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 FARM OWNERSHIP STRUCTURES

Every farm business operates within an ownership structure. There are a number of options available including sole ownership, partnership, trust, company or a combination of any if these. Each structure has different advantages and disadvantages when it comes to managing tax minimisation, risk, succession planning and estate planning.

Business structures may need to change over time as a result of growth of the farm, changes to business ownership (introduction of new owners, owners leaving the business).

The goals and objectives of the owner(s) are key in choosing a business structure. Goals for the farm operation and assets may differ between the family members, so it is important to seek input and advice from all family members when considering business entities.

Some of the factors to consider when choosing an appropriate structure are:

  • Life of Business. Do you wish for the business to continue, without interruption, after your death?
  • Estate Planning. What will happen to business if you or another owner were to die?
  • Sources of Capital. How much exposure to debt can you tolerate? Is combining of funds from multiple owners an option?
  • Management. How much control of the business do you want?
  • Inter/Intra Family Issues. How involved do you want your family to be in the business?
  • Terminations of Business. How easily do you want to be able to terminate the business or transfer ownership?
  • Taxes. Is tax management an issue for your operation? What are the capital gain tax implications?
  • Risk Management. How concerned are you about liability?
  • Multiple Entities. In risk management, income tax management, estate and retirement planning, multiple entities can be effective tools.
  • Income Sharing. Is there a requirement to distribute income between multiple parties?

At Kennas, we can help you to identify which business structure best suits your needs now and into the future and assist you to make any necessary changes to the current structure.

 

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