Building a farm business with family members can be a rewarding way to work toward shared goals and preserve a family legacy. However, even close-knit families can face disagreements over ownership, finances, responsibilities and the future of the farm.

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Having clear written agreements from the beginning can help family members understand their respective rights, responsibilities and expectations. It can also reduce the risk of misunderstandings and protect both the business and family relationships as the farming operation grows. 

Decide on the Business Structure. Common options include a sole proprietorship, partnership or corporation. Each structure has their own strengths and weaknesses and the option you pick may be primarily driven by taxation and liability protection.

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Many farmers begin as sole proprietors or in partnerships and may later incorporate. However, incorporating from the outset may make sense for some operations, while others—including medium to large farms—may continue to operate without a corporation. The right structure depends on your circumstances. Consulting a lawyer and accountant can help you understand your options and choose an arrangement that works for you. Regular reviews with these advisers are also important to ensure your structure continues to meet your financial and legal needs. Tax rules, laws and personal circumstances can change, so advice received years ago may no longer apply. 

Document ownership and financial contributions. Family members may contribute different amounts of money, land, equipment, livestock or labour to the farming operation. These contributions should be clearly documented to avoid confusion about ownership and financial interests.

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For example, one family member may provide farmland while another contributes capital or manages daily operations. A written agreement can clarify how these contributions will be recognized, whether certain contributions are loans or investments, and what ownership rights each person will have. The agreement should also address how profits, losses and business expenses will be shared among family members. 

Clarify each family member's role and responsibilities. Working with family can make it easy to assume that everyone understands what is expected of them. However, disagreements may arise when responsibilities are unclear or one person feels they are contributing more than others. 

A written agreement should outline each person's role, responsibilities and expected contributions. These may include managing daily farm operations, overseeing finances, maintaining equipment, purchasing supplies or supervising employees. It should also clarify whether family members will receive salaries, management fees or other compensation for their work. Establishing these arrangements early can help avoid disagreements over workloads, responsibilities and financial expectations. 

Protect the farm's land, equipment and other assets. Land, machinery and equipment are often among a farm's most valuable assets. It is essential to establish who owns these assets and how they may be used by the business. For example, a parent may personally own the farmland while allowing a family partnership or corporation to operate on it. In this situation, a written lease or other appropriate agreement can clarify the arrangement, including rent, maintenance responsibilities, the length of the agreement and conditions for ending it. 

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Establish how decisions and disputes will be handled. Family members may not always agree on important business decisions. One person may want to purchase new equipment, while another may prefer to reduce expenses or invest in expanding the operation.

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A written agreement should explain how routine and major business decisions will be made, including those involving borrowing money, purchasing land, selling assets or expanding the business. It should also identify which decisions require approval from other family members. Equally important is having a process for resolving disagreements. This may include family discussions, mediation or another agreed-upon dispute resolution process before pursuing legal action. 

Plan for unexpected events. A family farm agreement should address what happens if a family member decides to leave the business, retires, becomes unable to work, passes away or experiences a significant change in personal circumstances. 

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For example, the agreement may set out how an ownership interest can be transferred or purchased, how its value will be determined and whether the remaining family members will have the first opportunity to buy it. Succession planning is another important consideration, particularly when the intention is to pass the farm to the next generation. Families should discuss when and how ownership and management responsibilities will transfer, as well as who will take over the operation.

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Wills and Powers of Attorney are essential planning documents for every family member involved in the farm, not just those approaching retirement. A Will sets out how a person’s estate, including their interest in the farm, is to be dealt with after death. An enduring Power of Attorney allows a chosen person to manage financial and property matters if the person granting it becomes incapable of doing so. Without appropriate documents, an unexpected death or incapacity can create uncertainty, delay important decisions and disrupt farm operations. These documents should be reviewed alongside the farm’s business agreements and succession plan so that they work together to support each person’s wishes and the farm’s long-term continuity.

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Plan for retirement and the next generation. Succession planning requires a practical balance between the needs of the retiring generation and what the next generation can afford. Family members stepping back from the farm should consider the income and other support they will need to maintain their lifestyle, as well as what they have expected to receive from the farm during their lifetime. 

At the same time, the incoming generation needs a financially sustainable path to ownership. With the substantial rise in Manitoba farmland prices over the past two decades, paying full fair market value may be beyond the next generation’s reach. Discussing these expectations early can help families identify an arrangement that supports both generations without placing an unmanageable financial burden on the farm. 

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A useful starting point is a joint meeting with the current and future farming family members, their lawyers and their accountants. Bringing everyone together allows each person to explain their priorities and expectations, while the advisers help assess the available options and their legal, tax and financial implications. These discussions can help the family develop a coordinated succession plan that addresses retirement income, the timing of ownership and management transfers, and what the incoming generation can realistically pay. Having these conversations before anyone commits to a particular arrangement can reduce misunderstandings and help establish a shared understanding of the farm’s future.

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Running a family farm involves more than working toward shared goals. Open conversations, clear written agreements and coordinated planning with your legal advisors can help protect family relationships and build a sustainable future for the farm and the next generation.

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DISCLAIMER: This article is written for informational purposes only and does not constitute legal advice.  The views expressed are solely the author’s and should not be attributed to any other party, including Meighen Haddad LLP.  If you need legal advice, please call our office at (204) 727-8461.

Agribusiness

STACY SENKBEIL

Partner

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