Agriculture Law Test #2 Outline

Testate Succession

Property transfers according to decedent's will

Intestate Succession

Property transfers according to state law because decedent did not have a will

Capacity to make a will

Person must be 18+ and of sound mind

Sound mind in the making of a will

must understand the business of making the will; must understand the kind and extent of the property devised, must understand who the persons are who are the heirs

Writing of a will

Must be in writing, signed by Testator and 2 witnesses who were present at the signing

Spousal 5 day Survival Rule

Spouse must survive decedent by 5 days to inherit

Trust

Fiduciary relationship between trustee and beneficiaries whereby the trustee holds legal title to the specific property under a duty to deal with the property for the benefit of the beneficiaries

Settlor

Person who creates the trust

Trustee

Person managing the trust

Beneficiary

Person benefiting from the trust

Decedent

Person who has died

Estate

Property of the decedent

Will

Document stating decedent's wishes for estate

Heirs

People inheriting the decedent's estate

Testamentary trust

trust created by a will

Sole Proprietorship

- One person owns all assets and liabilities

- taxed the same as an individual and report profits and losses on schedule

- no real corporate entity

- can represent itself in court without attorney representation

General Partnership

- Ownership shared by two or more with equal profits

- can arise by conduct; both partners have equal management authority

- both partners share equally in profits and losses of the business

- each partner owns a fiduciary duty to the partnership

- income "flows through" and is taxed to the individuals

- each partner is guaranteed access to the books and records of the partnership

- each partner has unlimited personal liability for the debts and liabilities of the partnership

Limited Partnership

- Created by general and limited partners for business

- income "passes through" and is taxed to the individual partners; each partner's share of the profits is defined in the partnership agreement

- good for farm succession planning

Limited Liability Company

- Flexible structure with limited member liability

- can be one person or multiple people

- liability for the debts of the LLC are limited (meaning LLC is liable for own debts)

- profits are shared proportionally to each members investment or agreed upon

Corporation

- Owned by shareholders with separate rights and liabilities

- each "piece" is called a share

- a corporation is governed by a board of directors and managed by officers

- the shareholders (owners) elect board of directors

- the board of directors appoints the officers

- Subject to double taxation (taxed once when the corp. makes an income, and again when the income is distributed to the shareholder)

Cooperative

- Group working for members' benefit, owned and controlled democratically

- the returns that its members recieve on their financial investments in the co-op are limited

- a co-op is financed mostly by its members and those who use the co-op

- it distributes net earnings to its members in proportion to their use of the co-op

- similar businesses associate together in order to gain leverage over a market that they might not have access to as individual businesses

- to become a member of a co-op, an individual ur business must satisfy and comply with the co-ops membership requirements

Which types of business entities offer protection from individual liabilities

Limited liability companies, limited partnerships, corporation

Formalities that an LLC is required to abide by

1. conduct business in the name of the LLC

2. maintain a company bank account

3. DO NOT commingle business and personal assets

.4. maintain adequate capitalization (enough money to run a business)

5. Keep accurate financial records

6. Hold annual (or more frequent) meetings of the officers of the LLC

Corporation Ownership

Owned by shareholders, operated by board of directors and chairman, managed by CEO then officers (CFO and COO)

Security Interest

Creditor's legal right in collateral, created through agreement, attachment, and perfection

Agreement

- description of collateral

- statement of the intention to provide a security

- signatures from all parties involved = authentication

Attachment

- Value provided: creditor mist provide the debtor the agreed amount of money they promised

- rights in the collateral: debtors must rightfully own the property that they use as collateral. They cannot use someone elses property for their collateral (unless that party agrees)

- authenticated security agreement

Perfection

Process to give secured party priority over creditors, achieved by filing or taking possession of collateral. Has automatic perfection

Filing a Financing Statement

Includes debtor's and secured party's details, collateral identification, standard form, filiing dee, entity status and information, filed in public record office

Automatic Perfection

Occurs automatically for purchase money security interest in consumer goods

Purchase Money Security Interest (PMSI)

Automatically perfected security interest in consumer goods, created when debtor buys goods with retained collateral interest

Agricultural Liens Priority

Protects providers of agricultural goods and services, takes precedence over other creditors

Statutory Trusts

Established to protect farmers from being exploited in sales

Mortgage

uses real property as the collateral and payment terms will generally be longer than loans for other types of property

promissory note

promise to pay back the loan

Who is subject to taxes

Everyone including individuals, corporations, partnerships, LLCs, trusts, and estates

What is taxable

Earnings, profit, real estate, fuel, business rights, professional work, purchases, inheritance, and generation-skipping in will

Benjamin Franklin on Taxes

"Nothing is certain except death and taxes"

Alabama Livestock Definition

Includes but is not limited to bovines, swine, sheep, goats, equine or Equidae, ratites, poultry, other pen-raised livestock such as quail, deer, pheasants, or similar livestock and other animals

Alabama Fence-In Law

Permits livestock or animals to run at large upon premises of another without the permission or upon public lands, highways, etc., generally

California Proposition 12

Seeks to establish minimum square footage for the confinement of veal calves, breeding female pigs, and egg-laying hens

Recent developments with Cali prop. 12

NPPC and AFBF sued the Cali Department of Food and Ag secretary and went up to the Supreme Court. Prop. 12 went into effect July 1, 2023 and prohibited the sale of whole pork meat from breeding pigs or their immediate offspring that were "confined in a cruel manner". These requirements apply to all whole pork meat sold in California, regardless of where the animal might have been raised

Animal Cruelty Laws Coverage

Includes animals for public exhibition, animals sold as pets, used in research, or commercial transport

Excluded from Animal Cruelty Laws

Farm animals for food/fiber (fur, hide, etc.), coldblooded species (amphibians and reptiles), horses not used for research purposes, fish, invertebrates (crustaceans, insects, etc.), birds, rats and mice for research

Certified Organic Process

1. Adopt organic practices as defined in the regulations

2. Select a certifying agent

3. Submit an application and fees to the certifying agent

4. The certifying agent reviews the application to verify the practices comply with the USDA organic regulations

5. an inspector conducts an on-site inspection of the operation

6. The certifying agent reviews the application and the inspectors report to determine if the applicant complies with the USDA organic regulations

7. If the operation complies, the certifying agent issues the organic certificate

What does Organic Certificate do

Issued if operation complies with regulations and allows famrs to use "organic" label

Annual Renewal Process

Required to maintain compliance with organic regulations

Includes:

- updating the organic system plan

- addressing all noncompliance issues

- paying the annual certification fees

- undergoing an annual inspection

Cottage Food Law

Regulates types of foods allowed for sale out of homes

Allowed Foods under Cottage Food Law

- candies

- jams, jellies, fruit preserves, marmalades

- dried herbs and herb mixes made from commercially prepared ingredients

- baked goods: cakes, cookies, glazed pastries, Danish pastries, doughnuts, breads, pies cheese straws

- candied or roasted nuts

- popcorn (coated candied or flavored)

- spices (nonhazardous and considered generally recognized as safe or GRAS by the USFDA)

- roasted coffee

- dried baking mixes

- chocolate or caramel- covered fruit

Prohibited Foods under Cottage Food law

- meat

- cheeses

- milk products

- juices

- refrigerated items

Backyard Chicken Ordinance

Regulates keeping chickens based on lot size, enclosure requirements, and restrictions on breeding and males