% on top of your income tax rate. So even if your overall rate might be in the 12% bracket, then you add the 15% on top of it, and you're paying, when they pay their bill on their 1040, most of that bill is self-employment tax. Now, if they want to draw social security someday, they have to pay self-employment tax to get social security, so...
Phil Young (03:33):Gotcha. Okay.
Brenna Finnegan (03:34):It's a double-edged sword.
Phil Young (03:35):Yeah, right. Yeah.
Jon Stoller (03:36):You pick your poison. However, that self-employment is the biggest one. If a farmer has a Schedule F and their spouse owns ground, the farmer could pay rent to their spouse, and the spouse has that income as Schedule E, which is subject to income tax, but not subject to self-employment tax. So there's different strategies depending on the entity you can follow to try to do that. Now there's certain paperwork and procedures you need to do. Again, you have to play the game. You can't just do what you want to do.
Brenna Finnegan (04:12):There's probably some wheels turning in some heads as people are listening to this
Phil Young (04:15):Got a color within the lines, right?
Jon Stoller (04:19):But sometimes, you're on this coloring page, you flip it over and switch to an LLC. When you go to an LLC, then there's a whole new lines to look at. LLCs can be treated three different ways. There's no tax LLC form out there. LLCs can be treated as schedule Fs. LLCs can be treated as S corporations. LLCs can be treated as C corporations.
Brenna Finnegan (04:44):So what's the difference between those?
Jon Stoller (04:46):There's a lot. So Schedule F is on the 10-40. The income there is subject to SE tax. It's the simplest form. LLC, taxed as an S corporation, has to file a separate tax return. So then it has its own S corp tax return, which then they'll need to give to the bank, along with then their personals. Now you have two different tax returns. The primary benefit of an S corporation is, the farmer becomes an employee of that S corporation. The farmer is paid a wage, that wage is subject to SE tax. However, any profit from the S corporation is not subject to SE tax.
Phil Young (05:31):Okay.
Jon Stoller (05:32):So you take the 100,000 that was on a Schedule F, the full 100,000 was subject to the 15% SE charge. The farmer switches to an S corp, pays himself a wage of 50,000. He pays SE tax on 50,000. He'll still receive credit on social security for earnings up to 50,000, but then he's not paying SE tax on the remaining 50,000. So then he can save 7,500 in tax each year.
Brenna Finnegan (06:01):Once again, wheels are turning.
Jon Stoller (06:04):And then there are complexities and nuances to all of those, and certain things you want to do and not want to do to not draw attention to yourself. The saying that pigs get fed, hogs get slaughtered, pig out, but don't be a hog. You don't want to be noticed. Those who really are aggressive and push the limit and don't have a justification for it have a dramatically higher chance of being selected for audit.
Phil Young (06:32):Gotcha. Okay.
Jon Stoller (06:34):So back to the C corp. C corps are different. They are not a pass through entity. S corp, whatever profit it makes passes through to the individual. C corp has its own tax return, it has to pay its own tax. C corps have a tax rate of 21%. Then C corps can use commodity wages, they can pay health insurance benefits for the employees and their families, C corp can even get a deduction for grocery bills. If the employee of the corporation is hired to make food for the employees of the corporation, there's a lot of taxable benefits C corps can do, but they're the most complicated.
So then you have to, when it comes to paperwork, be willing to have minutes to have resolutions, to have things documented, to have the employment agreement between the employees of the C corp. And a lot of times, it's the same people, right? It's the farmer's family, but they have to put on different hats. I got my C corp hat on, I've got my employee of a C corp hat on. I'm now the renter who owns the land that the C corp is paying cash rent to.
Brenna Finnegan (07:45):There's a whole lot of shoe boxes on a counter that they're keeping track of all this stuff.
Phil Young (07:50):You're the shareholder of the-
Brenna Finnegan (07:51):Yup. I just keep thinking of operating agreements, going through my head and how it's all structured and what label you give yourself as an owner, employee, all that.
