Farm Corporation FAQs
Can anyone hold shares in a farm corporation?
No, all shareholders must be related individuals or one of the following:
- A trust for the benefit of an individual or a class of individuals who are related to every shareholder of the corporation within specified degrees of kinship.
- An estate of a decedent who was related to every shareholder of the corporation within specified degrees of kinship.
The shareholders must be related within one of the following degrees of kinship:
- First cousin; or
- The spouse of a person so related.
Do all shareholders need to be actively engaged in farming or ranching?
No, but at least one shareholder must be actively engaged in farming or ranching.
Do any shareholders need to live on the farm or ranch?
No, but at least one shareholder must reside on or be actively engaged in farming or ranching.
Who can serve as an officer or director of a farm corporation?
Only shareholders who are actively engaged in farming can serve as officers or directors of a farm corporation.
Can a farm corporation acquire ownership to land and rent it out to be farmed
No, a farm corporation must be actively engaged in farming.
May a farm corporation engage in business activities other than farming?
Yes, however 65% of the gross income over a period of five years, or every year of its existence, must be derived from farming. The income from nonfarm rent, nonfarm royalties, dividends, interest, and annuities cannot exceed 20% of the gross income of the corporation.
If a farm corporation ceases to farm, can the corporation be maintained?
Yes, the corporation can be maintained if an amendment is filed to convert the farm corporation to a business corporation after the land and livestock have been divested.
Can a farm corporation merge into a business corporation?
Yes, however, the farm corporation must divest of all livestock and owned or leased land since a business corporation cannot own or lease land used for farming or production of livestock.
Can a business corporation merge into a farm corporation?
Yes, however, 65% of the gross income of the surviving farm corporation must be derived from farming.
Can a farm corporation merge into a foreign corporation?
Yes, however, the land in North Dakota would need to be divested prior to the merger since a foreign corporation may not hold or lease land used for farming or ranching.
Can a foreign corporation engage in farming in North Dakota?
No, only a North Dakota corporation or a limited liability company created according to the provisions of NDCC, Chapter 10-06.1 may engage in farming in North Dakota.