Posted on 03/20/2016 2:54:15 PM PDT by goodwithagun
I'm considering starting a CSA, with which I would provide a basket of vegetables from my garden (uncertified organic) to 10 (the first year) families each week for 18 weeks. Using the CSA model, the customers sign up and prepay for the season, knowing the risks of crop failure. I have experience with intensive planting and growing a lot on a little land. Additionally, my neighbor will allow me the use of his field for free . . .
Every state is different.
Find out what the local, county and state regs are regarding sales tax, business tax, city/county/state business licensing, etc.
Your County and State should have plenty of info online for start-ups.
Same with FED. Initially, you would probably file under your SS#. If business is good, you would want to look into small business incorporation.
Do accounting with a microscope. Get receipts from your earthworms. Assume you’ll be audited by state, Feds, or both.
Have fun. I think it’s a nice idea.
Learn the tax code.
Keep pristine books.
Pay what you owe, when you owe it.
Biggest issue would be dealing with all the inspectors, FDA, etc. as an example, the City of Fort Worth has been trying to shut down a dairy that sells whole unpasteurized milk, even though they are not located in Fort Worth. The rationale is that the city prohibits the sale of such milk, and since people go out of the city, they are treating the dairy like a drug pushed.
Research the appropriate healthcare taxes. Some are $100 per day per employee if you structure improperly.
You can never control your revenue but you can always control your costs. Make sure you do.
1. Sole proprietorship.
2. Register with your state comptroller as a small business.
3. Will you deliver the produce? If so, you might get agricultural discounts on your vehicle registration & insurance.
4. Some states allow you to purchase Ag supplies, seeds, tools, equipment without having to pay sales taxes on those items. But—see #2.
5. Absolutely protect yourself from liability. If customers or laborers will EVER be on your property, make sure your homeowner’s insurance covers possible injuries resulting from home-based business activities. Talk it over with your agent—don’t make any assumptions from reading your policy.
I laughed when I read that. Then I realized that it could actually happen.
As for the guy starting his own business selling 18 weeks of produce baskets, I wish him luck and a lot of good advice was given here. I've been managing businesses for over 20 years and I can vouch for the maxim "You can't control your revenue but you can control your costs". I've survived some tough revenue quarters due to running lean and mean.
Also, do not extend credit past 30 days net. If possible, collect up front. And recurring revenue is always better than having customers pay it all up front - and if they do, use accrual accounting instead of recognizing it on the books all at once. That way, you will smooth out the revenue and be able to offset your expenses with revenue in the same time period.
In re-reading your OP, you say you’ll be using your neighbor’s field “for free.”
This could render everything I said above, either moot, or a tad more complicated. Sigh!
The best thing about running your own business is that you are free to pick which 80 hours a week you want to work.
T
Fortunately, I live in an area where I don’t need a business license nor does my profession require a license or inspections.
Those are certainly a concern when you are selling food.
The bookkeeping aspect keeps you “honest” and objective. By that I mean keeping your success or failure objective. Often times the most difficult part of running a business is to know when to call it quits. By the time most small business operators give up, it is way past too late.
Learn either Quickbooks or GnuCash and know how to read your accounting reports.
Dont skimp on tax advisers or lawyers.
Dear Modern Farmer: How Do I Legally Start a CSA?
Make sure you are not running foul with any zoning restrictions in your area and check with your local agricultural extension office or your state department of agriculture for things like food handling, storage and safety and any labeling requirements. Check to see if there are any other CSA’s in your area willing to share their experiences and advice with you or if there are an CSA orgs you might join.
You may want to consider having written agreements with your members rather than just verbal agreements. Think about if you were a member, what you would want to see in such an agreement as well as what you need to have in it for protecting your own self interests. Think about what could happen if someone complained and wanted their money back, how would you handle that, and what are your legal responsibilities or what might happen if someone claimed to have gotten sick from your produce?
You also say it is “uncertified organic” but you better be clear as to exactly what that means because as soon as you use the word “organic”, even “uncertified organic” - what that means to you might mean something completely different to someone else so make sure you are not, even unintentionally misleading anyone.