Jon Stoller (08:03):So you try to find ways to maybe reduce self-employment tax or to try to get deductions that you otherwise wouldn't be able to get, depending on the choice of the entity you form. But then you weigh that against, how much complexity do I want? I can show the benefits that you could have to someone, but if they hate paperwork, and it causes them headache and worry, then it might not be worth it to that individual.
Brenna Finnegan (08:38):You hire a secretary to handle it for you.
Phil Young (08:41):There you go. Bookkeeper does that. Yeah.
Phil Young (08:43):All right guys. Yeah, that was a good clip here. And so, that one again, if you wanted to listen to that clip or that full episode, it was episode 22 and our guest again was Jon Stoller. So another good episode of you guys listen to. Matt, you're up next, sir.
Matt Adams (08:57):Thanks, Phil. So it's been a great season. How do I pick my top? There's been so many great guests we've talked to, so much great information and topics we've had this year. I think one that might stand out for me a little bit was episode 34, where Libby and I got to sit down with Barry Thompson and Anthony Lester of the Ohio State Patrol and the Ohio Motor Carrier Division, and really covered a lot of stuff for farm exemption, utility vehicles, truck laws, farm equipment on the road laws. It's just a lot of stuff that today's producer, you think you know, but you don't know. And so it's just a lot of great, I'd say real life information on that, Libby. And one of the things that really, I think stood out to me too was when we started talking about the farm exemption, and especially we see them on the road all the time is utility vehicles, and we start talking about that.
(09:51):There's a lot of great information in that episode guys. But it's one of those, we're going to play a clip here, but just a lot of good information that you may not think about when you're out there on the road, especially, we're recording this right now. We are finishing up with Wheat Harvest. A lot of sprayers [inaudible 00:10:09] equipment's still on the road, so just give her a listen.
(10:12):Hey guys. And we're back here with AgCredit Said it. So we've covered some pretty good topics here. And another one I was thinking about too, Libby, and I know I'd say 90% of farmers have one. We talked about our side-by-sides, our utility vehicles. Can you guys go into, for one, I guess what can I do with that side-by-side? I am under the mentality of, hey, I'll toss an SMV on the back, it's a farm vehicle at that point, I can do what I want. Right?
Barry Thompson (10:45):Right. Yeah. There are some limited exemptions to those. They are an off-road vehicle. They're not titled as an on-road vehicle, you can't license them to drive up and down the road like you can your automobile. There are some limited exemptions that they're allowed in a municipality or an area that has a speed limit of 35 mile an hour or less. That local jurisdiction can do an inspection on that vehicle if they allow them, and then you could get an actual license plate. But at that point, they can only be operated on those streets that are 35 mile an hour or less in that municipality that allows them. Now, when we go to the farmer side of it, it can be used as a farm tool, just like a tractor, just like a skid loader, but they're not used for normal transportation. They would have to be used going from field to field, from a short distance, servicing that farm. So you couldn't just hop in it and go down to the local store and get your milk and come on back.
Matt Adams (11:40):Unless you have a shovel in the back.
Barry Thompson (11:43):Or go take your wife out to dinner or something. But it would just be a farm machinery, and they would fall into that same practice. If you're doing farm related work, going from field to field, they would be allowed. But routinely, they're not legal on the highway.
Matt Adams (11:56):So I think that was a great episode and a lot of great content. So be sure to listen to that episode and listen to all of our episodes when you get a chance. And there's a lot of things when I talk to some of our listeners, they go back and listen to a lot of our different episodes, you hear stuff that you may not heard the first time. So Libby, I guess we'll jump right over to you and pick your favorite of the season.
Libby Wixtead (12:17):So I'm sure it comes to no surprise which one my favorite was, it was our episode 33, when we got to talk about social media marketing with our AgCredit producer for our podcast, which was Kayla Laubacher. And it talked a lot about when you're doing direct marketing through social media and showing different aspects of your farming and what's important and what to post and what social media platforms you should be on or can be on, is a website necessary? We also referenced some other episodes throughout this episode 33 that you can go back on that talks about some other different social media or marketing branding type of things as well. Again, really hard to pick our favorite, or at least my favorite out of this. But this little clip will talk about what to post and just some little tidbits there with Kayla.
