Corporations doing business in South Dakota have to register and file annual reports with the Secretary of State. However, the Secretary of State would like to let corporations engaged in farming off the reporting hook.
House Bill 1038 repeals one statute, SDCL 47-9A-19, which currently requires the following:
Every corporation engaged in farming in this state shall, prior to the first day of the second month following the anniversary month of the corporation of each year, file with the secretary of state a report containing the information required in this chapter, based on its operations in the preceding calendar year and its status at the end of such year [SDCL 47-9A, 19, targeted for repeal by HB 1038].
Curiously, HB 1038 leaves on the books the following ag-corp reporting laws:
- SDCL 47-9A-16 requires ag-corps file agent, acreage, and location info.
- SDCL 47-9A-17 requires a list of shareholders and a statement of receipts from rent, royalties, dividends, interest, and annuities.
- SDCL 47-9A-18 says ag-corps can’t farm until the Secretary of State sees the above information.
- SDCL 47-9A-20 busts ag-corps for failure to file or false filing with a civil penalty of up to $1,000.
Farmers in the audience, maybe you can help us out. Current law requires corporations engaged in farming to file the above information. HB 1038 repeals the obligation to file that report yearly. So if HB 1038 passes, do ag-corps have to file reports or not?
I farm using a corporate entity. Land is owned personally and rented to my corporation. Admittedly it’s a Federal tax dodge, Rent I pay myself is unearned income and is not subject to self-employment tax. I file annual reports with the SoS and the reports are exactly the same from year to year and, especially since I can do them online, are no big deal. Is the intent to only require the filing if there are changes? It’s unclear.
It is possible, Nick, that the intent is to eliminate ongoing reports and require only initial reports upon commencement of operations. However, I don’t see clear language in the remaining statutes that would compel reports of changes other than perhaps a change of ownership in which a new corporation would be commencing farming activities. The statute HB 1038 strikes, SDCL 47-9A-19, appears to be the only statute that requires any sort of ongoing reports that would capture changes.
I think this is bad policy for farm corporations. When doing business as a corporation, the SOS filing is how trade creditors verify the company actually exists. Farmers who do not file will never know how many times they either don’t get trade credit or the trade credit is more expensive than it otherwise would be.
Interesting, Troy—you’re saying lenders look those filings up, right? If farmers apply for credit, and the creditors don’t find those files online SDSOS.gov, wouldn’t those creditors call the farmer and say, “Hey, send us this info”?