You mention 10 families the first year, but is that what you are hoping to get or are you pretty sure you can get that many? Are these people family members or friends or co-workers? Keep in mind that doing business with family and friends can risk those relationships. If not, how are you planning to solicit your members? Will you be advertising?
And what happens if you only end up getting half or a third or less that many? Will you be in danger of losing money and if so, how much? What happens if you plant for 10 families plus yourself but only end up with only one or two members? Will they just reap the extra produce? But what happens if they don’t want that much? What will you do with it?
How much risk of your investment are you willing to make? Even if they pay in advance and you only plant what has been paid for in advance, what might happen if you only have two families ultimately sign up? Will the additional expense of growing the additional produce, including the value of your own labor really be worth it?
So run some numbers on the best and worst case scenarios. And do a budget that includes all possible costs and stick to it.
You also say that your “neighbor will allow me the use of his field for free”. I’d try to get that in writing. When your neighbor says “free”, make sure you and he both fully understand what “free” means, how much of his land you will be farming and what your rights are for accessing his land – when, for how long, how often, etc. Is his idea of “free” really the same as yours? And what could happen if he changes his mind mid-season and claims that the produce grown on his land as his own for example?
Really important - find a good CPA, preferably one with experience in small agri-businesses to help you determine what sort of business/tax structure makes the most sense. You may also want to look into whether any sort of liability insurance is necessary. That could come in to play if members are coming onto your property for pick up or you are making deliveries - think home owner’s and car insurance riders.
Keep detailed records of all incoming and outgoing receipts and expenditures. You can use something like Quickbooks but most likely in your case, a simple spreadsheet (and there are many free templates available on-line to help you get started) with hard copies of your records and receipts, kept in an organized manner (not all stuffed into a shoe box) will probably suffice.
Keep in mind that no matter what sort of business/tax structure you elect (sole proprietorship, corporation (C or S), partnership, or limited liability company (LLC)), you will most likely have to file estimated federal and state taxes on a quarterly basis and you will have to file an estimate payment returns even if no taxes are owed. Not filing or filing late can cause you big trouble. You will also have to register your business with the State of Ohio.
http://business.ohio.gov/starting/
Same with Ohio Sales and Use tax returns – you will most likely still have to file quarterly returns even if you have no sales or use taxes to report.
I was a partner in a small bookkeeping and computer services company some years ago for several years – didn’t make much money but I learned a lot. I also have done work on the side over the years programming custom Access databases and providing bookkeeping and PR for small business and providing general administrative services for a few non-for profits – helping them with fundraising mailings and working on and at special events. It was a great experience and I’m glad to have had the experience. But I found that many, including myself and many of my small business and bookkeeping clients and small non-profits don’t consider and greatly underestimate how much time and effort goes into not only the work (and we tend to underprice the value of our services) but also the time for keeping good records, keeping up with the tax filings and dealing with customers who are unreasonable in their expectations.
If and when you get a complaint (and if you are in business long enough, you will), don’t overreact and don’t take it personally. Try to make it right if you can but also know when to stand your ground. I learned the hard way that some customers are not worth keeping.
Best of luck and wishing you much success. Keep us updated on how it goes.
I did think all along it was more of a scam, to convince local government that he should get favorable zoning exemptions and changes as he tried to get a development plan approved.
Kids are one thing ... Partners are another, even a spouse (unless you want to lose the spouse)
1. Find a good accountant to help you set up your bookkeeping, register with the tax authorities, and advise you regarding what kind of business entity (sole proprietor, LLC, S or C corporation, etc.) is right for you. Develop an ongoing relationship with this person.
2. Keep good records. Buy a copy of Quickbooks or some other bookkeeping program and use it.
3. Have written contracts with your neighbor regarding his land, and with your customers. Have them professionally drafted. Spending a few hundred dollars on this will save you thousands down the road.
4. If you have employees, use a payroll service. Your accountant may do payroll for a reasonable fee. The IRS and the state department of revenue don’t show much mercy if you get behind on your payroll taxes.
5. If you are thinking about taking on a partner, be very, very careful. Make sure this person can handle money responsibly, and that he has the same goals and philosophy as you do about how to run the business. Make sure any partnership agreement is detailed and in writing.
