Business Structures

The structure of an agricultural business is important for a variety of reasons, including taxation, set-up simplicity, and flexibility in succession planning. It is important to understand the needs of your business and to choose a structure that aligns with your business goals.

Legal Structure

Legal structure refers to the legal business entity under which the business operates. The three most common business structures are:

  • Sole proprietorships
  • Partnerships
  • Corporations

Joint ventures and syndicates are less common but may be useful in certain circumstances. The structure of business ownership determines how decision-making, business control, income reporting, taxation, and ownership transfer are handled.

Each type of legal structure has advantages and disadvantages. As a business grows, its legal structure may change, based on its needs. A good team of advisors will help you make the right business structure decisions for your farm.

Partnerships

Generally, partnerships come into existence when two or more people pool their resources and share profit-motivated business activities.

Ownership Structure

The ownership structure of a farm business refers to how the assets are owned. Multi-generational farms may complicate matters of ownership. In some cases, assets are owned by the individual and used by a corporation that operates the farm business.

Written agreements should clearly document the contribution of assets to the business, as well as owner compensation for use of their assets. Agreements also clarify how someone may enter or exit the business structure in the future and outline a process in the event of death or illness.

Cooperatives

A cooperative is a type of business which is owned and democratically controlled by its members.

Leases

Leases in the agricultural community can be a useful tool for increasing production without the financial commitment of purchase. They can benefit beginning farmers, existing farmers and retiring farmers alike. Leases may also be useful for times when a short-term break is required, such as a vacation or illness.

British Columbia’s agriculture is as diverse as its geography. Whether you are an orchardist in the Okanagan, a grain farmer in the Peace, a sheep farmer on Vancouver Island or a vegetable farmer in the Fraser Valley, the Guide for Agriculture Lease Agreements in B.C. will provide basic information on leasing. It includes sample leases and links to online lease documents.