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As we reviewed in part one of this series , the first option when planning the future of your farm when you retire is to transfer or pass down your business to someone (normally in most cases this is a family member or close relative). But what if you don’t have anyone to pass your business down to? Well, this is where it’s great to have a default plan – in which you have a couple of paths you could follow. In this part of the series, we’ll review your different options when selling and how to prepare your farm to sell.
Selling to someone who will take over your farm.
Perhaps there isn’t anyone in your immediate family or close relation that wants to carry on the family business, but there may be someone you can mentor or a young farmer out there looking to run their own business. However, that’s a lot of trust and time to invest in someone. What if it turns out that they don’t have the financial resources to buy your farm, equipment, livestock and existing inventory? Many young farmers will not have the financial resources or ability to get a loan without major collateral so if you take this road, be sure to discuss funding options early on in the process.
Selling to the highest bidder
The highest bidder is basically whoever is going to give you the best price for your land and business. However, as the baby boomer generation ages, this will limit your number of qualified buyers quite a bit. Also keep in my that this person may not be willing to continue it as a farm but, wants to buy your land for other purposes such as real estate opportunities. This can be an emotionally debilitating process for people and their families who have worked hard for generations to make their farm what it is today. As I mentioned in the first blog of this series, my brothers and I were faced with the decision to sell our family farm that once belonged to my aunt and uncle. In the summer of 2019, I drove by the farm and was surprised to see the house, barn and outbuildings completely torn down in order to increase acreage for crops. Initially, I wasn’t happy about seeing everything gone but I came to realize that my memories are what’s important and not the buildings that were old and had served their purpose. For many farmers, their business is also their home. Just be sure if you decide or need to take this route when passing off your farm, you give yourself enough time to prepare for the emotional repercussions you might face.
How do I prepare to sell my farm?
It’s important when you’re a farmer that you take the following into account:
- First Impressions – be sure you’re up to date on any vital maintenance that needs to happen to avoid your farm appearing run down. Everything from equipment functioning properly to making sure livestock and other inventory assets are well documented.
- Your finances are in order – It’s highly recommended that you work with a knowledgeable financial team including an accountant who will make sure you are in good standing before your buyer’s financial team reviews your business records.
- axes – be sure that during the financial preparation process that you’ve reviewed how taxes will impact the sale of the farm. Find out and see if you qualify for the capital gain exemption. If you qualify for this exemption, you could receive anywhere up to $883,384 (as of 2020) of your capital gain tax-free. For more information, consult your financial advisor or check out this factsheet from the Ontario Ministry of Agriculture, Food and Rural Affairs.
- Be upfront – does your business have any issues it’s currently facing such as access rights or development disputes? If so, these issues should be disclosed right away so there’s time to think of a solution for the issue. Plus, your buyers won’t appreciate you withholding that information, making it more likely that the sale won’t go through.
Looking for a financial consultant who can help you navigate the selling process of your farm and help you achieve your financial goals? Look no further. If you’ve decided you’re ready to sell your farm, I will help you take the next steps you need to take in order to achieve your goal. My job is to get you passed the retirement finish line with ease by using the financial tools I have available and my years of knowledge and expertise. Be sure to review my guidebook 10 Tips to Maximize Blue-Collar Wealth to help you get your retirement plan started. Continue following along with our four-part series and learn more about the complexities of selling a farm and how it relates to you.
Related: Is It Time to Sell the Family Farm? Passing Down Your Business