How Much is your Farm Worth?

Farm succession planning is no small task. It’s an emotional, financial and logistical challenge that can leave families feeling overwhelmed and stuck. That’s where 33seven steps in.

Specializing in farm continuity planning, 33seven guides farmers and their families through the process of passing their legacy to the next generation. Their tag line, ASK A FARMER WHO KNOWS®, speaks volumes. Founder and farmer Derryn Shrosbree launched the company after seeing firsthand the perils of his family ignoring the importance of continuity planning. To help others avoid a fate that impacts farms and families, he created this seven-part series that breaks down the process step by step so you and your farm can thrive now and for generations to come. It all starts with knowing the value of your farm – and what affects the numbers.

“As you prepare for continuity planning, valuating the farm is the first step. For that, it is important to recognize the difference between a sole proprietorship/partnership model, and a farm that is run as a corporation,” he says. “Corporately owned farms require the involvement of accountants and tax professionals to prepare financial statements along with personal and corporate tax returns.”

The differences extend to liabilities “With a personally owned farm, all assets can garner legal or creditor claims. While there is a cost in setting up a corporation, it separates the farm into its own legal entity, which provides some protection of personal assets against claims and creditors. Another layer of protection can be added by creating a separate holding corporation.”

How taxes are handled also differs between sole proprietorship/partnership and corporate models. In fact, one of the driving reasons to make the switch to a corporate model is to save on taxes.

Shrosbree explains, “Outside of a corporation, taxes are driven higher as income increases. Successful farms could be taxed above 50 per cent in some provinces. This limits after-tax dollars that could be used to invest in the farm and that could be used for continuity planning. While sole props or partnerships can help defray high taxes with investment strategies, the more efficient model is to convert to corporate.”

Corporations have low or even flat tax rates. In Alberta, it is around 11 per cent. Other provinces vary between 9.5 and 27 per cent. Since the corporation is considered a separate entity, the tax advantages do not stop when the founder or main shareholder(s) pass or retire.

“Low taxes free up cash for debt repayment and investments such as capital assets,” says Shrosbree. “Cash is not always directly generated through the farm. No matter the business

model, a valuation can include social benefits such as personal GST or HST credits, employment insurance, maternity/paternity leave benefits, CCB [Canada child benefit] and OAS [old age security]. Note, however, that income generated from personally owned farmland must be reported on the personal tax return regardless of whether it is needed for personal expenditures and this could limit or eliminate these benefits. Alternatively, structuring as a corporation allows farmers to strategically manage wages and dividends, aligning them with personal expenditure needs, which can improve eligibility for certain benefits.”

The final piece of the puzzle to consider is the capital gains exemption. 

“Farmers can unlock up to $1 million in capital gains exemptions per individual by owning eligible farm property. While incorporating offers benefits, keeping some assets personally owned simplifies claiming this exemption and allows for easier gifting to family. Strategic ownership maximizes tax advantages for current and future generations.” 

How much a farm is worth is a combination of many factors, and it all starts with the business model – sole proprietorship/partnership or corporation. This drives the value of all the other numbers involved and the amount of liability that can be considered. When doing continuity planning, it is important to work with a firm that valuates the farm from all angles.

Succession planning can feel like an overwhelming task, especially when the costs and complexities start piling up. Many farmers struggle to get through the process because there’s a lack of clarity and control, leading to frustration and delays. This is where 33seven can help.

“At 33seven, we specialize in farm transitions, completing one every month. You might only go through this once or twice in your life, but for us, it’s our focus,” says Shrosbree. “That experience gives us a unique understanding of the challenges farmers face – challenges I’ve experienced myself as a Canadian farmer.

“Like you, I’ve felt the exhaustion of invoice fatigue, with accountants, lawyers, insurance agents and financiers all adding complexity and costs. What we all want is pretty simple. We want clarity and control. We want to reduce taxes, lower risks, protect our families and secure our legacies. That’s why I created the 33seven Blue Sky Continuity Plan, a solution designed to give Canadian farmers exactly that. By eliminating invoice fatigue and cutting through the confusion, we help you take charge of your future.”

The first step on this journey is valuating the business. Understanding where you stand sets the foundation for everything else. From there, 33seven can work with you to build a transition plan that not only aligns with your goals but also protects what matters most – your family, your farm and your legacy.

He concludes, “At 33seven, we bring clarity, control and an insider’s understanding to every farm transition we guide. Take the first step today and start building a secure future for generations to come.”

This is part one of a seven-part series that will provide the tools and information needed for a smooth continuity plan for your farm and your family – a plan that keeps your legacy intact and your family from feuding. Stay tuned for part two.

“At 33seven, we bring clarity, control and an insider’s understanding to every farm transition we guide. Take the first step today and start building a secure future for generations to come.”