6. Try to avoid going into debt. If you must have credit for your operating expenses, develop a relationship with a well-established community bank.
7. Consider joining your local chamber of commerce, and set up a web site to market your business. Resist the temptation to sign up for advertising that requires you to enter into a long term contract with a monthly payment.
I retired from the Army in 2012 and wanted to follow my family tradition of farming. I looked at and studied the CSA concept but decided on market farming. I have gone from growing 150 tomatoes in 2013 to 3 thousand this year, along with a plethora of other crops. I have went from a 8x16 greenhouse to a 12x24 and now I have a 18x72 sitting on pallets waiting to be erected. If you are good at farming and have a great work ethic the sky is the limit.
You are not ready to be a “small business” if you do not know what “working capital” is, where it comes from, and how you will go out of business when you run out of “wc”. I could tell you what it is but you need to learn for yourself.
Have you talked to your present insurance agent about the conversion of your personal property to use as a commercial entity? When you do, which you probably have not done, get the cost of liability insurance and find out if state law requires workers compensation to be carried if you incorporate, even if you are the only employee? What will the cost of wc be if required by the state.
You will be selling a product, so “Product Liability Insurance” will be needed along with “Premises Liability” coverage. What will that cost? The casualty insurance company will probably send an “Inspector” to your premises to see if there are any hazards that could create a liability claim, such as a “slip and fall” which Walmart has to deal with on a daily basis. Also, they will question what chemicals you are using in the growing of the products you wish to sell. DO NOT SICK THE DOG ON THE INSPECTOR. He will be reporting on your “ATTITUDE” as well as the physical hazards of your property. That is known as “MORAL HAZARD”.
Will you be using your personal vehicle for business purposes? If so, this will require a reclassifaction of vehicle usuage from personal use to business use. Cost?
Do you have the mechanical equipment necessary or do you intend to use a mule and a plow. Equipment breaks down at the worst time and shop rates run as much as $100 an hour plus parts.
Do you have an attorney lined up to help with the issues involved with the agricultural business you intend to operate? What is his hourly rate and will he require a retainer? Does the state require an “occuptional license to operate what you intend to do? Cost and what are the regulations the state imposes by means of inspections with fines and penalties for non-compliance which newbies are prone to incur for their lack of knowledge and experience. Does the state require a sign at the enterance to your location?
Have you contacted the Farm County Agent for any advice he might have from a business viewpoint of operating in the county you will do business in? Is your property subject to flooding which is most likely to occur in the spring when crops are coming up.
DO NOT PLAN ON DOING YOUR OWN TAX RETURNS!! Find a CPA for that and ask him what business accounting software he recommends that you can use and also transmit your sales, expenses to via internet connection.
DO NOT ACCEPT PERSONAL CHECKS! Put up a large, readable sign > CASH or CREDIT CARDS ONLY! Being a new business you may run into a problem establishing a relationship with VISA, MC, AE, DISCOVERY, ETC. If you accept CC’s, know what the fee is and that has to be included in the sales price of what you are selling. SALES is where your CASH will come from and if SALES does not exceed expenses, including your take home, obamacare, IRA, then your ASS will be broke within 12 to 18 months.
Most of the time, sales do not come up to predictions and expenses exceed expectations for start ups and that is why they go out of business within a year or two (run out of Working Capital). If you have to borrow, the bank will require collateral, which will be your real estate, land and buildings.
The worst loan you can make is not to remit to the IRS the employment taxes that are due. This is the easiest loan to make but the WORST loan you can make. In your budget plan, make sure you know what taxes you have to remit and when they are due (penalties & interest) and that this is the top priority when it comes time to write the business expense checks. The IRS is not a friendly lender.
Try to find a “MENTOR” in your area, older and retired, who would be willing to share his knowledge and experience with you, especially about the effects of local weather patterns and how to deal with customers. On busy weekends you are going to need part time help, a Workers Comp exposure.
Try finding senior folks who need some additional income and have some sales background experience as far as dealing with retail customers and will also show up for work. Young people tend to party a lot on weekends and come to work not feeling too good (hungover).
Good luck and I hope you succeed... been there and done that!
Have you searched YouTube for ideas yet? There’s always some goo9d stuff there.
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