Farm Ownership Structures

Posted on: August 17th, 2010 by Richard Cressman

The backbone of Ontario agriculture has been the family farm, traditionally owned and operated by one family. The single proprietor farm is being replaced by partnerships and family owned corporations where siblings frequently find themselves working together.

Initially these ownership structures work successfully and things go smoothly for the first few years. But the odds are stacked against true long-term success. Most people farm because they like being their own bosses, making their own decisions, and not having to take orders from anyone. In other words, they like to be in control. This personality style may find it difficult to work in a close business relationship with another like-minded individual.

There are many farm situations that look idyllic from the end of the lane. When you get up close, you see individuals who feel trapped with no other options than to stay where they are.

The following scenario highlights some of the problems that are encountered when siblings decide to operate their farm business inside a corporation and attempt to keep everything as equal as possible.

Robert, Bryce and Felix are three brothers who had started cash-crop farming together 17 years ago. Robert and his wife Sue live on the home farm, while Bryce and Felix, with their respective wives, live on two of the other seven farms. All assets with the exception of the three farms where the families live are owned inside one corporation. Each family draws equal wages. The brothers have kept everything equal right down to buying cars and pickup trucks of the same value.

Each spring an acre of sweet corn is planted at Robert and Sue’s place. Sue and Robert were on holidays in July and got home the day before a large family reunion. Sue planned to harvest 15 to 20 dozen cobs of corn for this event. When she got to the field she found that someone had already been there harvesting corn. She asked Robert if he knew who had taken the sweet corn. It turned out Felix and his wife had a corn roast for a group of their friends the night before Sue and Robert got home. Sue was livid that her brother-in-law went into the patch and took the sweet corn. Her comment, “how dare he go into my patch and take my corn without my permission? Does nobody have any consideration for what is mine? “ Upon questioning, Sue admitted that the corporation paid her and Robert rent for that acre of land and had paid for the seed as well.

The issue at the core of the conflict stemmed from the fact that neither brother owned nor controlled anything that was actually 100 percent their own. Sue’s comment that, “my husband and I don’t own anything – we just own a third of everything” puts the issue into sharp focus. Owning shares for many people does not give the same degree of satisfaction that comes from tangible ownership of a specific piece of machinery or a barn full livestock.

With the demise of the single-family farm operation, farm families will need to be innovative and creative as they go about designing ownership structures that can be successful in the long term.

For starters, each individual needs to look at their long-term goals. Is pride of individual ownership and being your own boss two important reasons why you want to farm? Can you be happy as a farmer and share ownership with a partner? Can your spouse be happy working with your siblings? How you answer these questions can be pivotal for your success. Having your blood pressure rocket skyward over a few dozen cobs of corn makes no sense. Farming is stressful enough without having to go through an emotional roller coaster ride every time a trivial decision gets made such as who gets to pick the sweet corn.

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