You are here: News > Insights

You are viewing 1 of your 2 free articles

You’ll need to join us by becoming a member to gain more access.
Already a Member?

Login Join us now

Getting your family farm business structure right

Developing a business structure which works for your family could drive the farm forward, experts believe.

Twitter Facebook

According to Defra’s farm business survey, more than half of farm businesses are sole traders, with the next most popular business vehicle being a partnership.


Julie Robinson, partner at Roythornes Solicitors said: “In other words, 90 per cent of farm businesses are unincorporated.


“For family farms, the partnership is likely to remain the mainstay as far as business structure is concerned, with corporate entities and trusts in the mix where this best suits the needs of the family.”


But Mrs Robinson said it was becoming more common for farm businesses to limit liability.


She said: “With increasing exposure to market volatility, or if farmers are expanding with external investment and diversifying into riskier activities such as contracting or processing, limited liability has its attractions.”


Ashley Clarkson, director of agriculture at Grant Thornton, explained farmers could limit liability for certain parts of their business while keeping other parts as a partnership and sole propietorship.


He said limiting liability on all or part of a farm business could reduce exposure to risk, especially for those farms with diverse operations.


He said: “It allows you to do those entrepreneurial moves without having the same risk. It is not just something for the privileged or large-scale farms - we quite often see limited companies being set up.”


Farm businesses

Farm businesses

Sole traders - 52%
Partnerships 39%
Farming companies - 8%
(Less than 1% had ‘other’ structure)


*Defra sample of 750 farms


New approach

Mr Clarkson added incorporating part of a business could provide a new approach to succession and a way to bring new members of the family into the business.


He said: “The older generation can keep the land and the next generation can create their own business to prove their worth or bring a new approach. It incentivises the younger generation if the business is a real success and it belongs to them.”


But Mrs Robinson and Mr Clarkson highlighted the flexibility operating as a partnership gave businesses and claimed it was important to develop a structure which worked best for your business.


Mrs Robinson said: “One of the main advantages of partnerships is flexibility. Partners can bring in new owners and older partners can retire.


“Profit shares can be adjusted and rules changed by agreement, all without the changes having to be formally registered or made public.”


She said these flexibilities made partnerships particularly suitable for farms.

Case study: Joe Towers

Joe Towers runs a dairy processing unit in Lune Valley which buys its milk from the family farm, Brades Farm. The processing business trades legally as Brades Farm Dairy.


“The business relationship between the farm and the dairy processor is exactly the same as the traditional relationship between a farm and milk buyer,” said Mr Towers. “The dairy pays a competitive price to the farm.


“We have operated this way for three years and the purpose was to prepare for the next generation coming into the business, some of whom may be interested in farming and some in marketing,” he said.


“The advantage is the two businesses both stand on their own two feet and are accountable independently. In principle the farm should be able to seek a better milk deal elsewhere, should it choose to, and vice-versa.”


He highlighted the business structure had allowed him to progress into the area he was interested in without affecting the career path of his siblings.


“For me, I felt there was too much opportunity in British dairying, for both producers and processors, to pass up the chance to develop a business in that value sector.”


Three main business models

Sole trader: The business and the person who owns it are, in effect, one and the same. The sole trader’s liability for the debts of the business is unlimited. This risk is balanced by the lack of legal formality and low administration costs. You are your own boss


Partnership: The structure involves more than one person. In a general partnership, the partners have unlimited and joint liability for the debts and obligations of the business incurred while they are partners. As with sole trader status, the formalities are few and the administrative burden low


Limited company: A separate legal entity from its owners. The owners’ liability for the company’s debts is limited, but owners cannot take money from company accounts. Although lower than in the past, there is a significant administrative burden which goes with limited liability. Information about ownership, financials and the company constitution is made public

Twitter Facebook
Rating (0 vote/s)
Post a Comment
To see comments and join in the conversation please log in.

More Insights

New approach giving rich pickings for fruit business

One pick your own fruit business is drawing in the crowds and using the opportunity to communicate positive messages about farming and the environment, as Aly Balsom finds out.

'Jailbird' gets fresh start after launching pig farming business on release from prison

Essex girl Tracy Mackness turned her life around when she launched a pig farming business on her release from prison.

Chicory and plantain fight the drought

Plantain and chicory are often overlooked as forages for dairy and sheep. But their potential in boosting performance can have a significant impact on a unit’s bottom-line profitability. Farmers Guardian reports.

'I couldn't see the light at the end of the tunnel. I didn't want to be here'

As part of our new series to raise health awareness within the farming community, we talk to two individuals with two very different experiences of mental health issues.

VIDEO: What to look for in a champion beef animal

Vikki Wood of Popes Simmentals tells Farmers Guardian what she looks for when judging pedigree beef classes.
FG Insight and FGInsight.com are trademarks of Briefing Media Ltd.
Farmers Guardian and FarmersGuardian.com are trademarks of Farmers Guardian Ltd, a subsidiary of Briefing Media Ltd.
All material published on FGInsight.com and FarmersGuardian.com is copyrighted © 2016 by Briefing Media Limited. All rights reserved.
RSS news feeds