Photo by Charlton Equine Law September 2012
This evening I was the featured equine attorney on the national Horse Business Hotline hosted by the great EquestrianProfessional.com.
In addition to my offered insight there were also three other panelists: two for marketing and one for financial/tax/ accounting issues, all geared towards making your equine business more profitable.
Here are the nine topics we covered:
1. Employee or Independent Contractor: a classic question about how to classify those who work or provide services for your equine activities. IRS.gov provides a large list of factors that they balance in determining the classification, apart from you have called the worker. Control over a worker's schedule, provision of materials, and others factors are certainly important, but I have found that insurance coverage is one of the elements of primary importance to the IRS (if worker's compensation isn't provided, is the worker self-insured?)
2. What does the horse breeding business look like from a profitability standpoint?
Not great right now because of the sluggish economy, and you should realize that if you are just beginning a breeding business, you could be 2-3 years from having your first foal on the ground.
Also, keep an eye on what types of horses are selling, yearlings/ young stock vs. trained/ proven stock, etc. and plan accordingly
3. Boarder doesn't pay the board bill, what are the steps that the barn owner can take?
Should have an excellent Boarding Agreement that provides for this, either waiver of rights under lien laws, provisions for additional liens (such as against tack and equipment). If not, Stablekeeper's/ Agister's Lien is likely automatic, but is very state-specific; can be a timely, confusing, expensive process, so it would definitely be better to avoid the conflict than to go through the lien perfection process. Avoid allowing board bills to build up.
4. Tax Laws for equine businesses: discussed from a perspective of which entity formation you have chosen for your equine business, such as LLC, Inc., S Corp., etc.
5. Selling a horse on terms
Regardless of the terms of the sale, whether they are financial (e.g., down payment now, the remainder in full within 30 days), or terms based on a vet check or trial period, it is always crucial to have a written document signed by the buyer and seller, and list the things you are both agreeing on (e.g., the risk of loss of the horse shifts to the buyer at the time the buyer picks of the horse, or who insures the horse). And then take one further step: what do you both agree you will do if one person doesn't fulfill the required term? (e.g., lose all deposit money for the horse and the horse has to be returned).
6. What are some tips for "no budget marketing" (i.e., free?!)
Be a part of your local horse community before you need their help, use social media, tap into your current relationship, get the local paper involves. Also, can offer a referral program with kickbacks to your present clients for their help, you can get local food sponsors, and more.
7. Whether you must declare Commissions in a horse sale
This deserves an entire blog post in and of itself! If you have a fiduciary relationship with a party, you do need to disclose a commission. In California (and most states), if you are acting as a dual agent then you must declare that in writing and it must be approved by the parties.
8. Non-traditional funding for starting your equine business (i.e., not a bank loan)
Look into grants that might be available, such as conservation grants, from agricultural departments, perhaps financing from an energy grant for installing solar panels at your new business. In Kentucky there is a tobacco company funded program for providing infrastructure grants, such as installing new fencing at a loan rate of just 1-2%.
9. What are the features to add to a facility that will yield the greatest ROI? (for example, to bring in a higher net-worth client?)
First, be sure to identify the target client and be sure those clients are in your area, otherwise any improvements are for naught. You should also do a cost analysis and projection to determine what the improvements will cost, whether you will have to raise fees to cover them, and what financial return is anticipated from the improvements.
Certain low-cost but high-effect improvements are: adding a nice seating area by the barn or overlooking the arena, refacing the stall doors so they look new, repainting the inside of stalls, and perhaps some landscaping.
It was a pleasure to participate in the Hotline, and I hope there was some info in this review that was helpful to you! Anything particularly interesting to you?