Verified FBN Member (SD)
General

How do you pay yourself on your farm?

Wondering how others pay themselves from their farm income. I am not looking for how much other make. More like, Is it so much per acre farmed, or is it a percentage of farm income, or something else. Just curious as to how i pay myself compared to other farm operations. Thanks for any responses.

Verified FBN Member (NE)

I pay myself in beer usually.

Verified FBN Member
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Verified FBN Member (SD)

I don't borrow money unless absolutely necessary. I have a small operating loan that I only use to cover large expenses, like fertilizer or land rents and that only if I don't have the cash at the time. I am working completely off of cash flow.

Verified FBN Member (ND)
(edited)

I wouldn’t recommended paying yourself with a loan that’s just going backwards twice as fast

Verified FBN Member (IA)

You get paid to farm?? But seriously, since we created an S-Corp as the working entity, everyone just gets a monthly salary and then a dividend at the end of the year.

Verified FBN Member (ND)

Good choice.......... should help avoid most of the self employment tax I would guess

Verified FBN Member (SD)

Well, I am trying to get paid to farm.

My farm is incorporated also. There is me and one other full time employee, we both get a bi-monthly paycheck. Mostly curious as to how other farm owners figure out how much to pay themselves.

Lets start here...when you figure all the wages you pay out in a year how much is it per acre. 2019, I was around $55 / acre. Its my 2nd biggest expense, land rent is first. Its just above seed, chemical and fertilizers.

Verified FBN Member (ND)

I’d say it depends on your long term game plan. Do you want to grow your farm bigger or do you want stay the same size and just coast on what you have? We have 4 of us on our farm and we all work 40 hour work weeks plus we farm 2300 acres. At the end of the year we save our farm money and invest some into the farm and some into other assets.

Verified FBN Member (MN)

I write a check from the farm account to my wife every month as our monthly draw/family living, a set amount just enough to get buy. We try our hardest to live on that amount but if an unexpected living expense comes up in the middle of the year I might need to give ourselves an early bonus. After the new year and getting through my books to see how we did I usually give ourselves a little family living bonus. Last year it was upgrading my wife’s car a few years, this year we really needed a couch and dresser. Some years it’s just enough money to get her credit card back to zero after Christmas.....

Verified FBN Member (KS)

We have a C Corp. my dad owns it, I manage it. I’m paid a salary plus 5000 bushels grain to market myself. There is a tax benefit there for the corporation.

My dad is paid salary, grain, plus cash rent on the few farms he owns.

Verified FBN Member (KS)

Write a check every month out of line of credit we have set salary for each owner/employee

Verified FBN Member (NC)

Just take what you need to live and leave the rest alone borrowed or your own cash no matter what been there done that resurrected

Verified FBN Member (OR)
(edited)

Bi monthly check for absolute bare minimum expenses housing, food, etc ( ok I lied, plus enough to take my fiancé out to dinner twice a month). Then I get paid for custom work ( i.e tillage and or planting plus 5%) everything else gets put back in farm and we pay off debt or expand

Verified FBN Member (OH)

Here's what I use, with 1000 acre farm for example, half corn, half beans.

$15 × 3 hrs. per acre of corn = $45. = $22,500

$15 x 2 hrs. per acre of beans = $30. = $15,000

Plus 5% of gross farm sales for management.

600,000 sales = $30,000

Total = $67,500

I didn't invent this, it's simply what Ohio State says you should be budgeting for yourself to find your break even on enterprises.

Verified FBN Member (SD)

Very interesting. Have never seen anything like this before. If I follow it, I get a raise. ******. Thanks for the info.

I just may have to decrease the budget somewhere else to make it happen.

Verified FBN Member (TX)

We keep cash to make all payments for 12 months. Check it at the first of every month. Anything extra goes to LOC. If LOC is 0 then the extra gets paid out.

Verified FBN Member (KS)

****** could you elaborate some please? By payments do you mean mortgage? Or land + equipment payments? Or all of that + more?

Verified FBN Member (SD)

I pay to farm. $190,000 in 2019.

Verified FBN Member
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Verified FBN Member (SD)

Dad had a banker tell him years ago that you need to gross 10x what you want to take home to make a living just off your operation. That’s part of how we structure our living cost and our operation.

Verified FBN Member (SD)

We are at 30x and still we are barely hanging on.

Verified FBN Member (ID)

I pay myself just enough monthly to cover living expenses then settle up at the end of the year. I try to contract enough crop early in the year (winter). To cover my costs then at the end of the year sometimes I have extra sometimes I’m short. To me Farming is a lifelong retirement build up. Not a huge cash flow builder. My balance sheet says I’m worth way more than 10 years ago, but I really don’t have much more cash on hand. I also am not borrowing more than I have assets.

Verified FBN Member (WI)

Pay myself minimal amount to cover household expenses. LLC operation. Agree with comments about financing pay, if you have loans you either pay more on them or some for you. Tax person will give good advice

Verified FBN Member (IN)

I pay myself from commodity wages that way I'm not paying into social security and its up to me to save. So I get paid in bushels.

Verified FBN Member (SD)
(edited)

Farm is S corporate so housing utilities food health ins cell phone is all paid. Get paid minimal monthly wages and yearly bonus with commodity’s. Don’t pay much payroll tax.

Verified FBN Member (ND)

sounds smart

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