Kayla Laubacher (13:20):And then this is going to sound silly because you'd think it'd be obvious, but post about what you're selling. If you're a fruit stand and you're selling fruit or ears of corn or sweet corn or whatever, post when you have fresh, post what's coming in, post what you're going to have. People want to see the product, they want to know what you have available. And like I said, that seems so obvious, but you forget sometimes. You might post about it one time and think you're good, but keep posting about it. With the algorithms on social media, not everyone sees every post, so you can repeat posts, you can post similar things over and over, and each post will hit different people just depending on the interactions it gets.
Libby Wixtead (13:57):Hold on. Can you share what algorithms are?
Kayla Laubacher (13:59):Yeah. So the algorithm is the behind the scenes of the social media, where the platform, depending on you as the user, what you click on, what you're viewing, it'll customize your newsfeed for what it thinks you're going to be interested in. So depending what maybe ad you stop and watch, what ads you interact with, what posts you like or comment on. It's going to start serving you content based on that. So one post you create might not reach Libby, but it might reach Matt because, just the way it was worded or what the picture is possibly might relate with stuff he's been clicking on. And vice versa, you could use that same post but maybe word it different and it might hit Libby's feed. So it's interesting how that works. It can be frustrating too because you don't always have control over that.
Libby Wixtead (14:46):All right, well that was another a great podcast episode, and again, all of us said, go back and listen to the full episode if that interested you. And then like Matt said, go back and listen to all of them, especially the ones that we referenced in this little clip here. And we'll move on to Brenna. What was your favorite episode?
Brenna Finnegan (15:08):There were too many to choose from, for the most part, but I really enjoyed sitting down with Matt and Dawn Thayer with episode 36, and it was a spot in there that Matt was really talking about, his whole reasoning or forward-thinking for their farm and bringing back the kids and the meaning as to why they're doing the job that they're doing. And I think a lot of families could probably relate to that, especially in the farming industry, because it is more so about a family feel. And that's the spot that I thought was the most interesting, or the podcast that I thought was the most interesting just because it put it into perspective for the family aspect of it all. So here's the clip from Matt.
Matt Thayer (15:58):Well, I'd say it's my dream that everybody can come back. Now, that's not to say if my kid has an opportunity to go away and do some... They have this great opportunity to go away, then absolutely, I want what is best for them. But if I can make it nice and profitable enough for everybody to stay close, that's my end goal. That's why we're doing this. Even now, if I buy something and it's going to take 20 years to pay off, I'm retiring at 20 years. It's really not about me at this point, because... Maybe for my retirement, but not... It's really about keeping my kids close if we can. And you cannot do that if A, you're not profitable, and B, you're not big enough. And so that's why we're expanding some things now, so that by the time the kids are of age, they can come back if they want to. But if you are not ready for that, then the farm isn't profitable and it will not work.
Phil Young (17:08):Yeah, Brenna, that was another good clip. And so that's a wrap, guys. That's the end of season two. We're so thankful to all of our listeners out there for listening, providing feedback, and that's what we love. That's why we love doing this, is we love educating, we love having interesting conversations, and just bringing in people to just share what they know and hopefully help you guys grow your operation. So stick around. We are going to do season three, which starts in October, so check back then, and we'd love to hear any comments you guys have or shoot us any topic ideas on social media as we prepare, but we have another great season ahead of us. All right. Thanks, guys.
Brenna Finnegan (17:47):Thank you for listening to AgCredit Said it. Be sure to subscribe so you never miss an episode. While you are there, leave us a review to help others find the show. Let's talk ag in between episodes. Follow us on Facebook, Twitter, and Instagram at Ag Credit. For more tips and resources, visit agcredit.net.