Fern Creek Alpacas

Alpacas .... the Business

So you are interested in alpacas as a business?   The first thing you need to understand is that alpaca ownership, like other business ventures,  has inherent risks and it is recommended that you talk to breeders to familiarize yourself with the risks as well as the rewards of alpaca ownership.  

Then determine your goals for alpaca ownership. Would you like to own an inexpensive pair of gelding males for fiber production or as pets for you and your family? Are you going to be a full-time or part-time breeder? Will you invest in alpacas for current financial returns or are you going to build a herd toward the day you retire? 

Once you've decided on your goal, the path to alpaca ownership will be more easily defined. Maybe you've decided to start a small herd and let it grow over a period of time before retiring and living off the income the herd produces. If so, you'll have the power of compounding on your side.

If you're interested in acquiring a producing alpaca herd with immediate sales, you may want to consider a larger initial outlay. You would probably buy a number of pregnant females who would deliver a cash crop of cria immediately. This larger expenditure might also encourage you to become more involved in the industry and spend more time marketing your herd. Some breeders with larger herds have full-time ranch managers or hire additional labor to assist them with the day to day chores.

Maybe you just want one. They are herd animals, so they can't live alone.  So you will agist (board) your alpaca close to home, making it possible for you to still be involved in its training, but day-to-day care will be done by someone else.

Don't forget about the fiber !  Many alpaca businesses offer alpaca products for sale at their farm or shows.   Socks, scarves, sweaters, blankets, jewelry, yarn, raw fiber, rovings, etc.  They also find other services or products that would be unique to their farm.  You want to put that into your business plan as well.

However you choose to be involved, there is an opportunity suitable for you. The industry is very young and represents a ground floor opportunity. Very few investments have the potential to reproduce themselves every year as an alpaca does. Today's smaller breeder can choose to be almost any size in the future. An owner who likes the return alpacas offer, or the lifestyle they provide, can choose any level of investment.

At this time the IRS, through Section 179 of the tax code, is offering substantial tax benefits for start-up businesses.  That includes alpacas.  IRS Publication 225, The Farmer's Tax Guide, gives all the details. 

To qualify for the most favorable tax treatment as a farmer, you must establish that you are in business to make a profit. You cannot raise alpacas as a hobby farmer or passive investor and receive the same tax preferences as an active, hands-on, for profit farmer. Some of the factors considered when assessing your intent are:

 • You operate your farm in a businesslike manner.
 • The time and effort you spend on farming indicates you intend to make it profitable.
 • You depend on income from farming for your livelihood.
 • Your losses are due to circumstances beyond your control or are normal in the start-up phase of farming.
 • You change your methods of operation in an attempt to improve profitability.
 • You make a profit from farming in some years and how much profit you make.
 • You or your advisors have the knowledge needed to carry on the farming activity as a successful business.
 • You made a profit in similar activities in the past.
 • You are not carrying on the farming activity for personal pleasure or recreation.

You don’t have to qualify on each of these factors - the cumulative picture drawn by your answers will provide the determination. Once you’ve established that you are farming alpacas with the intent to make a profit, you can deduct all qualifying expenses from your gross income.

Some deductions examples. Please note, if you are agisting your animals, not all of these deductions may apply .

 • Vehicle mileage for all farm business miles (IRS publishes current rate)
 • Fees for the preparation of your income tax return farm schedule
 • Livestock feed
 • Labor hired to run and maintain your farm
 • Farm repairs and maintenance
 • Interest
 • Breeding fees
 • Fertilizer
 • Taxes and insurance
 • Rent and lease costs
 • Depreciation on animals used for breeding
 • Real property improvements such as barns and equipment
 • Farm or investment-related travel expenses
 • Educational expenses, which improve your farming or invest­ment expertise
 • Advertising
 • Attorney fees
 • Farm fuel and oil
 • Farm publications
 • Breed association dues
 • Miscellaneous chemicals, i.e., weed killer
 • Veterinarian care
 • Tools having a useful life of less than one year
 • Agistment fees

This is just some of the information available.  Much more available at

Please read:      or

contact an accountant versed in agricultural accounting for more info.

Feel free to email me:     jcmccarthy@ferncreekalpacas.com

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