Financial Analysis of Alpaca Ownership
Business Set-Up Essentials
Alpaca Purchase Contract
Every purchaser should require a purchase contract when acquiring an alpaca. A typical contract will call for a veterinarian exam certifying the alpaca’s health at the time of purchase. Other clauses might warrant that a breeding male will, in fact, settle females and that he is not sterile as a condition of birth. A contract for purchase of an alpaca female will often warrant that she is anatomically complete and capable of producing live offspring.
Contracts will specify the financial terms involved and include small details such as who delivers the animals. It is important to know what happens if there is a future problem with the alpaca that you purchase.
For instance, a young male could grow up to be sterile. This condition may not be known for one or two years after purchase. Most breeders will agree to replace the animal if this happens.
Contracts are important so that all the elements of a purchase can be accounted for. It is also very important to deal with a breeder of good reputation. Ask for references if you feel the need. You are making a large investment when you buy alpacas and it’s important that you feel good about it.
Your Investment = Your Business!
As an astute entrepreneur with an eye for a great investment, you did your research, visited numerous ranches, asked a hundred questions and bought your first alpacas to start your herd. Whether you board (agist) your animal or are preparing to build your dream ranch there are certain steps in the set-up of your new business that must be attended to within the first year.
As a business, Alpaca ranching requires that your ranch (whether you have property or not) has a name. Filing for a DBA or "Doing Business As" Fictitious Business Name is required so that your business name is on record with the county where you will do business. you can usually get those forms from the website of your county offices. You choose a name, fill out the forms, pay a small fee and send them in to the address given. If no one challenges the name as already being in use then it is yours.
Resale Number
With your first purchase of a breeding female you are now in the business of breeding alpacas. To the IRS, this means that taxes can be collected. If you are a reseller buying the animals for "resale" to other resellers then there is no need to pay State Sales tax on the purchase price. You definitely want to be registered as a reseller with a seller’s permit number on file. If you do not hold a resale number then the seller of the alpaca must charge you sales tax. Forms for getting a sellers permit, aka - resale number are available on the internet at the State Department of Taxation website.
Business Checking Account
Start a checking account, either under your name or your ranch name, which is strictly for Alpaca business expenses. Pay all your board, feed, equipment, show fees etc… out of this account. If you get a credit card for business expenses be sure to pay it out of this account as well. These are all deductible expenses and you want to keep them separate from your personal finances for ease of accounting at the end of the year.
Get an Accountant
A good accountant is a very valuable resource. They can tell you what is and is not deductible, what records to keep and how to keep them and when you have to have certain papers to the government to keep your taxes straight. Interview accountants and ask them if they have any experience with ranching and livestock accounting. Do they know what Title 179 of the farm code is? Spending a little extra time finding the right accountant will save you a lot of money later on down the line.
Payment Schedules
If you bought your animals on time and financed them through the seller or through the bank you will want to make note of your payment schedule so that you don’t accidentally miss a payment and default on the contract. Some sellers will even print out schedules for you and include them in your sales contract.
previous next home
